Claim No: CFI 015/2014
THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
BEFORE JUSTICE ROGER GILES
ASIF HAKIM ADIL
FRONTLINE DEVELOPMENT PARTNERS LIMITED
Hearing: 19-21 May 2015 and 21 February 2016
Counsel: Bushra Ahmed (KBH Kaanuun) for the Claimant.
Zeeshan Dhar (Al Tamimi & Co) for the Defendant.
Judgment: 3 April 2016
JUDGMENT OF JUSTICE ROGER GILES
Summary of Judgment
|The Claimant in this case, Mr Adil, was employed by the Defendant, Frontline, as its Managing Director under an employment contract dated 20 August 2011 (“the contract”). The Claimant had alleged that from 1 July 2013, the Defendant failed to pay his salary or provide his other employment benefits, whereupon on 28 November 2013 he gave notice of his resignation effective on 3 March 2014; but that the Defendant did not act on his resignation letter until 27 April 2014 when it terminated the employment effective immediately. The Claimant’s total claim (inter alia, for unpaid salary, the money value of other employment benefits and end of service gratuity) was in the order of USD 1.77 million plus an ongoing statutory penalty at USD 1,666 per day (under Article 18 of the
In the Amended Defence and Counterclaim
Justice Giles found as follows: (a) the employment was terminated on 30 June 2013; (b) the termination was not for cause, but pursuant to a contractual right to terminate without notice on payment in lieu of the notice entitlement; (c) the Claimant is entitled to a total recovery of USD 359,411.12 in AED equivalent and a penalty amount calculated at USD 1,643.84 from and including 15 July 2013; (d) the breaches of contract and of fiduciary duty are not made out; and; (e) the Defendant is not entitled to the other relief claimed in the counterclaim.
The Defendant had objected to some of the evidence submitted by the Claimant of the events in the period between July 2013 and January 2014, on the ground that the evidence was of without prejudice settlement discussions. Justice Giles drew a distinction between production and admissibility, while production of privileged documents may be refused because they are inadmissible, ordering production does not mean that a document is admissible. There are a number of exceptions to privileged communications in genuine settlement negotiations, including when the issue is whether without prejudice communications have resulted in a concluded settlement, those communications are admissible. A fortiori, if the settlement to which the parties have come is relevant, evidence may be given of the settlement agreement (the paradigm case being where a party sues on the settlement agreement).
Justice Giles observed that at least at trial, it has been common ground that the Claimant’s employment was orally terminated on 30 June 2013, moreover if the Defendant argued that it had exercised the contractual right to terminate without notice but with payment in lieu of the notice period, it could not then justify the termination as the exercise at the time of the right to dismiss for cause. The exercise of the contractual right created rights and obligations, specifically the debt of payment in lieu of the notice period, which cannot be retrospectively undone by later showing a different basis for termination. The Claimant’s objection to the Defendant’s purported reliance in its closing submissions on Article 59A of the DIFC Employment Law as a source of its ability to terminate the employment for cause was upheld, as it had not been pleaded and the counterclaim had not been defended on the basis that the Claimant’s conduct had warranted termination for cause pursuant to that Article. It was not open to the Defendant to rely on acts or omissions after termination, as neither Article 59 of the DIFC Employment Law or the corresponding common law principle would permit consideration of post-termination conduct as distinct from pre-termination conduct discovered post-termination.
As regards the Defendant’s counterclaim, which fell into two parts: (i) a claim to damages for breaches of the contract and fiduciary duty; and (ii) a claim for other relief – Justice Giles rejected the allegation that the Claimant had misappropriated USD 777,778 and the counterclaim in relation to damages failed in so far as that was maintained. In any event, there was no evidence of loss suffered by the Defendant from any breach. Justice Giles went on to emphasise that it is of the utmost importance that practitioners plead only that which can reasonably be supported. The extent of the discrepancy between the Defendant’s pleaded defence and counterclaim and the case it maintained may serve as a reminder of that professional obligation.
Furthermore, Article 18 of the DIFC Employment Law must be construed on its own terms, as a unique provision, and as part of the Employment Law. So far as reference to other jurisdictions may assist, it suggests that the strong terms of the Article were deliberately chosen. They are indeed strong terms: a strict time limit is stated (Article 18 (1)), and failure means that the employer “shall” pay what is described as a penalty. There is no alleviation by regard to wilfulness or reasonable excuse, in Article 18 or elsewhere in the DIFC Employment Law.
This is the first case in this Court
Although not on all heads of claim, the Claimant has been dominantly successful in the proceedings. Subject to any further submissions, if made, the Defendant should pay the Claimant’s costs of the proceedings (including of the without prejudice privilege application, which should be formally dismissed).
