In an action initially filed before Abu Dhabi Court, the Court of Cassation held that unless proven otherwise:
- Electronic Emails should be afforded due evidential weight; and
- Electronic Emails shall be treated as an original copy once the transmission of the email from the sender to the recipient is proven.
The Abu Dhabi Court held further that the doctrine of
"Exceptional Circumstances," which gives the judge the
right to intervene and to reduce a broker's commission does not
apply if the commission is fixed.
Claim
A commercial action was filed by a brokerage company
("the Claimant") against a local contracting company
("the Defendant"). The Claimant sought the following from
the Court:
- Confirmation of an attachment order issued from the summary judge;
- An order that the Defendant pay brokerage commission amounting to AED 29,812,646; and
- The Defendant filed a counterclaim against the Claimant in which the Defendant requested, amongst other things, that the actual commission due to the Claimant be reduced from 2% to 0.5 %.
Facts of the case
The Claimant asserted that it had managed to source one
purchaser to buy five towers ("the Towers") in the Al
Reem Island development in Abu Dhabi, and that on 22nd Jan 2008 a
sale agreement for the concerned towers was concluded between the
Defendant and the purchaser for the sum of AED 1,490,632,260
(approximately AED 1.5 billion). The Claimant further averred,
however, that the execution of the sale agreement was followed by
the execution of an agreement between the Defendant and the
Claimant, wherein the Defendant committed itself to pay the
Claimant 2% of the purchase price of the Towers as commission. The
total commission was stated by the Claimant as AED 29,812,646. The
Claimant argued that it had been agreed between the both parties
that:
- 1% of the commission was to be paid to the Claimant by the Defendant upon receipt of the first installment from the purchaser (being 5% of the total purchase price); and
- The remaining 1% of the commission was to be paid to the Claimant by the Defendant upon the receipt of the second installment that amounts to 5% of the total purchase price within seven days of receiving the notice of payment.
The Claimant asserted that the Defendant had received both the
first and second installments from the purchaser but had refused
and/or failed to pay the due commission to the Claimant. The
Claimant further particularised that the Defendant had acknowledged
that it was obliged to pay the commission, and that the Defendant
had undertook, by way of an electronic email sent on 1st May 2008,
to pay the commission in nine installments (i.e. AED 3,312,516.13
on a monthly basis), with such installment payments to commence
from 23 May 2008.
On 23rd May 2009 an attachment order was issued over the
Defendant's premises, bank accounts and vehicles. As stated
above, the Defendant filed a Counterclaim against the Claimant. In
addition to requesting that the Court reduce the commission due to
the Claimant from 2% of the purchase price of the Towers to 0.5% of
the purchase price, the Defendant also sought an order that the
Claimant pay AED 350,000,000 to the Defendant by way of material
and moral damages. In this regard, the Defendant asserted that it
had suffered a loss of reputation due to the spread of rumors
regarding the suspension and cancellation of work in the Towers
project, which rumors the Defendant claimed began to be circulated
in the market after the Claimant filed its case in Court. The
Defendant also requested that the Court appoint an expert to assess
the damages in this regard.
Court of First Instance
The Court of First Instance ruled in favor of the Claimant
and ordered the Defendant to pay commission amounting to AED
29,812,646. The Defendant appealed the decision.
Court of Appeal
The Court of Appeal reversed the decision of the Court of
First Instance. The Court of Appeal reduced the amount of
commission due to the Claimant by the Defendant to AED
14,905,322.60. Both the Claimant and the Defendant appealed to the
Court of Cassation.
Court of Cassation
Arguments Presented by the Claimant
The Claimant argued that the Court of Appeal had erred in its
decision to amend the amount of the commission to 1% of the total
purchase price because the Defendant received 10% of the total
purchase price. The Claimant further argued that the parties had
previously agreed to reduce the commission from 4% to 2%, and that
the Defendant had committed itself in the email dated 1st May 2008
to pay commission amounting to AED 29,812,646 by nine monthly
installments, commencing on 23rd May 2008.
Court's Decision - Claimant's Appeal
The Court of Cassation interpreted Articles 4 and 11 of
the Electronic Transaction and E-Commerce Law (Law No.1 of 2006) to
mean that, unless proven otherwise, electronic emails should enjoy
due evidential weight, shall be considered as an original copy and
shall be admissible as full evidence once the transmission of the
email from the sender to the recipient is proven. The Court of
Cassation held further that the content of electronic emails cannot
be disputed unless the concerned party denies its issuance or
signature, or if it is proven that what is produced does not match
the original.
The Court held also that acceptance and offers may be expressed by
electronic emails. The Court clarified this to mean that it is
permissible for offers and acceptances to be contained within
separate emails. With specific reference to the facts of the case,
the Court determined that it was clear that the Defendant had
confirmed in its email to the Claimant dated 1st May 2008 that it
would pay 2% as a commission. The Court of Cassation agreed that
the Court of Appeal had erred in its decision to amend the
commission due to the Claimant.
Arguments presented by the Defendant
The Defendant argued that the Court of Appeal erred in its decision
that the commission should not be less than 2% as per the customary
norms in the UAE. The Defendant further argued that the commission
due to the Claimant ought to be adjusted in light of the global
financial crisis, because it had become burdensome for the
Defendant to pay the previously agreed commission due to the
worldwide credit crunch.
The main grounds of the Defendant's appeal can be summarised as
follows:
- The credit crunch constitutes an exceptional circumstance that could not have been foreseen by the Defendant and which rendered the Defendant's obligations onerous but not impossible;
- That accordingly, the commission should be reduced from 2% to 0.5%;
- That the court should have appointed an expert to assess the damages suffered by the Defendant as a result of the rumors that had circulated throughout market after the Claimant filed the case.
Court's Decision – Defendant's
Appeal
The Court of Cassation interpreted Articles 2 and 255 of the UAE
Commercial Transaction Law (Federal law No 18 of 1993) to mean that
whenever parties fixed the amount of commission in a sale
agreement, the commission should be due for payment to the broker
once the transaction has successfully been completed between the
parties. The result of this finding was that the doctrine of
"Exceptional Circumstances," which gives the judge the
right to intervene, and, for example, to reduce the amount of
commission due, does not apply in this case. According to the Court
of Cassation the doctrine of Exceptional Circumstances should be
applied only to continuous contracts where the performance extends
over a period of time. The result of this finding was that if a
debtor was lax in the performance of a continuous contract and an
exceptional circumstance occurred during such performance and
rendered his obligation onerous, the debtor should not benefit from
his negligence and should not be able to claim the benefit of the
doctrine of Exceptional Circumstances.
The Court of Cassation also determined that the gross exploitation
cited in the Defendant's argument did not apply in this case as
it did not meet the conditions stipulated by Articles 187, 188 and
189 of the Civil Transaction Law (Federal Law No. 5 of 1985 as
amended by Federal Law No. 1 of 1987).
Finally, the Court of Cassation held that the documents provided by
the defendant were not sufficient to prove the allegation that it
had suffered moral damages and a loss of reputation as a result of
the rumors that had circulated in the market. With respect to the
Defendant's argument that an expert should have been appointed
to determine the damage caused to the Defendant's reputation,
the Court held that if it is capable of assessing the facts of a
case, the appointment of an expert is not compulsory.
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.