The Small Claims Tribunal (SCT) clarifies the evidentiary burden in construction disputes, ruling that a contractor is entitled to full payment when an independent expert report confirms work completion and refutes allegations of defective workmanship.
How did the SCT determine the quantum of the claim in LICFT v LASUT [2022] DIFC SCT 293?
The dispute centered on a construction contract for the supply and application of corten steel imitation paint finish for an Expo 2020 project. The Claimant, Licft, sought recovery of AED 147,903, representing the balance of the contract value and additional variation works, after accounting for an initial payment of AED 29,400. The Defendant, Lasut, contested the amount, arguing that the work was defective and that significant rectification costs should be deducted from the final payment.
The procedural history of the claim began in mid-2022:
On 29 July 2022, the Claimant filed a claim with the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking payment of the amount of AED 147,903.
The court was tasked with reconciling the Claimant’s demand for the full contract balance against the Defendant’s assertion that the Claimant was entitled to only AED 17,422.45 due to alleged defects and scope omissions. The final determination relied heavily on the findings of an independent expert appointed by the court to verify the quality and extent of the works performed.
Which judge presided over the SCT hearing in LICFT v LASUT [2022] DIFC SCT 293?
The matter was heard before H.E. Justice Nassir Al Nasser in the Small Claims Tribunal of the DIFC Courts. Following a consultation before SCT Judge Ayman Mahmoud Saey on 16 August 2022 that failed to produce a settlement, the substantive hearing took place on 9 September 2022. Justice Al Nasser subsequently issued the judgment on 1 November 2022.
What were the primary legal arguments advanced by LICFT and LASUT regarding the purchase order?
The Claimant, Licft, argued that it had fully performed its obligations under the Purchase Order (PO-0094) dated 4 May 2021. It maintained that the total contract value, combined with approved variation works, justified the outstanding claim of AED 147,903. The Claimant’s position was that the work was completed in accordance with the specifications provided by the Defendant.
Conversely, the Defendant, Lasut, contended that the work was substandard. It argued that it had incurred significant costs to rectify the alleged defects, which it sought to offset against the contract price. The Defendant’s position was:
The Defendant claims that the works carried out by the Claimant are defective and it has suffered to rectify the problems and therefore the Claimant is only entitled to payment in the amount of AED 17,422.45 (excluding VAT).
Additionally, the Defendant argued that certain items had been omitted from the scope of work, further reducing the amount owed.
Did the SCT have jurisdiction to hear the dispute between LICFT and LASUT?
The court had to determine whether the Purchase Order contained a valid and enforceable jurisdiction clause conferring authority upon the DIFC Courts. Justice Al Nasser examined the agreement and confirmed that the parties had explicitly consented to the DIFC Courts' jurisdiction in the event of a dispute.
First and foremost, I find that the relevant Agreement falls under the DIFC Courts’ jurisdiction as the Agreement states at Article 14 of the Agreement: “14.
This finding was crucial, as it established that the SCT was the appropriate forum to resolve the contractual disagreement, including questions regarding the validity and termination of the Purchase Order, despite the parties being registered in Ras Al Khaimah and Abu Dhabi respectively.
How did Justice Al Nasser utilize the independent expert report to resolve the conflict over alleged defects?
Justice Al Nasser adopted a proactive approach to evidence, ordering an independent expert report to address three specific questions: whether the works were completed, whether the defects were caused by the Claimant, and whether the Claimant had rectified any issues. The expert’s findings were pivotal in dismissing the Defendant’s claims for deductions.
The court found that the alleged defects were not the fault of the Claimant, but rather a result of the materials specified in the contract. The reasoning was clear:
The Claimant carried out the works in accordance with the Purchase Order and it is now seeking payment of the outstanding amount of AED 147,903 (including VAT) and variation work.
The expert report confirmed that the Claimant had completed 100% of the work. Because the "non-uniform surface visibility" was attributed to the specification of the materials rather than poor workmanship, the court rejected the Defendant’s attempt to deduct rectification costs from the final payment.
Which specific contractual claims and variations were considered by the court?
The court evaluated the breakdown of the claim, which included the original contract value and alleged variations. The Claimant’s calculation was:
The Defendant has already paid the sum of AED 29,400, therefore, the remining claimed sum by the Claimant falls to be in the amount of AED 147,903.
The court also scrutinized the specific claims regarding variations and scope omissions:
(b) The Claimant submitted to the Defendant a claim in regards to an alleged variation order for an amount of AED 28,860 excluding VAT.
However, the court noted that the expert was unable to verify these variations due to a lack of supporting documentation, such as formal approvals or instructions from the Defendant. Similarly, regarding the Defendant's claim for omissions:
(c) The Defendant alleges that on assessment of a final account some items have been omitted from the Claimant’s scope of work equaling to the value of AED 12,908 (excluding VAT).
The expert was unable to substantiate these omissions due to the absence of agreed-upon cancellation instructions.
What was the final disposition and monetary award in LICFT v LASUT [2022] DIFC SCT 293?
The court allowed the claim in part. While the Claimant did not succeed in recovering the full amount of AED 147,903 due to the lack of documentation regarding variation orders and scope adjustments, the court rejected the Defendant’s attempt to withhold payment based on alleged defects.
The final order required the Defendant to pay the Claimant the sum of AED 114,698.56. Furthermore, the court ordered the Defendant to pay the Claimant’s court fees in the amount of AED 5,738.84, reflecting the successful nature of the claim regarding the primary contract balance.
How does this ruling influence the handling of construction disputes in the DIFC SCT?
This judgment reinforces the necessity of robust documentation in construction contracts, particularly regarding variation orders and scope changes. Practitioners should note that the SCT will rely heavily on independent expert reports to resolve technical disputes. If a party alleges defects, they must provide clear evidence that the defects resulted from the contractor's failure to follow specifications, rather than the specifications themselves. The inability of the expert to verify variations due to a lack of written approval serves as a warning to contractors to ensure all changes to the scope of work are formally documented and signed by both parties.
Where can I read the full judgment in LICFT v LASUT [2022] DIFC SCT 293?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/licft-v-lasut-2022-difc-sct-293
CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/small-claims-tribunal/DIFC_SCT-293-2022_20221101.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- DIFC Courts Law
- Rules of the DIFC Courts (RDC)