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You are here: BAILII >> Databases >> The Dubai International Financial Centre >> Neville v (1) Nestor (2) Newton [2024] DIFC SCT 142 (05 August 2024) URL: http://www.bailii.org/ae/cases/DIFC/2024/DSCT_1421.html

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Neville v (1) Nestor (2) Newton [2024] DIFC SCT 142

August 05, 2024 SCT - JUDGMENTS AND ORDERS

Claim No: SCT 142/2024

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
BEFORE SCT JUDGE MAITHA ALSHEHHI

BETWEEN

NEVILLE

Claimant

and

(1) NESTOR (2) NEWTON

Defendants

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Hearing :	25 July 2024
Judgment :	5 August 2024

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UPON the claim having been filed on 2 April 2024 (the “Claim”)

AND UPON the Defendants’ defence dated 10 July 2024

AND UPON the witness statement of Najee dated 12 June 2024 filed in support of the Claim

AND UPON a hearing having been listed before SCT Judge Maitha AlShehhi on 25 July 2024, with the Claimant’s representative and the Defendants’ representative in attendance (the “Hearing”)

AND UPON reviewing the documents and evidence filed and recorded on the Court file

IT IS HEREBY ORDERED THAT:

1. The Defendants shall pay the Claimant the amount ofAED 485,970.

2. Pursuant to DIFC Practice Direction No. 4 of 2017, simple interest shall accrue at the rate of 9% per annum on the above-mentioned amount from the date of this Judgment until date of full payment.

3. The Defendants shall pay the Claimant the DIFC Courts’ filing fee in the amount ofAED 24,298.

Issued by:
Hayley Norton
SCT Judge and Assistant Registrar
Date of issue: 5 August 2024
At: 3pm

THE REASONS

Parties

1. The Claimant is Neville (the “Claimant”), a limited liability partnership and law firm registered in the DIFC, Dubai, the UAE.

2. The First Defendant is Nestor (the “First Defendant”), the shareholder and authorised signatory of the Second Defendant.

3. The Second Defendant is Newton (the “Second Defendant”), a company registered in the DIFC, Dubai, the UAE.

4. The Defendants will collectively be referred to as the “Defendants”, except where separation is necessary.

The Claim

5. The Claimant and the Defendants entered into an engagement letter dated 15 August 2023 (the “Engagement Letter”) for the Claimant to provide legal advice and services in return for payment.

6. Paragraph 2 of the Engagement Letter refers to the Claimant’s scope of work and fee arrangement, which is available under Schedule 1 and is read as below:

“Scope of work and duration of these Terms of engagement along with applicable charges are defined in Schedule 1.

Unless otherwise determined under Schedule 1, Neville will charge on hourly basis according to its applicable variable rates which can be requested at any time by sending an email to info@neville.com”

7. The Claimant submits that it was assisting and representing the Defendants in respect of a CFI Claim (“CFI Claim”) in line with its scope of work such as assisting the Defendants to acknowledge service of the claim, requesting an extension of time to file a defence, assess the facts and merits of the case and assist in formulating the defence and/or counterclaim.

8. Thereafter, the Claimant issued the first invoice to the Defendants dated 30 October 2023 and the Defendants continued to instruct them and did not raise any objection to the amount nor work carried out. A second invoice was issued on 30 November 2023, which still remains pending.

9. The Claimant’s position is that the Defendants should have suspended them after receipt of the first invoice if the amount was too high, but the Defendants chose to wait and challenge it later which is not justifiable.

10. The Claimant asserts that the Defendants did not terminate the Engagement Letter nor request them to cease acting, however, proceeded to de-instruct them in the CFI Claim on 9 January 2024 which the Claimant became aware of after viewing the notice of change of legal representative form that sets out the name of the new law firm.

11. The Claimant submits that during this time it was still carrying out legal services in favour of the Defendants, however, it decided not to invoice them after this date as the previous two invoices were pending for payment.

12. The Claimant contends that it is clear from Schedule 1 of the Engagement Letter that payment will be on a “time spent basis” with an hourly rate of AED 3,000; therefore, the parties never agreed on a budget of only AED 50,000.

