Construction Impasse: Court Orders Property Owner to Pay Contractor and Consultant Over Villa Expansion Dispute

In a detailed ruling resolving a multi-faceted construction dispute, the Al Ain Simple Commercial Circuit delivered a decisive judgment in favor of a contracting company and an engineering consultant, holding a property owner liable for substantial unpaid dues and ordering a financing bank to release a performance guarantee.

📋 Case Background: A Project's Promising Start Turns Contentious

The legal battle originated from a construction agreement for the expansion and renovation of a two-story residential villa. A reputable contracting company was hired by the property owner to undertake the project, which included significant external works and maintenance. The initial contract, valued at a substantial AED 800,000, stipulated a completion timeline of 14 months.

As the project progressed, an addendum was signed to accommodate a two-month extension. Subsequently, the parties agreed to additional works, including the construction of an extra room, for a further sum of AED 55,995. The project was financed by a major local bank, which held a performance bond from the contractor amounting to 10% of the contract value, or AED 88,000. An engineering consulting firm was separately engaged by the owner to oversee the design and supervision of the project for a fee equivalent to 2.5% of the total project cost.

Despite the contractor completing the project to a 100% standard and obtaining a building completion certificate from the municipality, a financial dispute arose. The contractor alleged that while 80% of the dues had been settled, the property owner had failed to pay the final 20%, amounting to AED 273,295. Frustrated by the non-payment and the continued retention of their performance bond, the contractor initiated legal proceedings.

⚖️ Legal Proceedings and Expert Intervention

The contractor's lawsuit sought several remedies: payment of the outstanding AED 273,295, release of the AED 88,000 performance bond, payment of VAT amounting to AED 40,000, and compensation of AED 50,000 for damages and lost profits.

In response, the property owner contested the claims and filed a motion to implead the engineering consultant, bringing them into the legal fray. The financing bank, named as a second defendant, argued that it had no direct contractual link to the dispute and should be dismissed for lack of standing. The newly impleaded engineering consultant then filed its own counterclaim against both the property owner and the contractor, seeking its own unpaid supervision fees of AED 34,500 and AED 10,000 in damages.

Given the technical nature of the dispute, the court appointed an engineering expert to investigate the project, assess the work performed, and clarify the financial accounts between all parties. The expert's comprehensive report became the cornerstone of the court's final decision.

Key Findings from the Expert Report

The expert's investigation confirmed that the contractor had indeed completed 100% of the contractual work and that the property owner had already taken possession of the villa and was residing in it. The report meticulously broke down the financial obligations:

• Amount Due to Contractor: After a thorough review of payments, contractual adjustments, and a disputed deduction, the expert concluded that the final amount owed by the property owner to the contractor was AED 173,810.

• Amount Due to Consultant: The expert determined that the consultant was owed AED 20,074 by the contractor and a further AED 6,675 by the property owner.

• Performance Bond: The report affirmed the contractor's right to reclaim the performance bond, as the project had been successfully completed and delivered.

• Identified Breaches: The expert noted breaches by both the contractor (delay in final delivery) and the property owner (failure to pay the final dues), which caused financial harm to the contractor and the consultant.

⚡ The Court's Final Judgment

The court adopted the expert's report in its entirety, finding it to be thorough and well-founded. It systematically addressed each claim and defense.

First, the court rejected the financing bank's argument regarding lack of standing, ruling that its role as the project financier and custodian of the performance bond made it a necessary party to the action. It then formally accepted the impleader of the engineering consultant.

On the main claim, the court ordered the property owner to pay the contractor the full amount of AED 173,810 as determined by the expert. It also ruled in favor of the contractor's request for damages, awarding AED 10,000 as compensation for the harm caused by the owner's failure to make timely payment. The court affirmed the contractor's right to the immediate release of the performance bond held by the financing bank.

Addressing the counterclaim, the court ordered the contractor to pay the engineering consultant its due of AED 20,074. It also ordered the property owner to pay the consultant the outstanding amount of AED 6,675. Furthermore, recognizing the harm caused to the consultant by the payment delays, the court awarded it AED 4,000 in damages, to be paid jointly by the owner and the contractor. Finally, the property owner was ordered to bear the costs of the original lawsuit, including the expert's fees, while the costs of the counterclaim were to be borne by the owner and the contractor jointly.