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December 22, 2010 1:40 am
A Dubai tribunal has halted an attempt by troubled developer Nakheel to raise Dh41m ($11.2m) in extra fees in a landmark ruling with implications for a dozen buyers on the offshore World development.
The ruling is a financial blow to Nakheel, which has sought hundreds of millions of dirhams in “delay fees” from clients who had put down payments for property on the artificial archipelago.
The chain of islands, a symbol of Dubai’s boom-time ambitions, lie idle as most owners will not build on the offshore development after the real estate market collapsed amid the global financial crisis.
Tuesday’s judgment against Nakheel could now trigger a wave of further claims at the Dubai World tribunal, which hears disputes relating to the troubled conglomerate, Nakheel’s parent.
“The result is already drawing interest from other purchasers in similar situations,” said Jonathon Davidson of legal firm Davidson & Co, which represented the claimants.
The ruling, made after its first trial since the tribunal was formed a year ago, requires Nakheel to complete a “consolidation agreement” transferring Dh28.4m in downpayments on two islands to mainland plots, including those of one of the claimants, Diamond Developers.
Nakheel, the biggest casualty of the emirate’s real estate crash, has concluded about 1,000 consolidations since the downturn halved valuations. These transactions, which transfer payments from one client to another, also form part of Dubai World’s agreed $25bn debt restructuring agreement.
The claimants, advised by Dubai-based consolidation specialist RBA Real Estate, in February paid an extra Dh3m to effect the transaction and signed the settlement agreement offered by Nakheel on March 31.
However, in July, Nakheel sent a demand for Dh41m in additional “delay fees” penalising late payments on the two islands.
Nakheel said it had not signed the settlement agreement and refused to issue Diamond the certificates needed to hand over 750 units to its buyers. The tribunal, however, ruled that a contract had been formed when the clients signed the agreements.
The claimants said the delay fees came after a change in policy introduced by Nakheel’s new chairman, Ali Lootah, who in March replaced Sultan bin Sulayem.
“Nakheel is making decisions when it suits itself,” said William Frain-Bell, barrister for the claimants. “Management suddenly wanted the Dh41m – that only came as a result of a change in focus from the new board.”
Aqil Kazim, Nakheel’s chief commercial officer, denied this, saying the change reflected improvements to consolidation procedures undertaken with the advice of consultancy Deloitte. But Sir Anthony Evans, one of two presiding judges, said Nakheel seemed to have taken advice not to forgo these fees and had therefore declined to sign the agreement.
The ruling comes amid broader problems at the World project, where buyers complain the islands were delivered without infrastructure. Limited construction activity has halted amid conflicts, people aware of the matter say.
In a separate tribunal, Singapore-based Penguin Marine, a logistics provider for The World, applied on Tuesday for an injunction to stop Nakheel drawing bank guarantees amid a payment dispute.
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