When a community changes managers, who answers for the arrears that built up before the handover? In this 2026 Dubai Court of Appeal judgment — in which our team acted for the successful first respondent — a contractor pursued our client for more than AED 8.5 million of accumulated service fees. The Court held our client answerable only for its own period of appointment: a low six-figure sum. It also refused to make the company’s manager personally liable.
1. The claim
A specialist contractor had provided services to a Dubai residential community over many years. It sued our client — a real estate management company appointed as the community’s administrative supervisor — for about AED 8.5 million, said to represent the balance accumulated across the whole period. It also sued our client’s manager personally, and the predecessor manager was joined as an intervening party. At first instance the claim was dismissed for want of standing; the contractor appealed.
2. A manager answers for its own period, not its predecessor's
The decisive point was chronology. Our client was appointed only in 2020, under an arrangement coordinated with the property regulator, and a fresh services agreement between our client and the contractor was executed in 2025. The bulk of the sum claimed — about AED 8.1 million — had accrued before our client’s appointment, during the predecessor manager’s watch.
The Court held that our client could be liable only for the amount attributable to its own period — a low six-figure sum, supported by the contractor’s own acknowledgement. Historic balances remained the responsibility of the party that incurred them. A carried-forward ledger figure does not transfer with the office.
3. Privity — you cannot be sued on an agreement you never signed
The contractor leaned on a 2018 agreement between the homeowners’ association and the predecessor manager. Our client was not a party to it. The Court applied the ordinary rule that a person is bound by the contract they conclude, and no other: an agreement between two other parties, predating our client’s appointment, could not found a claim against it.
4. No personal liability for the company's manager
The attempt to make our client’s manager personally liable failed. A manager of a limited liability company who contracts in the company’s name binds the company, not himself; he answers personally only where fraud or deceit is proved, and fraud is never presumed. No evidence of fraud was offered, and the separate legal personality of the company was left intact — consistent with Dubai Court of Cassation authority.
5. Interest at 5%, not the rate claimed
The contractor sought 12% interest. The Court applied the settled judicial rate of 5% per annum, running from the date of claim until full payment, reflecting the Court of Cassation’s position that the previously customary 9% no longer suits prevailing economic conditions and bank rates.
Practical takeaways
- On a management handover, fix the opening balance in writing. It is the single document that decides who owns the arrears.
- A successor manager is liable only for sums accruing after its appointment; historic balances stay with the predecessor.
- Check privity before suing the visible party rather than the contracting one.
- Claims against directors personally need pleaded and proved fraud — assertion is not enough.
- Expect 5% interest in Dubai, whatever rate the contract or claim form asserts.
Sources & citations
- Judgment: Commercial Appeal 3603/2025 (Dubai Court of Appeal — Commercial Division). Dubai Court of Appeal judgment of 24 June 2026 in Commercial Appeal 3603/2025. A certified copy is on file with the firm. See the ADGM Courts judgments database.
Rules & practice directions cited
- UAE Civil Transactions Law and Commercial Companies Law (manager's personal liability)
- Dubai Court of Cassation 393/2021 and 411/2021 (no personal liability of an LLC manager absent fraud)
- Dubai Courts — court of record
This case note is for general information only and does not constitute legal advice. For advice on an ADGM debt-recovery, enforcement or set-aside matter, please contact us. Last updated: 24 June 2026.