In reaction to the consequences of the economic downturn, there
have recently been a number of legal developments in Dubai. These
developments may mark the beginning of changes to various aspects
of the existing legal framework.
The first of these developments is the establishment of a judicial
committee to consider and settle all disputes concerning bounced
cheques (issued by buyers to developers). The second is the
founding of a panel to protect the creditors of Amlak and Tamweel.
The third development is the appointment of a tribunal to oversee
any disputes arising from the Dubai World restructuring.
The Amlak/Tamweel judicial body, which was formed pursuant to Dubai
Decree 61/2009 has jurisdiction to review requests and legal claims
related to the settlement of financial issues involving Amlak or
Tamweel. One of the difficulties in evaluating the panel at this
stage is the absence of detail regarding both the principles it
will apply and the powers of enforcement it enjoys. It could be
similar to the bounced cheque committee in that decisions rendered
by panel will not be subject to appeal.
Summary
In ruling upon an action filed before the Amlak/Tamweel Special
Judicial Committee (the Committee) it was held that the Claimant, a
customer who had applied for finance, was precluded from seeking
termination under the provisions of Article 272/2 of the UAE Civil
Transactions Law.
Claim
A civil action was filed by a Purchaser (the
"Claimant") against a local finance company ("The
Defendant"). The Claimant requested the Committee to terminate
both the booking form and the Forward Lease Contract which had been
executed by the parties. The documentation related to the
Claimant's purchaser of a residential unit. In addition to
termination, the Claimant sought an order that the Defendant return
back to the Claimant the amount of AED 284,307 along with several
guarantee checks.
Facts of the claim
The Claimant alleged that it signed a booking form reserving a Unit
(with a total price amounting to AED 1,231,445) in one of the
Defendant's projects. The Claimant further submitted that it
had both paid the amount of AED 284,307 (out of the total price) to
the Defendant and had also handed over nine guarantee
cheques.
The Claimant subsequently concluded a Lease Contract (Forward
Ijara) with the Defendant in respect of the finance of the unit.
The Forward Ijara required the Defendant to deliver the unit in
October 2008. However, the Claimant submits that the Defendant:
- Failed also to register the purchase agreement with Dubai Land Department (DLD);
- Failed to deliver the Unit on time, instead claiming a delay of 10 month; and
- Failed to conclude a valid SPA with the Claimant.
As a result the Claimant initiated legal proceedings against the
Defendant for its delay in delivering the Unit.
The basis for the Claimant's case to terminate the contract was
grounded in Article 272/2 of the Civil
Transactions Law.
Court of First Instance
The Court of First Instance ruled in favor of the Claimant. The
Court decided to terminate the booking form and requested the
Defendant to pay the amount of AED 284,307 and return back the nine
guarantee cheques to the Claimant. The Defendant appealed to the
Court of Appeal.
Court of Appeal
The Defendant requested that the Court of Appeal refer the case to
the Committee as stipulated by Decree no. 61/2009. The Court of
Appeal so ordered and the case was transferred to the
Committee.
The Committee Decision
The Claimant repeated the submissions that had been presented
before the Court of First instance. The Defendant requested that
the Committee dismiss the Claimant's case on the ground that
the Defendant was willing to perform its contractual obligations
(and had so demonstrated by offering the handover of the property)
as agreed between the parties.
Furthermore, the Defendant submitted that the contract concluded
between both parties was an Ijara contract which would ultimately
result in the Claimant's full ownership of the Unit, and that
the Claimant was fully aware that the Defendant was only a
financial institution and was not the Developer of the
project.
The Defendant submitted that parties had agreed in the Booking Form
that the delivery of the property may be delayed by the developer
and that the Defendant was excluded from any liability resulting
from such delays.
Finally, the Defendant furnished the Committee with the Interim
Real Estate Registry's report dated 25 April 2010 which
confirmed the registration of the Unit with the IRER. The report
also confirmed that the Claimant was a tenant only.
The Committee rejected the Claimant's first submission that the
Defendant had failed to register the Unit in the registry of the
DLD. The Committee concluded that Articles 2, 3 and 5 of Law No. 13
of 2008 (as amended by Law No.9 of 2009) could be interpreted to
mean that all transactions involving existing properties should be
registered in the Real Estate Register. In contrast, transactions
involving off-plan properties or properties under construction
should only be registered in the IRER.
The Committee held further that the DLPD was the responsible
authority for registering the SPA (or indeed any other transactions
in the IREP) after the submission of an application from the
Defendant within the 60 days prescribed by the relevant Law, or
even after the lapse of this period. The Committee decided that the
time limit of 60 days was for "organizing purposes" only,
and was not to operate as a time bar which could render
unregistered SPA's void.
In short, the Committee held that the Defendant's completion of
the registration even after this period did not render the SPA void
and the Claimant's submission in this regard was
dismissed.
As for the Claimant's second submission, the Committee held
that article 272 of Civil Transaction Law should be interpreted
along with Article 246 of the same law (dealing with the
performance of contracts in good faith) to mean that the Committee
enjoyed the full discretion to decide whether to terminate the
Forward Ijara and Booking Form. The Committee found that the
Defendant had acted in good faith (by demonstrating its intention
to deliver the Unit). The Committee also relied upon the
parties' agreement that the Defendant was excluded from any
liability resulting from delays caused by the Developer. The
Committee held that the delivery date was merely anticipatory and
not final.
The Committee ruled in favor of the Defendant and accordingly
dismissed the Claimant's request to terminate the Booking Form
and the Forward Lease Contract.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.