Federal Supreme Court Ruling on Compensation for Unjustified Delay in Paying Subcontractor Dues

United Arab Emirates - The Federal Supreme Court

Hearing on Tuesday, 20 January 2026

Presided over by Judge Shehab Abdul Rahman Al-Hammadi, President of the Circuit,
and with the membership of Judges Abdullah Abu Bakr Al-Sairi and Sabri Shams Al-Din Muhammad.

Commercial Appeals Nos. 983 and 991 of 2025 Commercial

Legal Principles

1. Obligation – Sources of Obligation: Harmful Act: A debtor's unjustified delay in settling debts constitutes a fault warranting compensation. Compensation: Compensation for the debtor's unexcused procrastinated payment. Civil Liability: Contractual liability – Elements of liability: Fault, harm, and causal link. Cassation: The effect of cassation of a judgment regarding one appellant on another appellant in a joined appeal.

2. A debtor's unexcused delay in settling due debts, even if the debtor did not use the funds for their own benefit, constitutes a fault requiring compensation. Ratio: Inflicting harm upon the creditor by depriving them of the use and benefit of their entitlements. This aligns with law and Islamic jurisprudence (Sharia) due to the debtor's procrastination.

3. An aggrieved party from any unlawful act is entitled to compensation for the harm suffered whenever a causal link between fault and damage is established.

4. Where the contested judgment rejected compensation for harm resulting from the respondents withholding the appellant's contractual financial dues without lawful reason—despite establishing fault on their part and ordering the main contractor and employer to pay the outstanding balance, which reveals direct and certain harm consisting of depriving the appellant of utilizing their dues, and establishing the causal link because the appellant (subcontractor) did not breach its contractual obligations—it erred in the application of the law, warranting cassation and remand.

5. Where the legal positions of joined appellants are interconnected, cassation of the judgment with respect to one entails cassation with respect to the other.

(Appeals Nos. 983 and 991 of 2025 Commercial, Hearing of 20/01/2026)

The Federal Supreme Court - Reasoning and Legal Findings

1. It is established—pursuant to the consistent jurisprudence of the Federal Supreme Court—that a debtor's delay in settling due debts without an acceptable excuse constitutes harm inflicted upon the creditor resulting from procrastination in payment. This entails liability for compensation in accordance with the law and Islamic Sharia, since depriving the creditor of the benefit of their dues mandates compensation even if the debtor did not deploy the money for their personal advantage.

2. It is established that the aggrieved party from any unlawful act has the right to claim compensation for sustained harm, whether current or ongoing, provided that the three constituent elements—fault, harm, and the causal link between them—are satisfied.

3. Whereas the case record confirms that the respondents breached their contractual obligation by failing to pay the amounts due to the appellant, namely by failing to disburse payments due to the subcontractor according to the main contractor's account statement, the accomplished expert report, and the contested judgment which established the main contractor's fault for unlawfully withholding the subcontractor's contractual entitlements without valid cause, ordering the main contractor and the employer to pay jointly and severally to the subcontractor (appellant) the amount of AED 978,161.69; and whereas the record contains no indication that the subcontractor delayed the execution of the works assigned to it or performed defective workmanship; and whereas the contested judgment failed to address the element of harm properly, without verifying its occurrence, effects, and entitlement, dismissing it on the grounds of lack of documentary evidence showing the subcontractor sustained losses, even though the same judgment affirmed the fault of the respondents in unlawfully retaining the appellant's contractual dues—which demonstrates direct, certain harm caused by deprivation of utilizing its entitlements due to established delay, and confirms the causal relationship—the contested ruling erred in law, necessitating cassation with remand without need to address remaining grounds.

4. It is established in the jurisprudence of the Federal Supreme Court that where the legal positions of appellants in joined appeals are linked, the cassation of the judgment as to one entails cassation as to the other, restoring the litigation and the parties to their prior status before the judgment was rendered.

The Court's Decision and Background

Following examination of the record, reading of the summary report, and deliberation:

Whereas both appeals have met their formal statutory requirements.

