Case Study: Unjust Enrichment and Recovery of Funds Under the Civil Transactions Law in Dubai

Background:

On August 21, 2023, the Dubai Primary Court issued a judgment in a partial commercial case, where the plaintiff, L. B., sought to obligate the defendant A. Y. to pay 297,102 AED in compensation for funds he unlawfully obtained, in addition to legal interest.

Facts:

The case dates back to 2009, when the plaintiff entrusted the defendant with 35,000 Euros (approximately 192,500 AED) to invest on her behalf in the Dubai Financial Market in exchange for a 2.5% profit share. Subsequently, the defendant received another sum of 288,614 AED, with a commitment to repay it into the plaintiff’s personal trading account.

The defendant was also granted a power of attorney to act on behalf of the plaintiff in the Dubai Financial Market. Over time, the power of attorney was revoked on August 13, 2020, and the defendant was duly notified. Despite the revocation, the defendant continued to use the power of attorney, transferring funds from the plaintiff’s account to his own. After unsuccessful attempts to recover her funds, the plaintiff filed the lawsuit.

Legal Actions:

1. The Lawsuit: On January 2, 2023, the plaintiff filed a lawsuit demanding the return of the amount unlawfully taken by the defendant (297,102 AED), along with legal interest at 5% annually from the date of the claim until full repayment.
2. Investigation and Expertise: A forensic expert was appointed to review the financial transactions in the Dubai Financial Market. The expert’s findings confirmed that the defendant, despite the revocation of the power of attorney, continued to use it and made multiple transfers from the plaintiff’s account to his own.
3. Defenses: The defendant argued that the court lacked jurisdiction and disputed the validity of the acknowledgment signed by him. However, the court rejected these defenses.
4. Forgery Allegations: The defendant filed a forgery claim against the acknowledgment, but the court ruled that the evidence presented was sufficient to decide the case without needing to address the forgery claim.
5. Judgment: After deliberation, the court ruled on August 21, 2023, that the defendant must pay the claimed amount, along with 5% annual legal interest from the date of the final judgment until full payment. The defendant was also ordered to pay the plaintiff’s legal costs and attorney’s fees.

Legal Concepts in the Judgment:

1. Power of Attorney and Its Effect: The court emphasized that a power of attorney is a contract that allows the agent to act on behalf of the principal. Once revoked, the agent is obliged to cease any legal actions on behalf of the principal.
2. Unjust Enrichment: The court based its decision on the defendant’s unlawful enrichment at the plaintiff’s expense, citing the concept of unjust enrichment. Under Article 318 of the Civil Transactions Law, any unjustly acquired funds must be returned, along with compensation for the delay.
3. Legal Interest: The court affirmed that the plaintiff was entitled to legal interest on the amount owed, starting from the date of the final judgment. This applies in cases where the debt is non-commercial and its amount is known.

Outcome:

The court ordered the defendant to pay 297,102 AED to the plaintiff, along with 5% annual legal interest from the date of the final judgment, plus costs and attorney’s fees.