What was the nature of the dispute between Miklay and Midhal regarding the AED 41,343.75 claim for unpaid consultancy fees?
The dispute arose from a Consultancy Service Agreement dated 23 July 2022, under which the Claimant, Miklay, provided services to the Defendant, Midhal. The Claimant sought payment for services rendered between 1 February 2023 and 7 April 2023, alleging that the Defendant had terminated the agreement on invalid grounds and failed to settle outstanding invoices. The Defendant contested the claim, arguing that the Claimant’s mismanagement as Project Manager caused significant project delays, thereby negating the Claimant’s entitlement to the monthly fees billed during the extended period.
Therefore, the Claimant seeks the total sum of AED 41,343.75 including delayed payment interest in accordance with clause 4.6 of the Agreement and the reimbursement of the Court fees.
The core of the disagreement centered on whether the project delays were attributable to the Claimant’s failure to communicate information regarding Landlord approvals or whether the responsibility for obtaining such approvals rested solely with the Defendant. The Claimant maintained that its scope of work was strictly defined and did not encompass the direct interior or mechanical design appointments that were the subject of the Landlord's rejections.
Which judge presided over the SCT 221/2023 hearing and when did the proceedings take place?
The matter was heard before H.E. Justice Nassir Al Nasser in the DIFC Small Claims Tribunal. The hearing took place on 24 July 2023, with the final judgment issued on 16 August 2023.
What were the primary legal arguments advanced by Miklay and Midhal regarding the project delays and payment obligations?
The Claimant argued that the project delays were caused by the Defendant’s repeated requests for design changes, specifically regarding the "sheesha area," which were subsequently rejected by the Landlord, Mekht. Miklay asserted that under clause 3.3 of the Agreement, the burden of obtaining Landlord NOCs and municipal approvals fell squarely on the Defendant. Conversely, the Defendant argued that the Claimant, acting as Project Manager, withheld critical information from the Landlord regarding the sheesha expansion, which led to the project stalling.
The Defendant submits that the total sum of AED 210,000 was the design phase (which required the Landlord’s approval) and the construction phase.
The Defendant further contended that the Claimant deliberately mismanaged the project to extend the timeline and continue billing monthly rates. The Defendant argued that because the Claimant allegedly failed to pass on information from the Landlord, the project was delayed from July 2022 to March 2023, and therefore, the Claimant was not entitled to payment for the period between 23 February 2023 and 7 April 2023.
What was the specific doctrinal question the Court had to resolve regarding the interpretation of clause 3.3 of the Consultancy Service Agreement?
The Court was tasked with determining the allocation of contractual risk regarding regulatory compliance. Specifically, the Tribunal had to decide whether the Claimant’s duty to "manage the landlord submissions" under clause 3.3 of the Agreement created a fiduciary or contractual obligation to ensure the success of those submissions, or if the primary responsibility for obtaining approvals remained with the Client (the Defendant), thereby insulating the Claimant from liability for rejections caused by the Defendant’s own design change requests.
How did H.E. Justice Nassir Al Nasser apply the contractual interpretation test to the Claimant’s performance obligations?
The Court examined the plain language of the Agreement to determine if the Claimant had breached its duties. Justice Al Nasser found that the Agreement explicitly placed the onus of obtaining approvals on the Defendant. The Court held that the Claimant’s role was limited to managing the dissemination of information, and there was no evidence that the Claimant had failed to perform this administrative task.
In light of the aforementioned, the Defendant shall pay the Claimant the sum of AED 42,296.27 (including the interest calculated above).
The Court rejected the Defendant's assertion that the Claimant was responsible for the project's failure to secure approvals. By distinguishing between the "management of submissions" and the "obtaining of approvals," the Court concluded that the Claimant had fulfilled its obligations under the Agreement and was entitled to the outstanding fees.
Which specific provisions of the Consultancy Service Agreement were central to the Court’s determination of liability?
The Court relied heavily on clause 3.3 of the Agreement, which stipulated that the Client (the Defendant) or their appointed contractor was responsible for lodging and obtaining all necessary approvals, NOCs, and permits. The Court also considered clause 4.6 regarding delayed payment interest and the definition of the Claimant’s scope of work, which the Court found did not include the specific design elements that were the primary source of the Landlord's objections.
How did the Court address the Defendant’s reliance on the alleged project delays as a defense to payment?
The Defendant attempted to rely on the argument that the Claimant’s failure to communicate Landlord feedback constituted a breach of duty. However, the Court reviewed the evidence and found that the delays were primarily driven by the Defendant’s own design changes. The Court noted that the Claimant had acted in accordance with the Agreement, and the Defendant’s attempt to shift the blame for the Landlord’s rejection of the sheesha expansion was unsupported by the contractual allocation of risk.
The Defendant in conclusion submits that such delay was within the control of the Claimant, therefore, the Claimant is not entitled to claim a monthly rate from 23 February 2023 to 7 April 2023.
The Court dismissed the Defendant's argument, finding that the Claimant was entitled to payment for the services rendered during the period in question, as the delay was not attributable to any breach of the Claimant's defined scope of work.
What was the final disposition and the specific monetary relief awarded to the Claimant in SCT 221/2023?
The Court ruled in favor of the Claimant, ordering the Defendant to pay the outstanding invoices plus interest. The total award amounted to AED 42,296.27. Additionally, the Court ordered the Defendant to reimburse the Claimant for the Court fee of AED 2,067.18.
What are the practical implications for practitioners drafting consultancy agreements in the DIFC following this ruling?
This case highlights the critical importance of clearly defining the boundary between "managing" a submission process and "obtaining" regulatory approvals. Practitioners should ensure that consultancy agreements explicitly state which party bears the risk of project delays resulting from regulatory or landlord rejections. The ruling serves as a reminder that in the absence of a clear breach of a defined scope of work, the DIFC Courts will strictly enforce payment obligations based on the literal interpretation of the contract's risk-allocation clauses.
Where can I read the full judgment in Miklay v Midhal [2023] DIFC SCT 221?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/miklay-v-midhal-2023-difc-sct-221
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external case law was cited in this SCT judgment. |
Legislation referenced:
- Consultancy Service Agreement dated 23 July 2022 (Clause 3.3, Clause 4.6, Annexure A, Annexure B)
- Rules of the Small Claims Tribunal (SCT)