A commercial claim: what to prepare before registration, and when it is too late to plead

A business owner calls because a client has fallen behind on payment for completed work. He asks one question: when do I file? The more useful question is what has to be ready before the claim is registered. The Law of Commercial Courts attaches consequences to late submission of claims, pleas and documents that cannot be cured once the moment has passed.

This article sets out the sequence of a commercial claim from the notice to the judgment, what to prepare at each stage, and where opportunities are lost. The reference is the Law of Commercial Courts, issued by Royal Decree No. (M/93) dated 15/8/1441H.

Before registration: notice and a fifteen-day wait

In the claims specified by the implementing regulation you cannot go straight to court. Article 19 provides that “in the claims specified by the Regulation, the claimant shall notify the defendant in writing to pay the right claimed at least (fifteen) days before filing the claim”.

The practical effect is immediate. Anyone intending to register tomorrow has already missed the window, and anyone who gave notice by phone has nothing to prove the notice with. Notice is given in writing, and proof of its delivery is kept.

The same article allows parties to a commercial dealing, before registration and under the supervision of the court, to pursue conciliation and mediation, to exchange documents and memoranda, and to hold a meeting to define the claims, the pleas and the evidence. This route is used far less than it deserves, and it is more productive than a series of hearings.

The statement of claim: itemised claims and all the bases

Article 20 requires the statement of claim to contain “the particulars of the parties, their representatives, their capacities and their addresses” together with “an itemisation of the claims and a statement of all the bases of the claim”. It also provides that “several claims with no connection between them shall not be combined in one statement of claim”.

The word “itemisation” is where the recurring error sits. A claim drafted as “to oblige the defendant to pay whatever is established against him” has itemised nothing. The amount is stated, the principal is separated from what follows it, and each claim is tied to the document that supports it.

A hypothetical: a business has completed three phases of a project and wants the value of the last two, and it also has an unrelated dispute with the same client under a separate supply contract. Combining the two in a single statement of claim risks one of them being held inadmissible. Unconnected matters are filed separately.

Registration and incomplete filings

The competent department registers the statement of claim if it is complete. If it refuses registration for incompleteness, Article 21 gives the applicant three things worth knowing:

• The applicant must supply what is missing “within (fifteen) days from the date of being notified”, and if he does not, “the application shall be deemed never to have been made”.
• If the claim is registered after completion, it “shall be deemed registered as of the date the registration application was submitted” rather than the date of completion, which preserves the effect of the earlier date.
• He may complain to the president of the court about the refusal “within (fifteen) days from the date of being notified of the refusal”, and the president’s decision on that complaint is final.

When is it too late to raise a plea?

This is what defendants most often miss. Article 22 requires the defendant to file with the court “a memorandum of defence containing his reply to the claim and all his pleas, together with a statement of his claims and all his bases, at least one day before the hearing set for the claim”.

Pleas are therefore raised together in the first memorandum, not in instalments. A defendant who holds back a procedural plea to spring it at a later hearing may find he has forfeited it.

Failure to submit what was asked for within the deadline without excuse has a stated consequence. Under Article 26 the court may impose the fine provided for in Article 13 — a fine not exceeding ten thousand riyals — or rule “that the incidental or counter claims of the party who failed to submit are inadmissible”.

A plea of lack of subject-matter jurisdiction has its own treatment. Article 18 allows the court to “decide separately on a plea of lack of subject-matter jurisdiction within a period not exceeding (twenty) days from the date the plea is raised”. Anyone intending to raise it should do so in the first memorandum.

Five years from when the right arose

Article 24 provides that “unless there is a special provision, claims within the jurisdiction of the court shall not be heard after the lapse of (five) years from the date the right claimed arose, unless the defendant acknowledges the right or the claimant presents an excuse that the court accepts”.

