What was the specific nature of the contractual dispute between Makisa Management and Makan LLC regarding the AED 19,000 claim?
The dispute arose from a consultancy relationship established in the spring of 2020. The parties had entered into a formal arrangement for social media management services, but the relationship soured by October of that year, leading to a claim for unpaid fees.
On 1 May 2020, the parties entered into a written agreement whereby the Defendant appointed the Claimant as its sole consultancy and communication agency for social media management (the “Agreement”).
Following the termination of this arrangement, the Claimant initiated proceedings in the Small Claims Tribunal (SCT). The core of the dispute centered on whether the Defendant had lawfully terminated the contract or if their actions constituted a breach of the agreed-upon notice period.
On 10 November 2020, the Claimant filed a Claim with the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking the payment of sums allegedly owed to the Claimant by the Defendant for an alleged breach of the Agreement in the sum AED 19,000.
The Claimant argued that while an initial notice was provided, the subsequent move to terminate the contract with immediate effect deprived them of the compensation they were contractually entitled to receive for the two-month notice period. The Defendant contested this, asserting that the Claimant’s performance failures justified an immediate cessation of the contract without further payment.
Which judge presided over the Makisa Management v Makan LLC hearing in the DIFC Small Claims Tribunal?
The matter was heard and determined by SCT Judge Delvin Sumo. Following an unsuccessful consultation before SCT Judge Hayley Norton on 18 November 2020, the case was referred to Judge Sumo for a formal hearing, which took place on 13 December 2020. The final judgment was subsequently issued on 21 December 2020.
What were the competing legal arguments advanced by Makisa Management and Makan LLC regarding the termination of the consultancy agreement?
The Claimant, Makisa Management, argued that the Defendant’s conduct was inconsistent and ultimately breached the terms of their written agreement. They pointed to two distinct communications from the Defendant: an initial email on 18 October 2020, which appeared to respect the two-month notice period, followed by a contradictory email on 27 October 2020 that purported to terminate the agreement with immediate effect.
The Claimant submits that the Defendant terminated the Agreement by way of an email dated 18 October 2020, whereby the Defendant also provided the Claimant with two months’ notice period pursuant to Clause 3 of the Agreement.
The Claimant further submits that the Defendant also terminated the Agreement with immediate effect by way of an email dated 27 October 2020.
Conversely, the Defendant, Makan LLC, contended that their actions were justified by the Claimant’s poor performance. They argued that the Claimant had exhibited "numerous incidents of incompetence and gross negligence," which they claimed rendered the continued performance of the contract impossible. The Defendant’s position was that they should not be forced to adhere to a notice period when the service standards—which they alleged were central to the agreement—had not been met. They further maintained that they had initially attempted an amicable termination that would have extended until 1 January 2021, but the Claimant’s alleged failures necessitated an immediate exit.
What was the jurisdictional question the SCT had to resolve regarding the opt-in clause in the Makisa Management v Makan LLC agreement?
The Court was required to determine whether it possessed the requisite authority to adjudicate a dispute between two entities that were registered in Dubai but not necessarily within the DIFC. The jurisdictional issue turned on whether the parties had effectively "opted-in" to the DIFC Courts' jurisdiction through their written agreement.
Under Article 5(A) of the Judicial Authority Law (Dubai Law No. 12 of 2004), the DIFC Courts typically exercise jurisdiction over matters with a clear DIFC nexus. However, the Court had to confirm if Clause 15 of the Agreement constituted a valid and binding submission to the exclusive jurisdiction of the DIFC Courts, thereby allowing the SCT to hear the claim despite the lack of an inherent DIFC connection. The Court affirmed that such an opt-in provision is valid provided it clearly demonstrates the parties' intention to submit to the DIFC Courts.
How did Judge Delvin Sumo apply the test for gross negligence to the performance failures alleged by Makan LLC?
