Setting Precedent in DIFC Construction Law

The DIFC Court’s Technology and Construction Division (“TCD”) has now handed down its first major judgment following a final substantive hearing, in the case of Panther Real Estate Development LLC v Modern Executive Systems Contracting LLC TCD-003-2019 (26 September 2022). I was instructed by MRP Advisory FZ-LLC to represent the Defendant. Justice Sir Richard Field’s judgment is available here.

As this is the first major judgment in a construction case before the DIFC Court’s TCD which deals with a DIFC governing law clause, this case sets DIFC law precedent on a range of issues frequently encountered in construction disputes.

The Basic Facts

The Claimant was the employer, the Defendant the main contractor. The project concerned the construction of a 16-storey residential building, located in Al Furjan, Dubai. The time for completion was 16 months, with the agreed completion date being 16 December 2017. The general conditions were FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer 1999.

Following the commencement of the works, several significant delays arose. As a result of these delays, relations between the employer and contractor broke down, leading to the encashment of the contractor’s bonds, and termination of the contract on 6 November 2019.

By this date, the project had been delayed by 325 days. The parties disputed liability for the delay.

The Claimant subsequently commenced a claim before the DIFC Court for AED 18,411,476.04 (after set off), claiming liquidated damages, but also significant general damages it allegedly suffered as a result of the delay, in particular loss of opportunity as a result of lost sales income (due to the diminution in value of the building once the project was finally completed). The Claimant also claimed its additional costs of completion and various other alleged losses.

The Defendant counterclaimed damages in the sum of AED 19,986,842.50 (after set off) for, inter alia, the value of works it had completed but had not been paid for, the sum of the bonds which it alleged had been unlawfully encashed, and prolongation costs.

Summary of the judgment

Field J (President of the DIFC Court’s TCD at the time of trial) handed down judgment, dismissing the most significant element of the Claimant’s claim, its general damages claim for loss of opportunity (AED 17.25m before set off) and finding that the Claimant had caused 306 of the 325 days of delay.

However, despite this, Field J found that the Defendant was not entitled to any extension of time (“EOT”) or additional payment. He found that the Defendant had not sufficiently complied with various conditions precedent requiring it to send notice within a period of time after each delay event. Further, the Defendant had failed to challenge engineer determinations, which refused EOT, within the required 14-day period. As a result, Field J dismissed the Defendant’s claim for prolongation, and awarded the Claimant the full sum of liquidated damages. In part due to the exhaustion of liquidated damages, Field J also found that the contract had been lawfully terminated and awarded the Claimant their additional costs of completion.

This judgment, though parts of it are currently the subject of applications for permission to appeal by both parties, provisionally sets down DIFC construction law precedent on the following issues:

1. What is required to be contained in a termination notice to effect legal termination (for fundamental non-performance pursuant to Article 86 of the DIFC Contract Law, similar to repudiation under English law) as opposed to termination pursuant to the contract.
2. Whether and when it is possible to pursue general damages for delay, in addition to/instead of liquidated damages, where the contract allegedly references the ability to pursue both.
3. Whether a contractor is debarred from pursuing EOT/prolongation costs if it fails to comply with conditions precedent to EOT, including:
   • Findings about the extent of conditions precedent contained within the FIDIC 1999 general conditions;
   • Findings about whether the prevention principle applies to notification conditions precedent to EOT; and
   • Findings about whether a failure to challenge an engineer’s determination in the prescribed time means this determination cannot be revisited by the court.