13. The Claimant states that as per paragraph 3 of Schedule 1 of the Engagement Letter, an “advance amount” of AED 50,000 was to be paid by the Defendants. The Claimant then subsequently charges them on an hourly basis, as reads below:

“An Advance Payment of AED 50,000 is payable upon signature of the Terms of Engagement.The Advance Payment will be offset against Neville’s invoices.Further Advance payments of AED 50,000 will be required when unbilled fees exceed AED 50,000”

14. The Claimant adds that the Defendants agreed to the billing mechanism by signing the Engagement Letter. The Claimant further relies on the First Defendant’s email dated 15 August 2023 (“August Email”) which demonstrates the First Defendant’s acceptance and acknowledgement of the terms of the Engagement Letter with an exception.

15. The August Email reads as follows:

“Dear Nathaniel

Thank you for the email.

After reasonable study to the (TOE) terms of Engagement, we agree to the same with the exception to the following.

For advance payment, we request your office to kindly split AED 50,000 in two part payments of AED 25,000 each.

Rest of the TOE we agree and will sign the contract and send to you in no time. Also all the documents mentioned in your email will provided to you in the same email.

I hope you will revert with acceptance to the change in the payment schedule.”

16. Moreover, the Claimant states that despite non-payment of the Invoices, the Defendants reached out to the Claimant again on 23 February 2024 to instruct them on a different matter with a fixed fee arrangement which they were willing to accept provided the Defendants agree on certain terms, which was not approved by the Defendants.

17. The Claimant rejects the First Defendant’s allegation that it did not see and sign Schedule 1 and submitted as evidence an email received from the First Defendant dated 15 August 2023 enclosing a link that contains the signed Engagement Letter inclusive of the Schedule.

18. Consequently, the Claimant seeks payment of the following invoices from the Defendants in the total amount of AED 485,970 (the “Invoices”) plus judgment interest at the rate of 9% pursuant to DIFC Practice Direction No. 4 of 2017:

() Invoice dated 31 October 2023 for AED 430,920; and

() Invoice dated 30 November 2023 for AED 55,050.

19. The Claimant submits that the Invoices represent work that have been carried out in favour of the Defendants prior to issuance of the notice of change of legal representative which ought to have been paid within 30 days of issuance. However, due to the Defendants’ breach of the Engagement Letter and in accordance with Clause 4, interest will accrue on all unpaid invoices at a rate of 9% per annum.

20. The Claimant’s stance is that the Defendants are withholding payment without any legal justification.

The Defence

21. The Defendants reject the Claim and submit that they agreed on a fixed fee arrangement of AED 50,000 and paid AED 20,000;with AED 30,000 only remaining.

22. The Defendants submit that the Invoices are forged, and the Claimant is in breach of its fiduciary duties towards the Defendants for failing to act in line with the Mandatory Code of Conduct for legal practitioners in the DIFC with respect to the CFI Claim.

23. The Defendants submit that the parties have entered two separate engagement letters, one in May and the other in August. The Defendants allege that the Claimant is deliberately neglecting the one signed on 25 May 2023 (“May Engagement Letter”) as it mentions the fixed fee arrangement and contradicts the Claimant’s claim.

24. As to the May Engagement Letter, the Defendants submit that it was agreed with Mr Ned and Mr Najee to be on a fixed fee arrangement. However, the Defendants assert that following Mr Ned’s unexpected departure from the UAE, numerous emails were left unanswered by the Claimant.

25. The Defendants’ reasoning for changing law firms is due to the Claimant’s failure to file a counterclaim in the CFI Claim as required and failure to provide timely updates on the progress of the case.

26. The Defendants submit that they were not aware that the Claimant would be charging them on an hourly basis as it did not have the right to do so in light of the limited fee arrangement of AED 50,000 in the May Engagement Letter. The Defendants further rely on the August Email to demonstrate the First Defendant’s understanding of payment of only AED 50,000.

27. The First Defendant submits that he was forced and compelled to sign the Engagement Letter as he is not on equal footing with the Claimant. The Defendant denies that he has seen nor signed Schedule 1 of the Engagement Letter and therefore submits that they should not be bound by it, as no signature appears on it.

28. The Defendants are of the view that this Claim should be referred to adjudication in the Court of First Instance as a trial. This is because they believe that the Claimant deliberately lowered the amount sought to take advantage of the Small Claims Tribunal process.

