Did Femke Company establish a valid claim for USD 50,000 against Feliks Corporation and Feliks Middle East?
The dispute centered on an alleged breach of a Consulting Service Agreement dated 17 September 2011. The Claimant, Femke Company, sought payment of USD 50,000, asserting that it had performed the required consulting services for the Defendants. According to the Claimant, the agreement stipulated that half of the fee would be paid in cash and the remaining half in preferred shares.
The Claimant’s position was that the work had been completed and the "required materials" delivered. However, the Defendants refused to fulfill the payment obligations, specifically failing to nominate the preferred shares. As noted in the court record:
The Defendants had refused to pay, which had led the Claimant to file this case before the Court.
The Claimant further alleged that the Second Defendant had already made a partial payment by cheque, which it interpreted as an acknowledgment of the debt. Despite these assertions, the Claimant failed to provide the necessary documentation to link its specific corporate entity to the contract in question.
Which judge presided over the SCT hearing in Femke Company v Feliks Corporation?
The matter was heard before H.E. Justice Shamlan Al Sawalehi in the Small Claims Tribunal (SCT) of the DIFC Courts. The hearing took place on 01 July 2015, with the final judgment issued on 24 August 2015.
What were the specific arguments regarding corporate identity and contractual privity raised by the parties?
The Claimant argued that it had entered into a Consulting Service Agreement with Feliks Corporation, which was signed by the Executive Chairman of Feliks Middle East. The Claimant’s argument regarding the formation of this contract was summarized by the court as follows:
In the Claimant’s Particulars of Claim, the Claimant argued that his Company Client Femke entered into a Consulting Service Agreement dated 17 September 2011 with Feliks Corporation (First Defendant) which was duly signed by the Executive Chairman of Feliks Middle East (the Second Defendant) and at that time was the Executive Chairman of Feliks Corporation (the First Defendant).
Conversely, the Second Defendant challenged the Claimant’s standing, arguing that the Claimant was a UAE-registered entity, whereas the contract was purportedly signed by a UK-registered entity. The Second Defendant further contended that the agreement was never properly countersigned by the First Defendant’s representative, Filippa, and that no payments were ever made from the DIFC or Dubai branch to the Claimant.
What was the central legal question regarding the Claimant’s standing to sue under the Consulting Service Agreement?
The Court was tasked with determining whether the Claimant—a UAE-registered entity—possessed the legal standing to enforce a contract that appeared to be executed by a different, UK-registered entity. The core issue was whether the Claimant could establish privity of contract or a clear legal relationship with the Defendants that would entitle it to the claimed USD 50,000. The Court had to decide if the evidence provided by the Claimant was sufficient to overcome the discrepancy between the entity named in the contract and the entity bringing the claim.
How did Justice Shamlan Al Sawalehi apply the doctrine of separate legal identity to the Claimant’s case?
Justice Al Sawalehi focused on the fundamental principle that corporate entities are distinct legal persons. The Court found that the Claimant had failed to prove it was the same entity as the "Femke Consultancy Inc." mentioned in the agreement. The judge emphasized that the Claimant could not simply step into the shoes of another entity without evidence of assignment or a clear contractual link.
The reasoning was grounded in the necessity of maintaining corporate boundaries:
I have found that the Claimant has built its Claim on the alleged Consulting Service Agreement in its Particulars of Claim, but has failed to establish first its contractual or legal relationship with the parties of such agreement mainly its relationship with the Consultant in the agreement, the Femke Consultancy Inc. A different entity shall have a separate legal Identity and may sue and be sued in such capacity.
Furthermore, the Court noted the lack of financial evidence linking the Defendants to the Claimant. The judge highlighted the absence of proof regarding payments made to the specific entity bringing the claim:
Moreover, I have noticed that the Claimant has not provided any evidence of payment made by the Second Defendant to Femke Consultancy Company (the Claimant Company) related to the alleged Consulting Service Agreement.
What specific evidence did the Claimant rely upon to support its claim for USD 50,000?
The Claimant relied on the terms of the agreement, which specified the payment structure:
In the said agreement, both parties agreed that the (First Defendant) would make payment in the amount of USD 50,000 to the Claimant’s Client for work performed in accordance with the Consulting Agreement, as agreed in the amount of USD 25,000 would be given in cash and the remaining amount of USD 25,000 in preferred shares nominated by the First Defendant to the Claimant.
The Claimant also pointed to the fact that the First Defendant had directed it to Canada to settle accounts, which the Claimant interpreted as an admission of liability. Additionally, the Claimant argued that the first half of the payment had been made by cheque, though the Court found this evidence insufficient to establish a binding relationship with the specific Claimant entity.
How did the Court address the Claimant’s assertion that the work had been completed?
The Court acknowledged that the Claimant and Mr. Finch may have performed work for the Defendants, as evidenced by draft business plans and investment proposals. However, the Court held that this work, in isolation, did not create a legal obligation for the Defendants to pay the Claimant under the specific agreement cited. The Court concluded that the evidence was insufficient to establish a contractual or legal responsibility, especially given that the agreement was not signed by the parties as claimed and the Claimant was not a party to the document.
What was the final disposition of the claim and the Court’s order?
The Court rejected the Claimant’s claim in its entirety. The judgment noted that no settlement was reached between the parties during the consultation phase, leading to the adjudication. The final order was:
No settlement was reached by the parties at the end of the consultation and, consequently, the case was sent for adjudication.
Consequently, the Claimant was denied the requested USD 50,000, as it failed to meet the burden of proof required to establish a valid contractual relationship with the Defendants.
What are the wider implications of this ruling for DIFC practitioners?
This case serves as a reminder that the DIFC Courts maintain a strict adherence to corporate personality and the requirement for clear contractual privity. Practitioners must ensure that the entity filing the claim is the exact entity named in the underlying contract. If there is a discrepancy—such as a difference between a UK-registered entity and a UAE-registered entity—the Claimant must provide explicit evidence of how the rights and obligations under the contract were transferred or assigned to the current claimant. Failure to do so will result in a dismissal of the claim, regardless of whether work was actually performed.
Where can I read the full judgment in Femke Company v (1) Feliks Corporation (2) Feliks Middle East [2015] DIFC SCT 017?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/femke-company-v-1-feliks-corporation-2-feliks-middle-east-2015-difc-sct-017
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external precedents were cited in this SCT judgment. |
Legislation referenced:
- DIFC Court Law
- Rules of the DIFC Courts (RDC)