In construction disputes, particularly between contractors and property developers, the intricacies of contract enforcement, project completion, and compensation claims can become highly contentious.

One such case recently came before the Abu Dhabi Court of Cassation, shedding light on the legal complexities surrounding construction contracts, compensation claims, and the involvement of expert testimony in resolving disputes.

Overview of the Case

The case originated from a contractual dispute over the construction of a commercial building.

The contractor (referred to as the appellant in the case) had entered into a construction agreement with the property owner (the respondent) in 2016.

The contract involved a total project value exceeding AED 11.6 million, with the contractor securing two performance bonds: one for the advance payment and another for good execution.

The contractor successfully completed over 97% of the project but encountered significant delays and disputes concerning the final payments.

The crux of the dispute revolved around unpaid amounts for the executed works and the release of the two performance bonds.

The contractor sought compensation totaling over AED 2.3 million, along with additional damages for delays and opportunities lost due to non-payment.

The contractor also demanded the release of the performance bonds and reimbursement for expert consultancy fees.

Initial Court Proceedings

The contractor initially filed a claim in the Abu Dhabi Commercial Court, seeking the rescission of the contract and demanding compensation.

They claimed that the developer had wrongfully withheld payments for completed works, including the ninth installment as certified by the project consultant.

The case grew more complicated when the contractor accused the project consultant (brought into the case as a third party) of failing to provide the necessary documentation to complete the project.

In response, the developer filed a counterclaim, alleging that the contractor had failed to complete the project in accordance with the agreed specifications and timeline.

The developer demanded compensation for the additional costs incurred due to the contractor’s alleged delays and failure to meet the project’s standards.

The court appointed an engineering expert to examine the technical details of the dispute.

The expert submitted a report outlining the remaining project work, the quality of the construction, and the causes for the delay.

Based on this report, the court ordered the contractor and the developer to pay respective amounts, taking into account the withheld payments and the performance bond deductions.

Appeal to the Court of Cassation

Dissatisfied with the lower court’s ruling, both the contractor and the developer appealed the decision.

The contractor’s primary contention was that the lower court had failed to account for several critical factors in calculating the compensation owed.

Specifically, the contractor argued that the court erred in its reliance on the expert report, which they claimed inaccurately assessed the project’s completion percentage and the costs required to finalize the remaining works.

The developer, on the other hand, appealed on the grounds that the court had not awarded them adequate compensation for the delays caused by the contractor.

They also raised concerns about the expert’s report, suggesting that it did not fully account for the damages incurred due to the contractor’s failure to meet the project’s deadlines.

Court of Cassation’s Findings

Upon review, the Abu Dhabi Court of Cassation upheld certain aspects of the lower court’s ruling but made significant adjustments.

The Court of Cassation emphasized that the evaluation of whether a contractor has fulfilled their obligations under a construction contract falls within the discretionary power of the court of first instance, provided the findings are based on solid evidence.

The Court of Cassation noted that the contractor’s work had reached 97.3% completion, but the remaining work involved substantial discrepancies that could not be overlooked.

Specifically, the court found issues with additional works that were not fully accounted for in the lower court’s judgment.

The expert report, though deemed competent, was found to have certain limitations, especially concerning the evaluation of outstanding work and price adjustments.

One of the pivotal issues was the discrepancy regarding the waterproofing of an underground storage tank.

The contractor argued that they had fully waterproofed the tank, while the developer claimed otherwise.

The court found that the contractor had completed the work, but there was ambiguity in the measurements, leading to an inaccurate deduction of AED 25,000 for this aspect of the project.

The Court of Cassation rectified this error, awarding the contractor the additional amount owed for this completed task.

Furthermore, the court reduced the original award of AED 2.3 million to approximately AED 1.87 million.

The reduction was primarily due to the court’s reassessment of certain deductions related to uncompleted work, including aluminum works and fire safety systems.

The court also imposed a 3% interest rate on the awarded amount from the date of the legal claim until full payment, significantly lower than the contractor’s requested 12% rate.

Conclusion

This case underscores the complexity of construction disputes, where the intersection of contractual obligations, performance bonds, expert reports, and legal interpretations can create multi-faceted legal battles.

The Abu Dhabi Court of Cassation’s decision highlights the importance of thorough project documentation, adherence to contract terms, and the role of expert testimony in such cases.

For contractors and developers alike, this ruling serves as a cautionary tale about the importance of clear communication, proper documentation of project milestones, and the critical role that expert reports play in the legal resolution of construction disputes.

It also reminds all parties involved in construction contracts of the need for careful consideration of the legal and financial risks involved in large-scale projects.

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