LUHART v LIFAN [2022] DIFC SCT 135 — Dismissal of renewed application for permission to appeal (12 December 2022)

What was the specific monetary dispute and the underlying contractual disagreement between Luhart and Lifan?

The dispute originated from a construction agreement dated 30 May 2021, under which the Claimant, Luhart, was engaged to fabricate and supply powder-coated aluminium mesh doors for the Spanish Pavilion. Following the execution of the agreement, the Claimant identified that the specified aluminium doors were unavailable in the UAE market. To avoid frustration of the contract, the Claimant proposed a substitution with GI mesh doors, which necessitated additional works, including heavy-duty rollers and modified tracks.

The core of the litigation concerned the Claimant’s entitlement to an additional AED 19,506.90 resulting from this variation. While the original judgment awarded the Claimant a total of AED 114,698.56, the Defendant sought to appeal specifically regarding the variation order, arguing that they never consented to the substitution or the associated price increase. As noted in the court records:

The Judgment was granted in favour of the Claimant awarding them an amount of AED 114,698.56 together with the Claimant’s Court fees.

The Defendant contended that the Claimant acted unilaterally, asserting that the absence of written approval for the variation absolved them of liability for the additional costs.

Which judge presided over the Renewed Application for PTA in the DIFC Small Claims Tribunal?

The Renewed Application for Permission to Appeal was heard and determined by H.E. Deputy Chief Justice Ali Al Madhani. The order was issued on 12 December 2022, following a hearing held on 7 November 2022, which reviewed the Defendant’s attempt to challenge the earlier judgment delivered by H.E. Justice Maha Al Mheiri on 10 August 2022.

What were the specific legal arguments advanced by Lifan regarding the variation order and the alleged lack of consent?

The Defendant, Lifan, argued that they were not liable for the additional AED 19,506.90 on three primary grounds. First, they maintained that they never provided formal consent to the variation order. Second, they alleged that even if notice was provided, it was insufficient given the time constraints surrounding the opening of the Spanish Pavilion. Third, they argued that there was no evidence of a request for such a variation originating from the Defendant.

The Defendant’s position relied heavily on the absence of a signed document approving the change, characterizing the Claimant’s actions as a unilateral breach of the original agreement. As summarized in the court’s findings:

Based on the above, the Defendant considers that they should not be liable in paying the additional amount of AED 19,506.90.

In opposition, the Claimant contended that verbal approval had been obtained during project meetings and that the Defendant’s subsequent acceptance of the GI mesh doors on-site constituted an acceptance of the variation by conduct.

What was the precise doctrinal issue the court had to resolve regarding the Renewed Application for PTA?

The court was tasked with determining whether the Defendant had met the threshold for permission to appeal under the Rules of the DIFC Courts (RDC). Specifically, the court had to decide if the Defendant had provided sufficient evidence to challenge the original findings of fact regarding the variation order and whether the Defendant had identified a clear legal basis for the appeal. The doctrinal focus was on the burden of proof required to overturn a Small Claims Tribunal judgment and whether the conduct of the parties—specifically the acceptance of goods—could legally override the absence of a written variation agreement.

How did H.E. Deputy Chief Justice Ali Al Madhani apply the doctrine of acceptance by conduct to the variation order?

The court reasoned that the Defendant’s conduct in accepting delivery of the GI mesh doors and allowing the installation to proceed on the Spanish Pavilion project effectively signaled their agreement to the variation, regardless of the lack of a formal written signature. The judge emphasized that the Claimant had proactively notified the Defendant of the supply issues and the potential cost implications.

The reasoning focused on the reality of the site operations, where the Defendant allowed the Claimant to perform the "Proposed Works" despite being aware of the market constraints. As stated in the judgment:

it was inferred that the supply of the GI mesh doors, albeit expensive, had been accepted by the Defendant by way of conduct, when it accepted delivery of the GI mesh doors and allowed the Proposed Wo

Consequently, the court found that the Defendant’s attempt to retroactively reject the cost of the variation was inconsistent with their actions on the ground.

What specific RDC rules and procedural requirements governed the Defendant’s application for permission to appeal?

The primary procedural authority cited was RDC 53.91, which governs the burden of proof for parties seeking to appeal decisions within the Small Claims Tribunal. The court noted that the Defendant had previously attempted to appeal the judgment on 11 August 2022, but that application was dismissed due to a failure to meet the requirements of this rule.

The court highlighted that the Defendant’s renewed application failed to rectify the deficiencies of the first attempt. The court noted:

On the 11 August 2022, the Defendant applied for permission to appeal the Judgment (the “First Permission to Appeal”) and it was dismissed due to the Defendant’s inability in discharging its burden of proof under RDC 53.91.

Furthermore, the court referenced the timeline of the Claimant’s notifications, specifically the letter dated 23 August 2021, where the Claimant explicitly requested the Defendant’s:

“earliest [...] approval to proceed accordingly”.

How did the court utilize the evidentiary timeline to dismiss the Defendant’s claims of insufficient notice?

The court utilized the correspondence timeline to demonstrate that the Defendant was fully aware of the supply chain difficulties well before the project deadline. By citing the 27 July 2021 Variation Letter, the court established that the Claimant had acted in good faith to mitigate the impact of the aluminium shortage.

The court noted that the Defendant had been alerted as early as 27 July 2021 to the supply issues surrounding the aluminium mesh doors in the UAE market. This evidence undermined the Defendant’s argument that they were blindsided by the variation or that the notice provided was insufficient. The court’s reliance on these documents served to validate the Claimant’s transparency and highlight the Defendant’s failure to object at the time the alternative materials were proposed.

What was the final disposition of the Renewed Application for PTA and the specific orders regarding costs?

The court dismissed the Renewed Application for Permission to Appeal in its entirety, confirming the original judgment in favor of the Claimant. The court ordered the Defendant to bear the costs of the proceedings related to the appeal.

The order regarding costs was explicit:

The Appellant shall pay the Claimant’s costs for defending this application on a standard basis, or assessed by the Registrar, if not agreed.

This outcome ensured that the Claimant was not financially prejudiced by the Defendant’s unsuccessful attempts to challenge the quantum of the award.

How does this ruling change the practice for construction contractors and developers in the DIFC?

This case serves as a critical reminder that in the DIFC, silence or inaction in the face of a notified variation—coupled with the acceptance of performance—can be legally interpreted as acceptance by conduct. Practitioners should advise clients that the absence of a signed variation order is not an absolute defense against payment claims if the client has permitted the work to proceed.

Litigants must anticipate that the DIFC Courts will prioritize the practical reality of project delivery over technical formalities when evidence of notice and subsequent acceptance is clear. Furthermore, the case underscores the high threshold for permission to appeal under RDC 53.91; parties must present a robust, evidence-backed case at the first instance, as the court will not permit "second bites at the cherry" based on arguments that were or could have been raised during the initial trial.

Where can I read the full judgment in Luhart v Lifan [2022] DIFC SCT 135?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/luhart-v-lifan-2022-difc-sct-135

CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/small-claims-tribunal/DIFC_SCT-135-2022_20221212.txt

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC), Rule 53.91