29. The Defendants assert that they had to change law firms as the Claimant was not conducting its work in favour of the Defendants and did not act in their best interest and they failed to file a counterclaim in the CFI Claim.

30. The Defendant’s representative submitted at the Hearing that an hourly basis arrangement is not a familiar concept to the First Defendant as he is only familiar with the concept of a fixed fee which is why they agreed to the amount of AED 50,000.

Applicable Law

31. The jurisdiction clause is set out in clause 17 of the Engagement Letter which reads as follows:

“Any dispute up to AED 500,000 arising out of or in connection with any aspect of these Terms of Engagement shall be referred to the DIFC Courts.”

32. RDC 53.2 requires that the SCT hear only cases that fall “within the jurisdiction of the DIFC Courts”. The jurisdiction of the DIFC Courts is determined by Article 5(A) of the JAL, which provides a number of limited gateways through which the DIFC Courts have jurisdiction over a claim, which are, as relevant:

“(1) The Court of First Instance shall have exclusive jurisdiction to hear and determine:

(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;

(b) Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;

(c) Civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities; . . .

(e) Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.

(2) The Court of First Instance may hear and determine any civil or commercial claims or actions where the parties agree in writing to file such claim or action with [the DIFC Courts] whether before or after the dispute arises, provided that such agreement is made pursuant to specific, clear and express provisions.”

33. For cases to be heard in the SCT, first, they must fall within the DIFC Courts’ jurisdiction by engaging any of the jurisdictional gateways set out in the abovementioned Article.

34. Further to the above, the DIFC Courts have jurisdiction to hear and determine the Claim in accordance with Article 5(A)(1)(a) as the Claimant is a DIFC company as well as in accordance with Article 5(A)(1)(2) of the JAL on the basis that Clause 17 of the Engagement Letter is clear on the parties’ intention to resort to the DIFC Courts in case of any dispute and is the appropriate forum to hear the Claim.

35. The Defendants request that the Claim be transferred to the CFI on the basis that it requires a trial. This kind of request ideally should have been made by way of filing a Part 23 Application Notice, however, I will address it in this Judgment.

36. Pursuant to RDC 53.41, the Judge has the power to transfer the case if any of the below provisions apply:

“Where appropriate, the SCT Judge may issue a reasoned order that the small claim be transferred to the Court of First Instance to be progressed as a fresh claim under the procedures followed by the CFI. When deciding whether to do so, the SCT Judge shall have regard to the following matters:

(1) The financial value of the claim or of the subject of the claim;

(2) The nature of the dispute;

(3) The nature of the remedy sought;

(4) The likely complexity of the facts, law or evidence;

(5) The number of parties or likely parties;

(6) The value of any counterclaim or other additional claim and the complexity of any matters relating to it;

(7) The amount of oral evidence which may be required;

(8) The importance of the claim to persons who are not parties to the proceedings;

(9) The views expressed by the parties at the consultation; and

(10) The circumstances of the parties, including their financial means.”

37. In light of the abovementioned, I find that none of those provisions are applicable given that the value of the Claim is within the SCT’s threshold, and the Claim pertains to a straightforward debt collection claim that presents no complexity which is normally dealt with in the SCT. Therefore, I find that the Claim must remain in the SCT and the Defendants’ request for a transfer is denied.

Discussion

What was the fee arrangement?

38. The fee arrangement is disputed as the Claimant submits that it was agreed that it will be on a time spent basis with a AED 3,000 hourly rate while the Defendants submit that it was agreed that the total amount of AED 50,000 would be payable only.

39. The dispute at hand concerns the Engagement Letter in August as the timesheet associated with the Invoices refer to work carried out by the Claimant following this, i.e. from August onwards.

40. The Claimant asserts that the May Engagement Letter relates to a different matter and has no relevance to the Claim at hand.

41. The Defendant failed to submit a copy of the May Engagement Letter for the Court to examine. Therefore, I am unable to determine this and shall rely on the Engagement Letter issued in August.

