Judgment Display

In the name of God, the Most Gracious, the Most Merciful

In the name of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Ruler of Dubai.

Court of Cassation

In the public session held on 08-07-2025 at the seat of the Dubai Court of Cassation.

In Cassation No. 695 of 2025, Commercial Cassation.

The challenged judgment was issued in Appeal No. 378/2025, Commercial Appeal, dated 07-05-2025.

The Following Judgment Was Issued

After reviewing the documents and hearing the summary report prepared and recited in the session by the assigned Judge, Dr. Saif Al-Haddad Al-Hazmi, and after deliberation.

Whereas the cassation has fulfilled its formal requirements.

Whereas the facts, as they appear from the challenged judgment and all other case documents, establish that the respondents filed a lawsuit against the appellant, Case No. 1694 of 2023 Commercial, before the Dubai Court of First Instance, seeking a judgment for his removal from the management of Fire Defense for Security and Safety Systems company, holding him accountable for all his administrative and financial violations, compelling him to return all funds and material assets he seized from the company, and ordering him to pay them an amount of AED 100,000 as compensation for the material and moral damages they sustained due to his financial and administrative violations and actions that harmed the company, and alternatively, appointing an expert to examine the lawsuit.

They stated in support of their claim that they and the appellant are partners in Fire Defense for Security and Safety Systems company with varying shares, and the appellant was appointed as the company's manager. The latter conducted transactions for the benefit of other companies by obtaining work permits for individuals affiliated with those other companies and then canceling them. This resulted in the Ministry of Human Resources and Emiratisation auditing the company's transactions, revealing that several transactions were submitted in violation of the terms and conditions, leading to administrative fines against the company amounting to AED 1,200,000. The appellant breached his obligations in managing the company and committed numerous transgressions that caused serious violations against the company. They communicated with him to hold a general assembly meeting to discuss the shortcomings in the company's management and reach a solution to save the company from collapse and protect the workers' rights, as they were filing labor complaints because he contacted them, took their cars, and asked them not to come to the company, which prompted them to file those complaints. He is obstinate and does not attend the general assembly meetings; instead, he closed the company's premises, did not renew the lease, and vacated the premises. Therefore, the partners were forced to hold a general assembly meeting in a public place near the company's headquarters, and the agenda included discussing all the violations committed by the company's manager that caused the company to incur significant fines and financial violations.

Lower Court Proceedings

The claimant demanded the return of all amounts seized from the company without right, and that the manager be warned not to deal in the company's name or sign any agreements related to the company's business from the date of his removal, and another manager was appointed. As the appellant manager refused to attend the general assembly meeting and instead committed several transgressions that severely harmed the company, the lawsuit was filed.

The court appointed an expert. After the expert submitted his reports, the court ruled on 09-01-2025 to remove the appellant from the management of Fire Defense for Security and Safety Systems, ordering him to pay the company AED 350,000 and AED 120,000, and to pay the respondents AED 15,000 as compensation, to be distributed equally among them, and rejected all other claims.

The appellant challenged this judgment in Appeal No. 378 of 2025 Commercial, and on 07-05-2025, the court ruled to uphold the appealed judgment.

The appellant challenged this judgment by the present cassation, based on a statement of grounds of appeal seeking the reversal of the challenged judgment and referral.

The respondents' lawyer submitted a memorandum in response.

When the cassation was presented to this court in the deliberation chamber, a session was set for its resolution.

