The Small Claims Tribunal (SCT) affirmed the sanctity of contractual termination clauses, ruling that a party cannot unilaterally bypass a notice period based on unsubstantiated allegations of non-performance.
What was the specific monetary dispute between Mirtu and Mrawin regarding the contract dated 12 September 2022?
The dispute centered on the termination of a service agreement between Mirtu, a Dubai-based entity, and Mrawin, a company registered in the DMCC. Following the termination of their business relationship in December 2022, Mirtu initiated proceedings to recover outstanding fees linked to the contract’s notice requirements.
On 13 February 2023, the Claimant filed a Claim seeking the payment of two invoices in the sum of AED 21,000.
The core of the disagreement involved Clause 3.1 of the Agreement, which mandated a two-month written notice period for termination. Mirtu contended that Mrawin failed to honor this financial obligation upon ending the contract, leading to the claim for AED 21,000.
The underlying dispute arises in regard to an alleged breach of Contract dated 12 September 2022 (the “Agreement”) by the Defendant.
Which judge presided over the SCT 071/2023 hearing and when did the final judgment occur?
The matter was heard before H.E. Justice Nassir Al Nasser in the DIFC Small Claims Tribunal. Following a consultation process that failed to yield a settlement, the case proceeded to a formal hearing on 23 March 2023. The final judgment, which mandated the payment of the claimed amount and associated court fees, was issued on 3 April 2023.
What were the primary legal arguments advanced by Mirtu and Mrawin regarding the breach of the Agreement?
Mirtu argued that the Defendant breached the express terms of the Agreement by failing to provide the contractually required two-month notice or compensation in lieu thereof. The Claimant supported its position by submitting evidence of work performed, including event proposals, reports, and correspondence, to demonstrate that it had fulfilled its obligations under the contract.
Conversely, Mrawin argued that the Claimant’s performance was deficient, asserting that Mirtu failed to deliver the agreed-upon services. Mrawin contended that this alleged non-performance justified the immediate termination of the contract on 12 December 2022 without the requirement of a notice period. Mrawin further claimed that the alleged failure to deliver services caused them significant financial loss, thereby absolving them of the liability to pay the two-month notice fees.
Did the Defendant’s allegation of non-performance legally justify the immediate termination of the contract without notice?
The legal question before the Tribunal was whether the Defendant could unilaterally waive the notice period stipulated in Clause 3.1 of the Agreement based on a subjective claim of non-performance. The court had to determine if the Defendant had met the evidentiary burden required to prove that the Claimant’s failure to perform was so substantial that it excused the Defendant from the contractual obligation to provide two months' notice or payment in lieu thereof.
How did H.E. Justice Nassir Al Nasser apply the burden of proof to the Defendant’s claims of non-performance?
The Tribunal evaluated the evidence submitted by both parties to determine if the termination was contractually compliant. While the Claimant provided documentation of work completed, the Defendant failed to substantiate its claims of breach.
On 12 December 2022, by way of an email, the Defendant terminated the Agreement. submitting that the Claimant failed to comply with the Agreement.
The judge found that the Defendant’s assertions regarding the Claimant's failure to deliver services remained entirely unsupported by evidence. Consequently, the Tribunal held that the Defendant could not rely on an unsubstantiated breach to bypass the clear financial obligations set out in the contract.
Therefore, pursuant to clause 3.1 of the Agreement, I find that the Defendant shall pay the Claimant the two-months’ notice in the sum of AED 21,000 inclusive of the 5% VAT.
Which specific contractual provisions and procedural rules governed the Tribunal’s decision in SCT 071/2023?
The decision was primarily governed by Clause 3.1 of the Agreement, which explicitly stated: "This Contract may be terminated by the Client or the Agency on a written two-month notice stating the reason for termination. The agency will charge for any outstanding work or work that was undertaken at the time of termination." The Tribunal also operated under the standard procedural rules of the DIFC Small Claims Tribunal, which facilitate the resolution of disputes through consultation and, where necessary, formal hearings.
How did the Tribunal treat the Defendant’s defense of non-liability for the notice period?
The Tribunal rejected the Defendant's attempt to avoid payment, noting that the defense lacked the necessary evidentiary support to override the written terms of the contract.
Therefore, the Defendant submit that they are not liable to pay the Claimant the two-months-notice period and/or damages.
By failing to provide evidence of the alleged non-performance, the Defendant could not overcome the contractual requirement to pay the notice period fees. The Tribunal emphasized that the Claimant had successfully demonstrated the work performed, thereby reinforcing the Claimant's entitlement to the fees under the Agreement.
What was the final disposition and the specific monetary relief awarded to Mirtu?
The Tribunal found in favor of the Claimant, ordering the Defendant to pay the full amount claimed, inclusive of VAT, as well as the costs associated with filing the claim.
In light of the aforementioned, I find that the Defendant shall pay the Claimant the sum of AED 21,000 inclusive of 5% VAT.
The final order required the Defendant to pay AED 21,000 for the two-month notice period and an additional AED 1,050 to cover the Court fees incurred by the Claimant.
What are the practical implications for practitioners regarding termination clauses in DIFC contracts?
This judgment serves as a reminder that contractual termination clauses are strictly enforced by the DIFC Courts. Practitioners should advise clients that allegations of non-performance are insufficient to bypass notice periods unless those allegations are supported by concrete, contemporaneous evidence. Parties seeking to terminate a contract for cause must ensure they have a robust evidentiary trail before withholding payments that are otherwise contractually due.
Where can I read the full judgment in Imirtu v Mrawin [2023] DIFC SCT 071?
The full judgment is available on the official DIFC Courts website at: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/imirtu-v-mrawin-2023-difc-sct-071. The text is also archived via the CDN at: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/small-claims-tribunal/DIFC_SCT-071-2023_20230403.txt.
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external precedents cited in this judgment. |
Legislation referenced:
- Clause 3.1 of the Agreement (Termination and Notice)
- Rules of the Small Claims Tribunal (SCT)