Dubai court orders law firm to return Dh1.1 million withheld from client

Dubai: A Dubai court has ordered a law firm to return Dh1.118 million it collected on behalf of a client but withheld for more than a year, ruling that lawyers cannot keep clients’ money to recover unpaid fees without following the proper legal procedures.

The Dubai Court of First Instance ordered the firm to refund Dh1,118,871.51, pay Dh50,000 in compensation for the financial losses caused by withholding the money, and pay 5 per cent annual interest from the date the lawsuit was filed until full settlement. The firm must also cover court fees and expenses, along with Dh1,000 in legal costs.

The dispute arose after a company hired the law firm to handle cheque execution proceedings over a Dh5.49 million claim. During the case, the debtor deposited Dh1.118 million into the court's execution account.

The firm transferred the money to its own bank account in August 2025 but failed to hand it over despite repeated demands. The company subsequently revoked the firm's power of attorney and formally demanded repayment in June 2026 before turning to the execution judge.

In July 2026, the execution judge ordered the lawyer to return the full amount, either to the court treasury or directly to the company's bank account. The firm sought approval to deposit only Dh803,702.24, but the judge directed it to pay the full Dh1,118,871.51.

The firm challenged the order before the Court of Appeal, but its appeal was rejected in September 2026.

Dispute over Dh30,000 legal fees

The firm sought an assessment of its legal fees. In October 2026, the court set them at Dh30,000 but rejected its request to freeze the execution proceeds as security.

In the company's lawsuit, the firm challenged its legal representation and sought dismissal of the case. It also claimed the right to deduct its fees from the collected money, requested a judicial set-off and precautionary attachment, and disputed the compensation and interest claims.

The court rejected the objection, finding that valid powers of attorney authorised the company's representatives to appoint lawyers and take legal action.

It also ruled that the expiry of the company's trade licence did not mean it had ceased to exist, entered liquidation or lost its legal representation.

Lawyers must return clients' money

The court ruled that money collected by a lawyer on behalf of a client must be treated as a deposit and returned when requested.

Under the UAE Civil Transactions Law, agents must keep clients informed of their work, account for the actions taken and return any money or documents held on their behalf.

Citing previous judgments, the court said that once a client proves an agent received money on its behalf, the agent must prove that the funds were either used for the client's benefit or returned.

The law firm failed to show that it had returned the Dh1.118 million or deposited it with the court.

It also rejected the firm's argument that unpaid legal fees entitled it to keep part of the money. The court stressed that a lawyer's right to fees does not override the duty to return clients' funds. Even a preferential claim for fees does not make the client's money the lawyer's property or allow automatic deductions.

The court added that the separate assessment of Dh30,000 in legal fees did not authorise the firm to deduct that amount from the execution proceeds. Its applications for a set-off and precautionary attachment had not followed the required legal procedures or included the necessary court fees.

The firm remains entitled to recover its fees, but must do so through the proper legal channels.

Dh50,000 compensation for financial losses

The court found that the firm had caused financial harm by withholding the money despite repeated demands, particularly as it could have deposited the funds with the court.

The company was deprived of the opportunity to use or invest its money for more than a year and had to take further legal action to recover it.

The court found a direct link between the firm's conduct and the company's losses, establishing grounds for civil liability.

Considering the amount withheld, the delay and the circumstances of the case, the court awarded Dh50,000 of the company's Dh100,000 compensation claim.

It also ordered the firm to pay 5 per cent annual interest on Dh1,118,871.51 from October 1, 2026, when the lawsuit was filed, until full payment. The court said the debt was fixed and did not require further assessment.