Grounds for Cassation

Whereas the cassation is based on three grounds, by which the appellant criticizes the challenged judgment for error in the application of law, deficiency in reasoning, corruption in deduction, violation of the right to defense, and contradicting the record. In his explanation, he argues that the respondents alleged he committed violations that cost the company AED 1,200,000, which is contrary to the truth as they did not provide any evidence for their claim. He submitted before the appointed expert in the case evidence proving the payment of these violations or fees through other companies, but the expert ignored what he presented and did not mention it in his report. He also submitted accounting reports to the respondents showing the company's financial status. The transaction concerning the AED 350,000—which he was ordered to pay—was dated September 2019 and was not objected to. This amount was withdrawn from the first respondent's account with his knowledge as a partner in the company and his brother. Subsequent transactions from the same account for the following two years were also conducted with the knowledge and consent of the first respondent. The respondents' statements are hearsay with the aim of legitimizing their claims and lack any supporting evidence. He requested before the court of the subject matter to refer the case for investigation to prove his defense, but the court did not grant his request. He also maintained that the incident has a different version from what the respondents claimed regarding his commission of numerous transgressions resulting in serious violations against the company, including many workers filing labor complaints against it. This is contrary to the reality of the case, as the respondents incited the workers in the company to file complaints to prove their claim of him harming the company and causing it to incur financial expenses. He appeared before the court and presented official work permits and contracts issued in the name of all the workers who filed labor complaints against the company. These permits bear the name of a company belonging to the second and third respondents, proving their act of transferring the workers' sponsorship to their private companies, which indicates their intention to cause harm. Furthermore, regarding the AED 350,000, a receipt was issued confirming his receipt of that amount, but he was a victim of theft of the amount and the receipt, and a report was filed for that. However, the judgment ignored the foregoing and based its decision on the report of the appointed expert, despite its flaws and deficiencies, without examining his objections and defense, which renders it defective and warrants its reversal.

Court's Reasoning

Whereas this plea is unfounded. It is established in the jurisprudence of the Court of Cassation that the provisions of Articles 113 and 117 of the Civil Transactions Law and Article 1 of the Law of Evidence state that the burden of proof alternates between the litigants according to what each claims. Whoever claims a right against another must provide proof of their claim, which is contrary to the original state of non-liability, while its occupation is an exception. If they prove their right, the defendant must provide evidence of the extinguishment of the debt and its cause. It is also established that one who claims discharge of an obligation must provide proof thereof, and the denier is only exempt from proof if their denial is absolute and they do not respond to the claim with anything other than denial. However, if they admit to one of the alleged elements of the claim and allege something contrary to the apparent facts, the burden of proof falls upon them.

Legal Framework for Managerial Responsibility

A manager's daily operations are generally derived from the company's foundational law or the specific contract appointing them, which grants them the authority to act on its behalf in all matters covered by that mandate and its necessary incidents. However, their actions are restricted by the provisions of the contract and by custom. Article 22 of the Commercial Companies Law, in the section on general provisions for companies, states that the person authorized to manage the company must protect its rights and exercise the care of a prudent person. They must perform all acts that align with the company's purpose and the powers granted to them by a delegation from the company. According to Article 23 of the same law, the company is bound by any act or transaction carried out by the person authorized to manage it while conducting the management activities in the usual manner. The company is also bound by any act carried out by one of its employees or agents who has the authority to act on its behalf, and a third party has relied on that in their dealing with the company. Article 24 of the same law invalidates any provision in the company's contract or its articles of association that allows it or any of its subsidiary companies to approve the exemption of any person from any personal liability they bear as a current or former official in the company. Regarding the management of a limited liability company, Article 83 of the same law stipulates that: '1- The limited liability company shall be managed by one or more managers as determined by the partners in the articles of association. These managers are chosen from among the partners or others. If the managers are not appointed in the articles of association or in a separate contract, the general assembly of the partners shall appoint them. If there is more than one manager, the partners may appoint a board of directors, and the board shall be vested with the powers and functions specified in the articles of association. 2- Unless the manager's appointment contract, the articles of association, or the internal regulations restrict the powers granted to the manager, they shall be authorized to exercise full powers in the management of the company, and their actions shall be binding on it, provided they are accompanied by a statement of the capacity in which they are acting.' Article 84 of the same law also states that: '1- Every manager in a limited liability company shall be liable to the company, the partners, and third parties for any fraudulent acts they commit, and they shall be obliged to compensate the company for any losses or expenses incurred due to the misuse of authority or violation of the provisions of any applicable law, the company's articles of association, their appointment contract, or a gross error on the part of the manager. Any provision in the articles of association or the manager's appointment contract that contradicts the provisions of this clause shall be void. 2- Without prejudice to the provisions concerning limited liability companies in this Decree-Law, the provisions concerning the members of the board of directors in public joint-stock companies mentioned in this Decree-Law shall apply to the managers of limited liability companies.' Therefore, the principle is that all acts and actions carried out by the manager within the limits of their authority are attributable to the company, and they are not held personally liable unless their actions involve fraud, misuse of authority, violation of the law or the company's articles of association, or gross negligence in performance, such as managing a competing company or one with similar purposes, or conducting for their own account or for the account of others deals in a competing or similar trade to that of the company without the approval of the company's general assembly. In these cases, the principle of limited liability to the company alone is not applied; rather, liability extends to its manager before the company, the partners, and third parties. Thus, the manager of a limited liability company is responsible before the company, partners, and third parties for compensating for damages resulting from their mistake and negligence in management and for all acts of fraud and misuse of authority and for any violation of the law or the company's system. It is established that the provision of Article 109 of the Law of Evidence in Civil and Commercial Transactions states that the court may, when necessary, appoint one or more experts to seek their opinion on matters requiring resolution in the case, such as technical points that are not within its knowledge and material facts that are difficult for it to ascertain. This is without addressing legal issues, which remain under the exclusive authority of the court. The court of the subject matter only resorts to experts to assist the expert in conducting research and study based on their capabilities and technical efficiency to uncover the truth in matters that are obscure to it regarding technical issues and material facts it seeks to verify. The court has full authority in assessing the work of experts, considering it an element of evidence in the case and in adopting it.

