Tim Elliot: Hello and welcome to another edition of Lawgical, the legal podcast from the Dubai-based law firm, HPL Yamalova & Plewka. Lawgical is still the Gulf Region’s first and only legal podcast. Now, I’m Tim Elliot, socially distanced on the 18th floor at Dubai’s JLT – Jumeirah Lakes Towers at the firm’s offices with the Managing Partner, Ludmila Yamalova. Good to see you.
Ludmila Yamalova: Great to see you too, Tim.
Tim Elliot: In this edition of Lawgical, it’s a complaint that I’m guessing is familiar to many here in Dubai in the U.A.E., a complaint over gym memberships. It doesn’t sound like much, but there is a story here. Let me explain. Now because of the coronavirus, the health and fitness sector, in particular gyms, were hit badly. Now, most gyms were closed down by the government as soon as the lockdown happened back in March, and it was some months before they were permitted to re-open and re-open in a limited capacity or fashion as well. Now, it’s standard in many cases for people to pay for their gym membership in advance, for perhaps six months or even a year. There are often discounts or incentives for longer term subscriptions, which is fine. However, you’ve been following, Ludmila, a recent judgment where the claimant filed a case against his gym for a reimbursement of membership fees. Now, in this case, this was for an annual membership. He renewed it in February 2020, so just before lockdown, something he really could not have foreseen, clearly nobody could. So, what happened from there on?
Ludmila Yamalova: Well, the gym closed or was forced to close shortly thereafter, after the claimant paid the gym membership for a year ahead. It was obvious they were forced to close because of the pandemic. Then the claimant requested a refund of his gym membership fee, especially since he had paid for the whole year and he had only gotten maybe a few weeks into the year, and the gym refused. The gym refused on the grounds that while they were hit by the pandemic and they were forced to close down, it was not of their own choosing and therefore they were not going to refund him the funds and had the legal right to retain his funds. It’s as simple as that. As simple as it is, it is actually a situation that seems to have happened to a lot of people in the U.A.E. in the wake of the pandemic. A lot of gyms took the same stance. A lot of their members had paid in advance and then they could not use the gym, and the gym refused to refund the amounts relying on the pandemic as the excuse of not being able to operate and therefore legally not having to refund.
Tim Elliot: Okay. So, the gym argued that they suffered substantial losses in this case, but the claimant won because he simply couldn’t benefit from a membership for which he had paid. Does this then amount to at its most simple level the breaking of a contract? If you put coronavirus aside, this decision simply affirms a claimant didn’t get what he paid for.
Ludmila Yamalova: Absolutely. In this case, the claimant obviously took this issue to heart because the gym membership was not substantial. I think it was 2,000 dirhams, but obviously it was an important issue that he decided to see through and litigate. It wasn’t a question of money. It was a question of value.
Tim Elliot: Right.
Ludmila Yamalova: The gym argued in defense, as you said, that they had suffered substantially because of the pandemic, and therefore that was their defense, to not have to refund the amount. However, the court held while they sympathize with the gym for having obviously financially suffered, as so many other businesses did, that their financial suffering did not quite correlate or did not give them the right to keep the membership dues for something that they did not provide. The court reasoned that membership dues are obviously paid, especially when they are paid so far in advance, they pay for the benefit, the benefit of using the gym and using those services that come with a membership. In this particular case, the gym obviously did not provide those services. The reason for why they were not going to provide or were not able to provide them is irrelevant with regard to this claimant’s request for a refund. But at the end, since the gym closed its doors and was not able to provide the service for which the claimant had paid, therefore, there was no consideration and you have to have the mutuality of obligations. That is, if the member pays the fees, the gym has to do something in exchange. Since they did not do that in exchange, they had to refund the amount because otherwise it would be unwarranted for them to keep the amount. The court, however, held that one month of membership before the gym was closed was warranted for the gym to subtract that because at that point in time for those three weeks or so, the claimant did have the benefit from, or at least could have had the benefit of the gym, and therefore it was not warranted for the gym the entire amount, but anything after the time they closed their doors was refundable.
Tim Elliot: Okay. That seems reasonable. But wouldn’t it have been sensible for the defendant gym, in this case, to just have offered a new 11-month contract from the day that they were allowed to re-open? That would have avoided a whole world of to and fro legally.
Ludmila Yamalova: Absolutely. There could have been a number of options and a settlement and compromise that offered and perhaps at least discussed with the members. I would guess in this particular case that perhaps was exactly the reason why the claimant took it as far as he did and filed the case in court was because he felt the gym was unreasonable. We don’t know the specific details, but based on the experiences of so many other people we know who found themselves in very similar situations, in most cases the gyms just closed their doors and they didn’t really negotiate or offer any other alternatives to their members, but rather took a stance and said:
Well, you are hurting, but so are we. We are hurting and therefore we are not required to pay you because we’re hurting.
