Cassation
No. 933 of 2019 Commercial
Court
Panel: Presided over by Mr. Judge Shihab Abdul Rahman Al-Hammadi, Chief Judge of
the Circuit, with Messrs. Judges Abdullah Boubakar Al-Siri and Sabri Shams
Al-Din Muhammad as counsellors.
UAE-LC-En_1985-12-15_00005_Kait,art,677
UAE-LC-En_1985-12-15_00005_Kait,art,675
The
law “its application”. Commercial companies. A partner “his
dismissal" “his removal”. Contracts. “Limited Duration”
company. Ruling “invalid causation.” Reversal “acceptable
reasons.”
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In matters not covered by private law, public law principles should be
consulted.
-
The Commercial Companies Law No. 2 of 2015 is bereft of provisions governing the
majority partners' right to seek judicial intervention for the dismissal of a
partner. In light of this lacuna, recourse is to be made to the Civil
Transactions Law No. 5 of 1985, specifically concerning contractual
matters.
-
The majority of partners, in consonance with Article 677 of Law No. 5 of 1985
promulgating the Civil Transactions Law, have the right to petition the
judiciary for the dismissal of any partner, provided they present compelling
reasons justifying such action.
-
Based on the aforementioned article, any partner has the right to request
judicial removal from the company, especially if the company operates on a
limited-term basis, and such a request is based on reasonable grounds.
-
With regard to the share of a dismissed or withdrawn partner, Article 675/2 of
the aforementioned law governs such matters, and its application takes effect
from the date of filing the lawsuit.
-
An illustrative instance of a deficiency in reasoning is evident in the ruling
directing the payment of a sum to the respondent based on the expert's report,
which regrettably omitted the calculation of the company's losses and profits
until the date of filing the lawsuit.
Whereas,
pursuant to the ruling of this court, the public law shall govern matters not
explicitly addressed by private laws, and upon careful examination of Law No. 2
of 2015 on Commercial Companies, it is evident that said law does not expressly
confer upon the majority of partners the right to petition the judiciary for the
dismissal of a fellow partner within the company. In contrast, Chapter Three of
Title 2 of Law No. 5 of 1985, which promulgates the Civil Transactions Law and
pertains to contracts, specifically addresses the company contract in Articles
654 to 709. Notably, Article 677 of said law stipulates as follows:
1-
The majority of partners may seek judicial intervention to adjudicate on the
dismissal of any partner, provided that such request is grounded in compelling
reasons justifying dismissal.
2-
It is also within the prerogative of any partner to petition the judiciary for
his removal from the company in instances where the company operates for a
limited term, and such petition is founded on reasonable grounds.
3-
In both aforementioned scenarios, the provisions of Article 675, Paragraph (2)
shall be applicable to the share of the dismissed or voluntarily withdrawn
partner. The valuation of this share is to be determined based on its value as
of the date of filing the lawsuit.
Consequently,
a ruling for the removal of a partner from the company does not result in the
dissolution of the company; instead, it persists with the remaining partners.
Furthermore, the dismissed partner is entitled to receive his share in the
company's funds, and the valuation of this share is contingent upon its value as
of the date when the legal action was initiated.
In
light of the aforementioned circumstances, it is noted that the contested
judgment awarded the appellant an amount determined in accordance with the
expert's report. However, it is crucial to underscore that the said report did
not encompass an evaluation of the company's profits and losses up to the date
of the lawsuit. Rather, it was confined to the calculation of the debts owed to
the company by its customers and the valuation of the inventory of goods,
without elucidating whether these debts have been collected or not.
Furthermore,
the contested judgment determined the appellants' share based on the company's
outstanding debts to external entities and the inventory of goods, overlooking
the expert's failure to reconcile the financial transactions among the partners
pertaining to profits, losses, and debts attributable to or owed by the company.
Despite the appellants' explicit objections to the report, the ruling premised
its decision on this report without due consideration of the objections raised,
thereby rendering it deficient in reasoning and in breach of the right of
defence, necessitating reversal.
Whereas
in the facts - as apparent pursuant to the perusal of the contested ruling and
the remaining document - it is observed that the respondent initiated Suit No.
1319 of 2017 - Civil, Plenary - in Ajman against the appellants. The suit sought
a judicial declaration to institute receivership proceedings on the company
(Name) engaged in advertising media trading, along with the removal of the first
appellant from said company. Additionally, the plaintiff urged the appointment
of an accounting expert to conduct an inventory of the company's accounts and
ascertain its profits.