42. The Claimant provided an email that shows the First Defendant signed the incorrect version and asked him to sign the correct version instead“Please sign this version. The one you signed and returned was the previous version which referred to payments in advance of Aed 50,000.”This was then rectified by the First Defendant on the same day by signing the correct Engagement Letter by virtue of the August Email.

43. Typically, the fee arrangement is the deciding factor upon entering any agreement; therefore, it is usually covered in the Engagement Letter as standard practice. In this Engagement Letter, the first reference is in paragraph 2 wherein it states that“Neville will charge on hourly basis according to applicable variable rates”.

44. The second reference is in paragraphs 1 and 2 of Schedule 1 of the Engagement Letter wherein it states that fees in respect of scope of work 1 and 2“will be charged on “time-spent” basis with an hourly rate of AED 3,000”.

45. The Defendants’ argument is that it could not have known that it was on a time spent basis because it was not privy to Schedule 1 and had never signed it. However, as mentioned above, the first page of the Engagement Letter states that it would be on an “hourly basis”. As such, this argument is not upheld as the Defendants acknowledge signing the Engagement Letter, although allegedly under duress.

46. Regardless of whether there is a reference to the exact rate of AED 3,000 on the first page, I am of the view that paragraph 2 clearly states that the Claimant is entitled to charge on an hourly basis.

47. The Claimant submitted evidence in the form of an email dated 15 August 2023 from the First Defendant to the Claimant enclosing a link of the signed Engagement Letter including Schedule 1 as the last page.

48. The fact that Schedule 1 was not signed does not mean that the Defendants did not have a copy of it. First, Schedule 1 was not supposed to be signed as it did not have the information for that below. Second, reference to Schedule 1 is made in paragraph 2 of the first page of the Engagement Letter“along with applicable charges are defined in Schedule 1”and the Defendants ought to have been made aware of its existence by reading the Engagement Letter.

49. As evidenced in the August Email, it is clear that the First Defendant examined the contents of the Engagement Letter as stated,“After reasonable study to the (TOE) terms of Engagement”and requested that payment of the advance payment be split. Furthermore, the First Defendant used the term “advance” payment which means that more amounts can accrue due to ongoing engagement.

50. The Defendants failed to submit any evidence to support their understanding that payment ought to have been made once in the amount of AED 50,000 which to date has not been paid in full.

51. As to the Defendants argument of being forced to sign the Engagement Letter, I find that the Defendants failed to submit any evidence to support this allegation. Therefore, I shall reject this assertion for lack of evidence.

52. For the above cited reasons, I find that it is clear that the parties entered into the Engagement Letter for fees to be paid on a time spent basis rather than fixed fee as there is no reference to a limited budget arrangement whatsoever.

Is the Claimant entitled to be paid the outstanding amount as per the Invoices?

53. Given that it has been established above that the Defendants are required to pay the Claimant based on an hourly basis for work conducted in the CFI Claim, the Court must now determine whether the Invoices are payable in full.

54. Although the first invoice is dated 31 October 2023 and pertains to services rendered through 31 October, the Claimant only shared the Invoice to the Defendants on 20 November 2023 as per the below:

“Dear Mr. and Mrs. Nestor,

We refer to our recent correspondence in this matter.

We are writing to you concerning our invoicing for this matter.

By an oversight, for which we apologise, we have not billed you for the work carried out on this matter since we opened the file in August.

As a result, the sum which has now fallen due to be invoiced has reached Aed 577,710 (including VAT).

However, we realise this is a substantial amount and we value the relationship we have with you. Therefore, we have reduced the invoiced amount to Aed 430, 920 (Inclusive of VAT) as a gesture of good will.”

55. Following this email and on 23 November 2023, the Defendants had queries in relation to the first invoice and asked to put on hold accounting investigations in respect of the CFI Claim. Following this, the Claimant responded with the following email:

“Dear Nadia,

I understand from Nader that you have put the accounting investigation of Ninian's activities on hold because of questions you have regarding our invoice.

I would strongly advise that you proceed with the accounting examination in any -event as this will determine whether there is a viable counterclaim.

Please feel free to discuss the invoice with me.”

56. On the basis that no explicit instruction was received to cease acting for the Defendants, the Claimant carried out its services as normal to assist the Defendants in finalising its counterclaim in the CFI Claim as evidenced in the email of 27 November 2023 which reads as follows:

“Dear Mr Nestor and Mrs Nadia

We write further to the below email.