But that’s not a proper legal theory. What they could have done is they could have offered other packages. Many gyms went on Zoom, for example, and they could have offered at least that. They could have offered, as you said, to defer payments until after, or for the membership to be extended for the period during which the gym was closed and perhaps a membership to start later or to last longer, or perhaps offer some other additional benefits once the gym is open. There could have been a number of things that the gym could have done and perhaps some have done that. At least personal trainers we know have done that. It’s not to say that the client or the claimant would have necessarily accepted or had the obligation to accept, but you can see how it would have provided for a very different discussion with regards to the court if the gym could have shown that we provided, we offered all of these benefits, and in fact, we offered, let’s say, the Zoom services and they were available and many of our other members availed themselves of these services, and they felt those services, while they do not necessarily translate to the physical experience, they come close enough to at least justify retaining some portion of the membership. I’d say if there was that kind of dialogue, then perhaps the claimant would not have either filed the case or the court would not have necessarily sided with the claimant the way that that it did. But from experience, in most cases perhaps, just to be objective, it was not surprising so many businesses were so taken aback because it was such a big blow when they were forced to close, especially businesses like gyms that generally operate on physical experiences. Perhaps in a panic and as a result of this, they did not feel that there was justification for them to return. It could have also been just because so many other gyms, and that is also one of the theories, is so many gyms run at a loss anyway, and so they rely on many memberships and it is thought, well, we run at a loss anyway, so we’re just not positioned to refund money because we have already spent it or we don’t have money to refund. There could have been a number of reasons, but it probably could have been handled differently, and as we see now, a lot of the gyms re-opened and a lot of experiences are being offered in a different format. People have adapted to that environment as well. I would say that if things had been handled differently, maybe we wouldn’t have gotten this far.
Tim Elliot: I would agree. It’s almost trivial in terms of the amount. It’s a gym membership. What gives really? But the point is that this is such a prevalent story. Social media is awash with stories about gyms not honoring commitments, whether it’s COVID or not COVID, it’s just something that seems to crop up so regularly. It interests me because if the gym had suffered such substantial losses as part of COVID and didn’t look for a way to defer payment or offer something alternative in return, how could they have taken this to court and shown reasonable evidence to support their cause. Is there any way of doing that?
Ludmila Yamalova: Well, yes, they could have, but I would say in this particular case, I would guess, because as you said, if it’s a matter of 2,000 dirhams, then I cannot see how the gym justified actually having to litigate this case in court versus just paying the 2,000 or 3,000 and just refunding it to the member. But I would speculate perhaps there are many more that were either fighting these cases and so they wanted to set a precedent because they felt that if they give to one, they will have to refund to others. But at the end, from a practical standpoint and from experience, I perhaps would theorize or speculate that the gym was just not doing well financially, and they were just not in the position to refund money under those circumstances or any other circumstances. So for them to offer anything, perhaps they were going to close their door anyway, and so for them to offer anything else was perhaps not practical because they were not going to be around for very long. That’s also an explanation that is reasonable given how many gyms actually did closes and if you read the messages from a lot of these fitness centers that did close, there is sort of a message of they had been struggling for a while even before the pandemic. Perhaps this is why for this particular gym, either they didn’t have the ability to compensate or they just didn’t feel that it was fair because they were suffering so much because of the pandemic.
Tim Elliot: Yea. It was hit very hard, but it became obviously a point of principle for the claimant.
Ludmila Yamalova: Yes. Because it’s been such a sore point for so many people we know, we just thought it was interesting to actually see that somebody took such an interest in this matter that they actually took it to court because this is based on an actual court decision by the Dubai courts that was just decided last week. Obviously, this was perhaps a representation of how so many other people feel. While a simple matter, obviously one that was very close to this person’s heart. Also, it shows you what cases courts litigate and decide. The courts took it. They didn’t throw it out, and they issued a judgment in the favor of this claimant, and because the judgement is for such a small amount, it actually cannot be appealed because anything, according to the new procedural rules, anything below 50,000 dirhams is not subject to being appealed. In this case, this is the final judgment and perhaps this will be used as an example for other gyms to factor in how they wish to treat their members.
Tim Elliot: The final question. What would you say to anyone who might have paid for something like a gym membership, as an example, in advance just as lockdown happened and perhaps put off by a refusal to offer a refund? What steps can, or maybe should, a person take if they feel they have been treated unfairly?
Ludmila Yamalova: This is more practical advice. I would say, negotiate. Negotiate something else, negotiate perhaps an extended membership or additional benefits because, what are your options? Your options are either go to court and pursue the same legal battle as the claimant in this particular case did, which requires a lot of dedication, resources, and time. That is one option.
The other option is you just give up and you just walk away. What’s in between? In between is to negotiate and see what else you can negotiate that is a part that is short of one or the other scenario. As long as you had interest in the gym, once upon a time, presumably there is still a reason for you to still be part of the membership and now that the gyms are back online, although it is a lot harder for them to function because of the social distancing requirement, they are around. I would say, just figure out an alternative arrangement that is somewhere in the middle.
Tim Elliot: That’s another episode of Lawgical, the perennial question of whether or not to pay for a gym membership in advance. I’d say, if it’s a New Year’s resolution, think before you spend. However, in this case, a quite different result. As ever, today our legal expert here on Lawgical was Ludmila Yamalova, the Managing Partner here at Yamalova & Plewka. Thank you very much for your expertise.
Ludmila Yamalova: Thank you, Tim.
Tim Elliot: If you have a legal question you’d like answered in a future episode of Lawgical or if you’d like a consultation with a qualified U.A.E. experienced legal professional, you can now WhatsApp us directly. Here’s the number: 00971 52 525 1611, or just head to LYLawyers.com and click the Contact button.