The facts, as revealed by the contested judgment and case records, summarize as follows: The plaintiff, [Company Name] for General Transport—appellant in Appeal No. 991 of 2025—instituted Action No. 261 of 2024 against [Company Name] for Transport and General Contracting and [...] (first and second respondents in the same appeal), requesting an order compelling them, jointly and severally, to pay the sum of AED 1,121,582.96 with legal interest at 12%, along with AED 500,000 as compensation for material and moral damages.

This claim was based on a subcontract agreement concluded between the plaintiff as subcontractor and the first defendant as main contractor, assigning the plaintiff to execute civil ground works in the project connecting [...] to the federal road network (Package 1 and Package 2) for an aggregate contract value of AED 2,815,000. Clause 35 of the contract stipulated payment via monthly account statements submitted by the plaintiff according to measured works and unit rates to the first defendant, who verifies and submits them to the supervising engineer and the second defendant (employer, [...]), who in turn makes direct payments to the subcontractor.

The plaintiff performed the assigned works as agreed and issued three tax invoices. The employer settled the first invoice based on the payment certificate issued by the main contractor, transferring AED 636,436.30 directly into the plaintiff's bank account. However, both defendants failed to settle the remaining balance of the executed works despite amicable demands, and the first defendant unilaterally terminated the contract without stating reasons. Following the intervention of the Ministry of Energy pleading lack of capacity, an expert was appointed to investigate the dispute.

Procedural History

On 19/11/2024, the Abu Dhabi Federal Court of First Instance ruled ordering the defendants to pay jointly and severally to the plaintiff the sum of AED 978,161.69. The plaintiff appealed under Appeal No. 262 of 2024, and the second defendant appealed under Appeal No. 273 of 2024. The Abu Dhabi Federal Court of Appeal consolidated both appeals and ruled on 29/01/2025 to dismiss both appeals and uphold the appealed judgment.

Both parties lodged cassation appeals Nos. 127 and 189 of 2025. On 22/04/2025, the Federal Supreme Court quashed the judgment in both appeals and remanded the case. The court of remand, on 19/11/2025, dismissed both appeals and confirmed the judgment of first instance.

Dissatisfied with this decision, both appellants filed the present cassation appeals, which were examined in chambers and scheduled for hearing, leading to the decision reserved for today's session.

First: Regarding Appeal No. 991 of 2025

The appellant challenges the contested judgment on grounds of error in law, misapplication thereof, and defective reasoning, stating that the respondents unlawfully refused to pay their due entitlements, thereby causing damages as recognized by the approved court-appointed expert. The court erred in rejecting the compensation claim solely on grounds that no separate documents establishing damages were submitted, contrary to law and established precedent.

This ground is well-founded. It is settled jurisprudence that a debtor's unexcused failure to satisfy due debts causes direct harm to the creditor through procrastination, warranting compensation in accordance with statutory provisions and Islamic Sharia. The deprivation of funds entails compensable damage even if the debtor did not appropriate the sum for their own use. Any party injured by an unlawful act is entitled to compensation provided that the trio of fault, damage, and causation is met.

Merits of Appeal No. 991 of 2025

Whereas the evidentiary record establishes that the respondents breached their obligations by not paying the sums due to the subcontractor as indicated by the main contractor's account statement and the expert report, and as affirmed by the judgment finding the main contractor at fault for withholding dues without lawful cause and obliging the main contractor and employer jointly to pay the sum of AED 978,161.69, and in the absence of any default or defective workmanship attributable to the subcontractor; and

Whereas the appellate court did not properly examine the element of damage, its impact, and entitlement, rejecting compensation merely for lack of separate proof of damage despite having established fault in the withholding of funds—which itself evidences certain and direct harm through denial of the use of funds—the judgment was tainted by misapplication of the law, warranting cassation and remand.

Second: Regarding Appeal No. 983 of 2025

Whereas it is settled law that where the legal positions of joined appellants are interrelated, the quashing of the judgment with respect to one appellant necessarily results in quashing it with respect to the other, returning the parties and dispute to their pre-existing legal status. Having concluded that the judgment must be quashed in the first appeal, it follows that the contested judgment is likewise quashed in this joined appeal.