and need not provide specific reasons to refute the parties' objections to the expert's report, as its adoption, based on its own grounds, implies that it found nothing in the opponent's defense that undermines the validity of the expert's conclusion, which does not require a more detailed response than what the report already contains, as long as it has clarified the truth it is convinced of and provided its evidence. The court is not obliged to reassign the task to the expert to accommodate one of the litigants, as long as it finds in the completed report sufficient basis to form its conviction and as long as the appointed expert has adhered to the scope of the mission assigned to them in the appointment judgment. Furthermore, the expert is not obliged to perform their work in a specific manner as long as what they do achieves the purpose of their appointment and without being bound by what the litigants deem appropriate, as long as their work is ultimately subject to the court's assessment, which it may adopt if it is satisfied with it or reject it if it doubts it.

Furthermore, the text of Article 236 of the Commercial Companies Law states that 'If the company manager is appointed in its articles of association without a specific term, they shall remain a manager for the duration of the company, unless the articles of association provide for their removal. The removal of the manager in this case shall be by the majority required to amend the company's contract, unless the contract specifies another majority. If the articles of association do not provide for the removal of the manager, they may be removed by the consensus of the partners or by a court judgment when serious reasons justify it.' This implies that if the manager of a limited liability company is appointed in the company's articles of association for a specific period, they remain in their position as manager until the end of that period. However, if they are appointed in the articles of association without a specified term for their tenure as manager, they cannot be removed by the other partners because the agreement to appoint them as manager in the articles of association is considered part of the company's contract and takes its binding nature. If the articles of association provide for the removal of the manager, their removal shall be by the majority required to amend the company's contract unless the articles specify another majority. If the articles do not provide for the removal of the manager, they may be removed by the consensus of the partners. In all cases, any partner, regardless of the size of their shares in the company's capital, may resort to the judiciary to request the removal of the company's manager if there are serious reasons justifying it, such as mismanagement of the company, illness, inability to work, or acts of betrayal against the company and its partners, regardless of whether the manager was appointed in the company's articles of association for a specific or indefinite term.