1. We understand that you wish to raise queries regarding the Invoices issued by the firm to you. Please ensure you raise those enquiries with Najee who will deal will them as soon as possible

2. However. and no matter what happens with the invoices, please can you ensure that you engage with Normand for the purposes of the counterclaim / separate claim that you wish to bring against Ninian.

Irrespective of what may happen as a result of the issues you raise with the invoices, it is very Important that you engage with Normand so that he may assist you to bring the claim itself.

We want you to be in the best possible position to advance your possible counterclaim / separate claim. no matter What happens with the invoices or otherwise.”

57. The Defendants submit that they sought clarification from the Claimant as to the exact date of filing the counterclaim in an email dated 15 December 2023, however, the Claimant did not answer, which reads as below:

“Dear Mr. Najee,

I trust this message finds you well.

I am writing to seek clarification on the deadline for filing a counterclaim in response to the case initiated by Mr. Norval in the DIFC court. I appreciate your ongoing assistance in this matter and would be grateful if you could provide information on the timeframe within which we need to submit our counterclaim. Thank you. I look forward to your prompt response.”

58. Having reviewed the case file, I can see that the Claimant did respond to the email on the same day as per the below:

“Dear Nadia

Thank you for your email.

Firstly, the claim was initiated by Ninian NOT Norval.

Secondly, the timeframe for submitting a counterclaim will depend on your analysis of its content.

It will be either a counterclaim as part of the present action brought by Ninian or it will be a separate claim and may even involve Norval.

In either event, we need to consider the conclusion of your expert as soon as possible.”

59. The Defendants’ main contention is that the Claimant failed to file the counterclaim. However, having reviewed the email correspondence between the parties, particularly the emails dated 25 October, 31 October, 1 November, 6 November, 16 November, 21 November, 23 November and 27 November 2023, I am of the view that the Claimant was working in the Defendants’ best interest first by urging the Defendants to gather evidence so it can bring the counterclaim as soon as possible and arranging meetings to discuss the potential counterclaim and its impact, and advising the Claimant to proceed with the investigation so it does not hinder the filing of the counterclaim and many more.

60. Although the above emails do not confirm that the counterclaim was lodged, it shows the work commenced in anticipation of such filing. There is no evidence before me to show the exact reason for not filing the counterclaim.

61. The Claimant submitted further evidence of the work carried out in favour of the Defendants such as representing them in the CFI Claim by attending the Case Management Conference on 5 December 2023 (as evidenced in the order issued by the court), and the submission of a successful application of setting aside a default judgment entered against the Defendants and filing a defence in respect of the CFI Claim.

62. In addition, numerous phone calls and meetings were conducted with the parties to discuss the progress of the CFI Claim. Therefore, the Defendants’ allegation that the Claimant did not carry out its work diligently in the CFI Claim is denied as almost all of the emails submitted by the Claimant pertain to the progression of the CFI Claim.

63. It is important to note that the Defendants did not raise any objections to the quality of the work performed by the Claimant prior to receiving the Invoices or even after. The only objection received after is that the Claimant failed to file a counterclaim.

64. Further to the Claimant’s email of 15 December 2023, it appears that the Claimant was waiting for the conclusion of an expert report form the Defendants to prepare and consider the counterclaim. That being said, it did not refuse or neglect to file the counterclaim.

65. Therefore, I am of the view that the Invoices are due and payable in the full amount of AED 485,970. To summarise, this is because of the parties’ agreement for fees to be charged on an hourly basis, the extensive works completed, the re-instruction of the Claimant on another matter for a fixed fee, and the lack of complaint from the Defendants regarding the quality of the Claimant’s work..

Findings

66. The Defendants shall pay the Claimant the amount of AED 485,970.

67. Simple interest shall accrue at the rate of 9% per annum on the above-mentioned amount from the date of this Judgment until date of full payment in accordance with DIFC Practice Direction No. 4 of 2017.

68. Given that the Claimant has been successful in all of its claim then it is entitled to recover the filing fee. As such, the Defendants shall pay the Claimant the DIFC Courts’ filing fee in the amount of AED 24,298.