Judges' Verdict

The following article by Curtis partner James Harbridge appeared in the October 3, 2010 Muscat Daily newspaper.

Judges' Verdict

The issue of interest on late payments often causes problems in Oman.

An interesting judgment on this topic was made by the Omani Supreme Court on 29 March 2006.

The facts of the dispute related to a 2002 rock blasting contract. The Claimant performed the services and the Defendant failed to pay. The contract between the parties was absolutely silent on the subject of interest on late payments.

The Claimant filed a court case in March 2003, and requested the principal sum owing - plus interest at 10% per annum.

The Primary Court ordered the Defendant to pay the principal sum, but rejected the claim for interest.

The Claimant appealed to the Appeal Court, as he wanted to obtain the interest he had claimed.

But the Appeal Court ruled against him, and upheld the validity of the Primary Court's ruling.

The matter moved to the Supreme Court. The Claimant argued that, as a matter of public policy, interest should always be applied to late payments. However, the Defendant said no interest should be payable, as the parties' contract did not grant any right to claim interest.

The Claimant also relied on:

Ministerial Decision 151/2002 which stated that the interest on commercial loans - other than for loans granted by CBO-licensed entities - would be 10% per annum, unless a lower rate had been agreed; and

Article 80 of Oman's Commercial Code, which states that a creditor is entitled to levy interest on a commercial debt.

The Supreme Court ruled that the Claimant was entitled to interest at 10% per annum, and that interest was definitely applicable even in the absence of an agreement on the point.

This judgment is an important one, as it shows that a claim for interest cannot be denied on the grounds that a contract is silent on the subject.

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Fast-Tracking of Omani Court Proceedings

In a country as well managed as Oman, it should come as no surprise to see court cases resolved quickly. But even we have been surprised at how swiftly some Omani court proceedings are being resolved these days as a result of strengthened efforts by the court system to fast-track proceedings. For example, in a recent Primary Court labour case, the Judge allowed two submissions only: a statement of claim by the Claimant, which was filed at the first hearing; and our written response on behalf of the Defendant employer, filed at the second hearing, which took place just 14 days after the first hearing. The Court then pronounced its judgment at the third hearing, which took place 20 days after the second hearing. From start to finish, the entire Primary Court proceeding took only 34 days. Traditionally, labour cases may have taken up to 12 months in the Primary Court before receiving a judgment. Happily, our client won and the Claimant's case was rejected. Our recent experience indicates that this case was not an exception, but rather part of a growing trend of Omani courts taking a fast-track approach to many proceedings. This trend has important implications: lawyers must be increasingly swift and responsive in their handling of disputes, and their business clients must also be prepared to take part in a fast-moving process. Legal strategies will need to become more forward-thinking and preemptive. For example, as many readers know, all exhibits to an Omani court filing must be presented to the Omani Court in Arabic (and must also bear the stamp of a certified translator). In defending the case cited above, one key to our success was having translated many key emails into Arabic before the proceedings began – so that they were immediately available when we needed them for exhibits. It will be interesting to monitor the fast-tracking in the Omani court system as this trend continues. Of particular note will be the extent to which this expedited approach extends upward through the ranks of the court system. While fast-tracking is clearly on the rise in the Primary Courts, we shall have to watch closely to see whether the same will occur in the Appeals Court, and finally in the Supreme Court.

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Judge's Verdict: Landlords & Tenants

This article was written by Curtis partner James Harbridge of the firm’s Muscat office. It originally appeared in the Muscat Daily and is republished here with permission.

Landlord/ tenant disputes are sometimes quite prevalent. Furthermore, on some occasions, the outcome at court may differ from what one would have expected.

The facts that led to Supreme Court case 273/06 were as follows:

A property owner rented out a property to the tenant, who planned to use the premises as an educational establishment. However, when the tenant stopped paying the rent, the owner of the building filed a case in the Primary Court. The tenant was ordered to pay RO12,000 in accrued rentals to the owner. This sounds fairly routine, but in fact it was a judgment that surprised the tenant, for reasons explained below.

The tenant, meanwhile, filed an appeal to the Appeal Court, stating that the two parties had never actually signed a lease. He also relied on the resultant fact that there was no tenancy agreement registered with the relevant municipality. Accordingly, the tenant reasoned, the Court should disregard the case as it is a statutory requirement in Oman that a building lease must be registered.

However, the Appeal Court ruled against the tenant, and upheld the RO12,000 judgement in favour of the landlord.

In consequence, the tenant appealed to the Supreme Court. He relied upon four lines of appeal:

1. The Primary and Appeal Courts in Muscat should have declined to hear the dispute as the property in question was not in Muscat;
2. The lease contract had never been signed;
3. He had never derived a benefit from the lease, as he had never obtained the necessary licence from the Ministry of Education; and
4. He had made some payments by cheque and therefore the claimed amount was wrong.

On November 8, 2006, the Supreme Court gave its ruling. They adjudged that the lower courts in Muscat had been right to hear the dispute, as although the building was outside Muscat, the two parties had met and negotiated the lease in Muscat. Moreover, it was held that a dispute regarding an unregistered lease could be heard, as, in the particular circumstances of this case, the tenant had admitted there was a lease contract in place. Indeed, it seems that the fact that the tenant stated he had made some rental payments by cheque was evidence in itself from the tenant that a landlord-tenant relationship existed and that the monthly amounts paid were connected to the lease arrangements.

The judges, moreover, sated that it was not the fault of the landlord that the tenant failed to obtain the necessary licence from the Ministry of Education. Finally, the Supreme Court state that it could only hear legal arguments, and not factual disputes, meaning that the fourth ground of appeal lacked credibility.

In this way, the Supreme Court upheld the lower courts' judgements that the tenant must pay RO12,000 to the landlord.

The lack of signature on the contract was deemed not to be a problem, as the parties had formed the contract by a combination of writing it and then acting in accordance with what it stated.

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