What was the nature of the dispute between Likhil and the Defendants, Lakshin and Laabh, regarding the AED 40,000 promissory note?
The dispute centered on a financial arrangement between the Claimant, Likhil, and the two Defendants, Lakshin and Laabh. The parties entered into a Promissory Note dated 23 August 2021, under which the Claimant advanced AED 20,000 to each Defendant as a recoverable retainer fee. The repayment of these funds was strictly conditional upon the Defendants meeting specific fundraising targets. Specifically, the Defendants were required to secure USD 25 million each by 15 December 2021.
The Claimant initiated the lawsuit on 2 November 2021, alleging that the Defendants failed to meet these targets. While the Defendants did secure an initial sum of USD 315,000 from a client named "Lohit," that client subsequently terminated the agreement and requested a full refund of the investment. Consequently, the Claimant sought the immediate repayment of the AED 40,000 advanced to the Defendants. As noted in the court file:
The underlying dispute arises in regard to the Claimant’s claim filed on 2 November 2021, in connection with the Promissory Note dated 23 August 2021 (“Promissory Note”).
The Claimant argued that because the fundraising targets were not met and the funds were subject to a refund, the Defendants were in breach of the Promissory Note and liable for the full amount on demand.
Which judge presided over the SCT hearing for Likhil v Lakshin and when was the judgment issued?
The matter was heard before H.E. Justice Nassir Al Nasser in the Small Claims Tribunal (SCT) of the DIFC Courts. The hearing took place on 19 December 2021, and the final judgment was issued on 28 December 2021.
What were the specific legal arguments advanced by the Defendants regarding the Head of Terms and their counterclaim for USD 9,450?
The Defendants did not deny the existence or the terms of the Promissory Note. Instead, they relied on a separate document, the "Head of Terms," issued by the Claimant on 15 July 2021. They argued that this document entitled them to a 3% commission on any funds they raised for the Claimant.
The Defendants asserted that because they had successfully raised USD 315,000 from Lohit, they were entitled to a commission of USD 9,450. During the hearing, the Defendants attempted to leverage this counterclaim as a settlement tool, proposing that the Claimant’s claim for AED 40,000 should be extinguished if the Claimant paid them the 3% commission. As the court record indicates:
The Defendants filed a counterclaim claiming the 3% of the USD 315,000 raised by them to the Claimant which calculates to USD 9,450.
The Defendants maintained that the commission was earned upon the act of raising the funds, regardless of the subsequent termination of the agreement by the investor.
What was the precise doctrinal issue the Court had to resolve regarding the interplay between the Promissory Note and the Head of Terms?
The Court was tasked with determining whether the Defendants’ failure to meet the primary fundraising targets (USD 25 million each) triggered an absolute obligation to repay the advanced retainer, and whether the "Head of Terms" created an independent, unconditional right to commission despite the failure to meet those targets. The jurisdictional and doctrinal question was whether the commission clause in the Head of Terms could be severed from the performance requirements stipulated in the Promissory Note, or if the commission was inherently conditional upon the successful and permanent closing of the funds.
How did Justice Nassir Al Nasser apply the test of performance-based liability to the Defendants' counterclaim?
Justice Nassir Al Nasser reasoned that the Defendants’ entitlement to commission was not absolute but was contingent upon the achievement of the agreed-upon targets. The Court found that the "Head of Terms" was intended to reward the successful closing of funds, not merely the solicitation of funds that were ultimately refunded.
Because the client, Lohit, had terminated the agreement and demanded a refund of the USD 315,000, the Court concluded that the Defendants had not achieved the necessary performance to trigger the commission payment. The judge emphasized that the Promissory Note’s repayment terms were triggered by the failure to close the required USD 25 million. As the judgment states:
I find that the Defendants are therefore liable jointly and severally to pay the Claimant the total sum of AED 40,000 pursuant to their failure to achieve the closing of the USD 25 million each.
The Court effectively held that the Defendants could not claim a commission on funds that were never successfully "closed" or retained by the Claimant.
Which specific provisions of the Promissory Note and the SCT procedures were cited by the Court in Likhil v Lakshin?
The Court relied on the "Payment Terms" clause of the Promissory Note, specifically Clause 4, which states: “Payment Terms – Due on Demand. Any payments received will be applied first to outstanding late fees, if any, next to interest, if any, and thereafter to the unpaid principal balance of the loan.”
Furthermore, the procedural conduct of the case was governed by the rules of the Small Claims Tribunal, as noted in the judgment:
In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a Hearing held on 19 December 2021, at which the Claimant and the Defendants were in attendance.
How did the Court interpret the "Head of Terms" in relation to the Defendants' claim for commission?
The Court examined the "Head of Terms" to determine if it created a standalone right to payment. The Defendants had argued that the document entitled them to 3% of "any funds raised." However, the Court looked at the context of the agreement, noting that the Claimant had accepted the Head of Terms but argued that the commission was subject to the successful completion of the fundraising targets.
The Court highlighted the specific language regarding the benefits to the Defendants:
However, the Defendant’s allege that on 15 July 2021 the Claimant has issued a Head of Terms wherein the benefits to the Defendants were: “the Claimant to pay 3% of fees of any funds raised by the Defendants”.
The Court concluded that since the underlying funds were subject to a refund request and the targets were not met, the commission was not payable.
What was the final disposition of the case and the specific monetary orders made by the SCT?
The Court allowed the Claimant’s claim in full and dismissed the Defendants' counterclaim. The Defendants were ordered to pay the Claimant the principal sum of AED 40,000. Additionally, the Defendants were ordered to pay the court fees incurred by the Claimant. The final order was:
The Defendants jointly and severally shall pay the Claimant the sum of AED 40,000.
The Court also ordered the Defendants to pay the Claimant the court fee in the sum of AED 2,000.
What are the practical implications of this ruling for practitioners drafting fundraising agreements in the DIFC?
This judgment serves as a reminder that performance-based commission clauses are interpreted in the context of the entire commercial agreement. Practitioners must ensure that "Head of Terms" or similar preliminary documents clearly define whether commissions are payable upon the procurement of funds or the successful closing of funds.
The case reinforces that where a promissory note is tied to specific performance targets, the failure to meet those targets will likely result in the immediate enforceability of repayment obligations. Litigants should anticipate that the DIFC Courts will look to the substance of the commercial deal—specifically whether the funds were actually retained—rather than just the literal wording of a commission clause, when determining if a target has been met.
Where can I read the full judgment in Likhil v Lakshin [2021] DIFC SCT 322?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/likhil-v-1-lakshin-2-laabh-2021-disct-322
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 Courts Small Claims Tribunal Rules and Procedures