What counts is the date the right arose, not the date of the most recent demand. A creditor who hesitated for years on the strength of verbal promises may find the period has run. An acknowledgement by the defendant changes the position, which is why obtaining a written acknowledgement during negotiations — even a partial one — is worth more than a courteous meeting note.

Proof: no particular form is required

Many business owners assume that the absence of a written contract defeats the claim. Article 5 of the Law of Evidence provides that “no particular form is required to prove an obligation, unless a special provision or an agreement between the litigants provides otherwise”. Article 6 allows the parties to agree on specific rules of proof, provided the agreement is in writing and does not breach public order.

What a commercial claim can rest on is wider than the contract:

• Correspondence: Article 30 of the Law of Evidence gives “correspondence that is signed or whose attribution to its sender is established the evidential weight of an ordinary document, unless the sender proves that he did not send it and did not instruct anyone to send it”.
• Electronic evidence: Article 55 of the Law of Evidence gives proof by digital evidence the same effect as proof in writing, and Article 54 counts digital records, digital instruments, digital correspondence including email, and means of communication as digital evidence.
• The other side’s documents: Article 36 of the Law of Evidence gives each party in a commercial case the right to request documents held by the other, provided they are identified individually or by type, relate to the commercial dealing, and are not confidential. If a party refuses to produce what the court has ordered, “the court may treat the refusal as a presumption”.
• Commercial custom: Article 88 of the Law of Evidence allows proof by custom or by the practice between the parties where there is no special provision or agreement, and Article 89 provides that “whoever relies on the custom or the practice between the parties must prove its existence at the time of the facts”.

One limit deserves attention. The Law of Evidence, issued by Royal Decree No. (M/43) dated 26/5/1443H, provides in Article 66 that “every transaction exceeding (one hundred thousand riyals or its equivalent) in value, or of undetermined value, must be proved in writing”, and witness testimony is not admitted to prove its existence or its extinction unless an agreement or a provision says otherwise.

Absence and striking out

A claimant who files and then neglects to attend loses on procedure rather than on merits. Article 31 allows the court, where the claimant is absent without an acceptable excuse, to decide the claim on the defendant’s application if it is ready for decision, and otherwise to strike it out. The claimant may apply to continue “within (thirty) days from the date of the striking out”, and if the period expires with no application the court shall rule of its own motion that the claim is deemed never to have been made.

After judgment: the appeal windows

Article 61 requires a date to be set, after judgment is pronounced, for delivery of a copy of the judgment, “the delivery to take place within a period not exceeding (twenty) days from the date of pronouncement”. The appeal window is calculated from that date.

Article 79 sets that window at “(thirty) days from the date set for delivery of a copy of the judgment”, reduced to “(ten) days” for judgments on jurisdiction and in urgent claims. It also provides that a final judgment on the court’s subject-matter or territorial jurisdiction is not open to challenge by any route.

Before any of that, check whether an appeal lies at all. Article 78 treats all judgments of the first-instance circuits as appealable “except minor claims not exceeding fifty thousand riyals, as determined by the Council”. Anyone filing a small claim should know that its judgment may be final at one level.

What to prepare before registration

• The written notice to pay and proof of its delivery, with the fifteen-day period counted.
• A numerical itemisation of the claims: the principal separated from what follows it, each claim tied to its document.
• A document file arranged chronologically: purchase order, delivery, invoices, running account, correspondence.
• Proof of the authority of whoever represents the business, and the scope of that authority.
• The date the right arose, not the date of the last demand.
• A list of the documents held by the other side that you intend to request, identified individually or by type.
• The basis of territorial jurisdiction under the Law, or the parties’ written agreement on it.

In short

A commercial claim is a system of deadlines before it is a system of arguments. Notice precedes registration by fifteen days, pleas are raised together one day before the hearing, a claim is not heard five years after the right arose save by exception, and the appeal window runs from the date set for delivery of a copy of the judgment.

Get those dates right before registration and you argue the merits. Miss them and you argue procedure.