Abu Dhabi Court of Cassation, Commercial Appeals Nos. 954 and 962 of 2024, judgment of 7 October 2024
A person who uses a right lawfully is not liable for resulting harm to others (Articles 104 to 106 of the Civil Transactions Law). Abuse exists only in the cases listed exhaustively in Article 106, all marked by an intent to harm or a reckless disregard of serious harm. Going to court is a right open to all and gives rise to liability only if it is diverted from its purpose and used vexatiously to harm the opponent; the failure of a complaint or claim does not in itself show abuse. An unregistered business partnership that takes none of the forms in the Companies Law is void as a matter of public order.
Two parties signed partnership agreements in 2016 to carry out construction projects together. After the projects were completed and earlier final judgments had settled accounts between them, the defendant continued to assert that the partnership subsisted and that money was owed to him, having previously sued the company on the basis of an employment relationship. The company sued for a declaration that the partnership had ended and AED 100,000 compensation for the harm caused by his claims. The first-instance court declared the agreements terminated, awarded AED 50,000 compensation for abuse of the right to litigate and held his counterclaim for an account barred by res judicata. The Court of Appeal set aside the compensation award. Both sides appealed in cassation.
The Court first rejected an objection that the claims were below the AED 500,000 threshold: under Articles 50, 51(4) and 175(1) of the Civil Procedure Law, a claim concerning the validity or termination of a contract is valued by the subject of the contract. On the merits, it held that the partnership, formed in 2016 without taking any of the forms in Article 9(1) of the Companies Law (Federal Law No. 2 of 2015) and without the notarised Arabic memorandum required by Article 14, was a concealed arrangement and void as a matter of public order; declaring the agreements ended had the same effect as declaring them void. The counterclaim was barred because the account had been finally settled (Article 87 of the Evidence Law). On compensation, under Articles 104, 105 and 106 of the Civil Transactions Law, lawful use of a right attracts no liability; abuse requires one of the Article 106 cases, whose common feature is an intent to harm. Litigation is a right available to all, and losing a claim or complaint may be due to weak evidence or other reasons. The Court of Appeal had permissibly found no bad faith, since the defendant believed his rights were at risk. Both appeals were dismissed.
Counterclaims for 'malicious litigation' rarely succeed: a business must show that the other side litigated to harm it, not merely that it lost. The decision also shows that informal construction partnerships that are never registered as companies are treated as void, with accounts settled under the parties' agreement.
| Articles 104, 105 and 106 of Federal Law No. 5 of 1985 (Civil Transactions Law) — text of articles 104, 105, 106 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
| Articles 9, 14, 16 and 374 of Federal Law No. 2 of 2015 (Commercial Companies Law) Decided under this law; it has been replaced by Commercial Companies Law. |
| Articles 50, 51(4) and 175(1) of Federal Decree-Law No. 42 of 2022 (Civil Procedure Law) — text of articles 50, 51, 175 |
| Article 87 of Federal Decree-Law No. 35 of 2022 (Evidence Law) — text of article 87 |
“وأن حق الالتجاء الى القضاء من الحقوق المباحة المكفولة للكافة فلا يكون من استعمله مسؤولاً عما ينشأ عن ذلك من ضرر للغير”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
A claim filed against a deceased person can be cured by joining the heirs; rescinded partnership refunds net of sums received
A claim or appeal brought against a person who had already died is not void beyond repair: it may be corrected by joining the heirs at the same level of court, by a memor…
A partner's work cannot pay for a share in an LLC, so a share transfer made for services alone is void
Under Article 17 of the Commercial Companies Law (Federal Decree-Law No. 32 of 2021, corresponding to Article 17 of Federal Law No. 2 of 2015), the capital of a limited l…
Several wrongdoers who cause one harm may be held jointly liable, and a pending criminal case suspends the civil claim's lapse period
A final criminal judgment binds the civil courts on the facts it necessarily decided: whether the act occurred, its legal description and who committed it. Where several …
A co-owner leaving joint ownership of indivisible property: valuation, offer to co-owners, then sale of the whole by auction
Where jointly owned real property cannot be divided in kind without serious loss, a co-owner who wants to exit may ask for sale of his share or of the whole property. In …
A debtor company's trade licences and other intangible business assets can be attached by its creditors
All of a debtor's assets secure its debts (Article 391 of the Civil Transactions Law), and a creditor may attach the debtor's movable and immovable property except what t…
A properly filed and served claim interrupts limitation even if it is later dismissed or declared inadmissible
Under Article 484 of the Civil Transactions Law the limitation period is interrupted by a judicial claim, or any judicial step by which the creditor asserts its right aga…
Whether you are establishing a new venture, restructuring an existing enterprise, or exploring residency pathways — we are here to advise.
Arrange a Consultation →