Judge Sumo applied a strict interpretation of the contractual obligations, finding that the Defendant’s allegations of incompetence did not reach the legal threshold required to justify immediate termination without notice. The Court examined the evidence provided by the Defendant regarding missed deadlines and late email responses.
I find that late responses to emails and/or missing and delaying deadlines due to unforeseen personal circumstances do not constitute gross negligence under the Agreement.
The Court reasoned that while the Defendant may have been dissatisfied with the quality of service, such dissatisfaction did not equate to the "gross negligence" required to bypass the notice period stipulated in the contract. By failing to prove that the Claimant’s conduct was sufficiently egregious to warrant immediate termination, the Defendant remained bound by the notice provisions of the Agreement.
Which specific DIFC statutes and legal provisions were applied by the Court in Makisa Management v Makan LLC?
The Court relied on the following legislative framework:
- Judicial Authority Law (Dubai Law No. 12 of 2004), Article 5(A): This was the primary authority used to establish the Court's jurisdiction. Specifically, the Court utilized the "opt-in" principle, which allows parties to submit to the DIFC Courts' jurisdiction even in the absence of a direct DIFC nexus, provided there is a clear written agreement to that effect.
- DIFC Contract Law (DIFC Law No. 6 of 2004), Clause 87.1: While the judgment focused heavily on the interpretation of the specific notice period clause (Clause 3 of the Agreement), the Court’s reasoning was underpinned by the general principles of contract law governing performance and breach within the DIFC.
How did the Court interpret the "opt-in" clause found in Clause 15 of the Agreement?
The Court interpreted Clause 15 as a definitive expression of the parties' intent to confer exclusive jurisdiction upon the DIFC Courts. The Court noted that the clause was unambiguous, stating:
"This Agreement is covered by and is to be construed in accordance with the Courts of the Dubai International Financial Centre and each party hereby irrevocably agrees to submit to the exclusive jurisd"
By citing this provision, Judge Sumo concluded that the parties had successfully invoked the DIFC Courts' jurisdiction under Article 5(A)(e) of the Judicial Authority Law. This interpretation underscores the principle that the DIFC Courts will respect and enforce party autonomy in choosing a forum, provided the language of the contract is clear and unequivocal.
What was the final disposition and the specific monetary relief ordered by the SCT in this matter?
The Court found in favor of the Claimant, ruling that the Defendant had breached the notice period requirements of the Agreement. Consequently, the Defendant was ordered to compensate the Claimant for the full value of the notice period that was denied.
Therefore, I find that the Claimant is entitled to be paid the amount of AED 19,000 in lieu of the two months’ notice period pursuant to Clause 3 of the Agreement.
In addition to the principal sum of AED 19,000, the Court ordered the Defendant to pay the Claimant the DIFC Courts’ filing fee, amounting to AED 997.49, bringing the total judgment amount to AED 19,997.49.
What are the wider implications of this ruling for practitioners drafting consultancy agreements in the DIFC?
This case serves as a reminder that "gross negligence" is a high bar to clear in the context of service-based contracts. Practitioners should advise clients that dissatisfaction with service quality, including missed deadlines or slow communication, is rarely sufficient to justify immediate termination without notice unless the contract explicitly defines such failures as material breaches or gross negligence.
For litigants, the case reinforces that the DIFC Courts will strictly enforce notice periods. If a party wishes to terminate a contract immediately due to performance issues, they must ensure they have robust evidence of conduct that meets the legal standard of gross negligence, rather than mere operational inefficiency. Furthermore, the case confirms the efficacy of standard "opt-in" clauses in ensuring that disputes can be resolved within the DIFC Courts even when the underlying business activities occur outside the DIFC.
Where can I read the full judgment in Makisa Management v Makan LLC [2020] DIFC SCT 393?
The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/makisa-management-v-makan-llc-2020-dis-sct-393
Legislation referenced:
- Judicial Authority Law, Dubai Law No. 12 of 2004, Article 5(A)
- Contract Law, DIFC Law No. 6 of 2004, Clause 87.1