The
grounds for the plaintiff's claims were rooted in the establishment of the
company on 6/5/2012, wherein he, along with the two appellants, founded the
enterprise. The plaintiff asserted his ownership share in the company as 24%,
attributing 25% to the first appellant and 51% to the second appellant.
Subsequently, the plaintiff alleged that he was unjustly ousted from the company
by the defendants, prompting the initiation of the lawsuit with the
aforementioned requests.
Upon
the court's assignment of an accounting expert who subsequently submitted a
report, the plaintiff amended his original requests to include the removal of
the first defendant (first appellant) and sought an order for the defendants to
remit his entitled share of 1,923,125 dirhams. In response, the two defendants
(appellants) filed a counterclaim, requesting the removal of the plaintiff from
the company as a partner.
In
a session convened on 30/06/2019, the court issued a ruling rejecting the
original lawsuit and ordering the removal of the plaintiff, (respondent) from
the company. Subsequently, the plaintiff in the original lawsuit lodged an
appeal, identified as Appeal No. 573 of 2019, Ajman Commercial. In the session
held on 28/10/2019, the Court of Appeal modified the contested ruling by
directing the appellants to remit the amount of 991,568 dirhams to the
respondent, representing the value of his share in the company. The Court of
Appeal confirmed the appealed ruling in all other aspects. Dissatisfied with
this judgment, the two appellants sought redress through the present cassation,
and upon review by this court in a Council Chamber, it deemed the cassation
worthy of consideration.
The
two appellants raise various objections against the contested ruling, including
alleged violations of the law, errors in its application, and deficiencies in
reasoning. Notably, they contest the directive compelling them to pay the
respondent's share of the company's outstanding debts to its clients. The
appellants assert that these debts remain uncollected, with some being
perishable and deemed irrecoverable. Additionally, they express dissatisfaction
with the expert's report in the case, citing the failure to settle accounts
between the partners and determine their respective shares after accounting for
losses and profits. The appellants had requested the court to reassign the
expert to address this matter, a request that went unanswered. This, in their
view, renders the ruling defective and warrants its reversal.
Whereas
this objection holds merits, since pursuant to the ruling of this court, the
public law shall govern matters not explicitly addressed by private laws, and
upon careful examination of Law No. 2 of 2015 on Commercial Companies, it is
evident that said law does not expressly confer upon the majority of partners
the right to petition the judiciary for the dismissal of a fellow partner within
the company. In contrast, Chapter Three of Title 2 of Law No. 5 of 1985, which
promulgates the Civil Transactions Law and pertains to contracts, specifically
addresses the company contract in Articles 654 to 709. Notably, Article 677 of
said law stipulates as follows:
1-
The majority of partners may seek judicial intervention to adjudicate on the
dismissal of any partner, provided that such request is grounded in compelling
reasons justifying dismissal.
2-
It is also within the prerogative of any partner to petition the judiciary for
his removal from the company in instances where the company operates for a
limited term, and such petition is founded on reasonable grounds.
3-
In both aforementioned scenarios, the provisions of Article 675, Paragraph (2)
shall be applicable to the share of the dismissed or voluntarily withdrawn
partner. The valuation of this share is to be determined based on its value as
of the date of filing the lawsuit.
Consequently,
a ruling for the removal of a partner from the company does not result in the
dissolution of the company; instead, it persists with the remaining partners.
Furthermore, the dismissed partner is entitled to receive his share in the
company's funds, and the valuation of this share is contingent upon its value as
of the date when the legal action was initiated.
In
light of the aforementioned circumstances
,
it is noted
that the contested judgment awarded the appellant an amount determined in
accordance with the expert's report. However, it is crucial to underscore that
the said report did not encompass an evaluation of the company's profits and
losses up to the date of the lawsuit. Rather, it was confined to the calculation
of the debts owed to the company by its customers and the valuation of the
inventory of goods, without elucidating whether these debts have been collected
or not.
Furthermore,
the contested judgment determined the appellants' share based on the company's
outstanding debts to external entities and the inventory of goods, overlooking
the expert's failure to reconcile the financial transactions among the partners
pertaining to profits, losses, and debts attributable to or owed by the company.
Despite the appellants' explicit objections to the report, the ruling premised
its decision on this report without due consideration of the objections raised,
thereby rendering it deficient in reasoning and in breach of the right of
defence. The ruling is hereby reversed, and the case is remanded for further
proceedings, with no need for examining the remaining grounds of
cassation.