If the manager of a limited liability company breaches one of the duties of management or violates the law or the provisions of the company's contract and its articles of association, they shall be liable for their personal mistakes or any acts involving fraud, deceit, or gross negligence. The determination of the manager's liability in this case is a matter of fact that the court of the subject matter independently assesses once its decision is based on sound grounds derived from what has a fixed origin in the documents. The determination of the fault giving rise to liability—whether contractual or tortious—the resulting damage, and the causal link between them, and the negation of these, are matters that the court of the subject matter independently assesses with its authority to understand the reality of the case, evaluate evidence and documents, and accept what it is satisfied with and reject what it is not. The interpretation of contracts, acknowledgments, and all other documents is based on what it deems to be the most faithful to the intention of the contractors or the parties involved. The appointed expert in the case derives their authority from the judgment issued for their appointment and within the limits of the mission assigned to them. They are not obliged to perform their mission in a specific manner, and it is sufficient for them to perform what they were appointed for in a way that achieves the goal intended by the court in their appointment, and to gather their information from any documents presented to them by the litigants, considering that their work is ultimately subject to the assessment of the court of the subject matter. The court is not obliged thereafter to track the litigants in all aspects of their statements and arguments and to respond independently to each of them, as long as the truth it has become convinced of and for which it has provided evidence contains an implicit response that dismisses the statements and arguments of the litigants, and as long as its judgment is based on sound reasons sufficient to support it and justify the conclusion it reached.

Since this is the case, and it is evident from the papers that the respondents filed their lawsuit seeking a judgment to remove the appellant from management...

Court's Findings and Final Judgment

...and for the moral damages they suffered due to his financial and administrative violations and actions that harmed the company. The first instance judgment, upheld by the challenged judgment, based its decision on its satisfaction with the case documents and the report of the appointed expert, which it adopted on its own grounds after addressing the litigants' objections. It concluded that the relationship between the parties is that they are partners in Fire Defense for Security and Safety Systems company, and they agreed that the appellant would be the manager of the company according to the powers and obligations stated in the company's articles of association dated 23-06-2013. The appellant breached his obligations by failing to appoint an external auditor and prepare balance sheets for the company showing its financial position at the end of each year so that an accounting could be conducted between the partners regarding the results of its operations.

Regarding the claim to compel the appellant to return AED 350,000 to the company, he did not provide any documents showing how the first respondent received this amount from the company, whether in cash or by checks, and only provided a photocopy of a receipt which was challenged by the latter, in addition to a loss report filed more than three years later. The appellant did not provide any documents proving that the first respondent received that amount, so the appellant is obliged to pay it to the said company.

Regarding the claim to compel the appellant to return AED 120,000 to the company in exchange for breaching his obligations as the company's manager regarding violations by the Ministry of Human Resources, it was clear from reviewing the violation notice issued by the Ministry of Human Resources and Emiratisation that it was addressed specifically to the company. The appellant did not provide any documents proving that this violation was related to other companies of the company's sponsor as he claims, nor did he provide any documents proving the absence of any violations against the company by the Ministry of Human Resources and Emiratisation, so he is obliged to return it.

Regarding the respondents' claim to compel the appellant to compensate for material and moral damages resulting from his actions that harmed them and the company, according to what was stated in the expert's report, as mentioned above, it has been established that the appellant breached his obligations as the company's manager, and the fault on his part has been established, and this fault resulted in damages to them, for which they are entitled to compensation. The judgment concluded by removing the appellant from the company's management as a result of the violations he committed—as this was done by the majority required to amend the company's contract, they being the owners of 75% of the company's shares, which is the same majority required to remove the manager since the articles of association did not specify another majority for that—and ordering him to pay the amounts awarded. What the judgment concluded was sound and has its basis in the documents, is sufficient to support its decision, and leads to the result it reached, containing an implicit response that refutes any contrary argument. There is no blame on it if it did not grant the appellant's request to refer the case for investigation as long as the case documents were sufficient to form the court's conviction. Therefore, the plea on these grounds of appeal is nothing more than a factual dispute over the authority of the court of the subject matter in understanding the reality of the case, assessing the evidence presented therein, and evaluating the expert's work and determining the elements of liability for compensation, which is not permissible to raise before the Court of Cassation. As for what has been presented, the appeal must be rejected.

For these reasons

The court has ruled to reject the cassation and to compel the appellant to pay the expenses and an amount of one thousand dirhams for attorney's fees, and to confiscate the security deposit.