Parties to file agreed draft orders confirming these reasons, or if draft orders cannot be agreed his or its draft orders, within 14 days. Unless otherwise directed, any disagreement will be decided on the papers.
This summary is not part of the Judgment and should not be cited as such
|1. Introduction and Statement of Result||1 – 6|
|2. The Parties||7 – 11|
|3. The Contract||12 – 31|
|4. The Fronteira Connection||32 – 41|
|5. The Fronteira Shareholders Agreement||42 – 55|
|6. The Fronteira Consultancy Agreement||56 – 65|
|7. The 30 June 2013 Meeting||66 – 81|
|8. Events After the 30 June 2013 Meeting|
|8.1 Describing why||82|
|8.2 Events from 30 June 2013 to late July 2013||83 – 97|
|8.3 The without prejudice negotiations objection||98 – 108|
|8.4 Events from late July 2013 to 3 October 2013||109 – 144|
|8.5 Events from 3 October 2013 to 20 January 2014||145 – 156|
|8.6 Final events||157 – 165|
|9. The credit of Messrs Adil and Chaturvedi||166 – 168|
|10. There Was Termination on 30 June 2013, Not For Cause||169 – 174|
|11. The Termination Was Effective|
|11.1 The asserted defects||175|
|11.2 Failure to follow the proper mechanism||176 – 177|
|11.3 Acceptance of termination||178 – 180|
|11.4 Keeping the Contract alive||181 – 189|
|12. No Amendment to Sue on a New Contract||190 – 193|
|13. No Cause For Termination|
|13.1 Frontline’s case on cause||194 – 202|
|13.2 Allotment and issue of shares in Fronteira to PDEL||203 – 220|
|13.3 Misappropriation of funds||221 – 261|
|13.4 Provision of accounts||262 – 270|
|13.5 Wild Bull Beverages loan application||271 – 276|
|14. The Counterclaim|
|14.1 The two parts of the counterclaim||277|
|14.2 The claim to damages||278 – 285|
|14.3 The claim to other relief||286 – 287|
|14.4 A comment on the pleaded case||288|
|15. Overpayment in Relation to the Equity Grant?|
|15.1 The issue||289 – 292|
|15.2 No overpayment||293 – 302|
|15.3 Entertaining a claim to recover any overpayment||303|
|16.1 The claim||304 – 305|
|16.2 Payment in lieu of notice||306|
|16.3 Balance compensation / incentive payment||307 – 308|
|16.4 Gratuity||309 – 311|
|16.5 Driver’s charges||312|
|16.6 Out of pocket expenses||313 – 314|
|16.7 Statutory penalty||315 – 340|
|17. Other Matters|
|17.3 Costs||343 – 344|
1. Introduction and Statement of Result
1.The Claimant, Mr Asif Adil, was employed by the Defendant, Frontline Development Partners Ltd (“Frontline”), as its Managing Director under an employment contract dated 20 August 2011 (“the Contract”).
2. In the Particulars of Claim Mr Adil alleged that from 1 July 2013 Frontline failed to pay his salary or provide his other employment benefits, whereupon on 28 November 2013 he gave notice of his resignation effective on 3 March 2014; but that Frontline did not “activate” the resignation letter and “implicitly indicted to the continuous of the Employment relationship between the Parties [sic]”, and on 27 April 2014 itself terminated the employment effective immediately. He claimed unpaid salary and the money value of other employment benefits, including for a six months notice period; a statutory penalty for non-payment of salary; an end of service gratuity; reimbursement of out of pocket expenses; and “Abusive Dismissal Compensation”: all on the basis of employment until wrongful termination by Frontline on 27 April 2014. The total claim was in the order of USD 1.77 million plus an ongoing statutory penalty at USD 1,666 per day.
3. In the Amended Defence and Counterclaim Frontline alleged that it had lawfully terminated the employment without notice on 30 June 2013, for “numerous and serious breaches” of the Contract by Mr Adil which enlivened a contractual right of termination for cause; alternatively, that there was termination with immediate effect “through mutual recognition and agreement of the parties on around 30 June 2013”; alternatively again, that there was termination by Mr Adil’s resignation “which took effect immediately and without notice through his abandonment of his usual place of work… on 1 July 2013 and his failure to attend thereafter”. Frontline denied that Mr Adil was entitled to any salary or other employment benefits, even if the termination had been by the resignation effective on 3 March 2014, on the ground that he had been absent from his normal workplace and did not perform any duties for it after 30 June 2013. It counterclaimed for damages for the breaches of the Contract and of fiduciary duty, and for relief to protect confidential information and intellectual property and to restrain Mr Adil in other employment or engagement. The money content of the counterclaim was not fully quantified, but so far as it was quantified was in the order of USD 2.9 million.
4. Some of the claims fell away, and in a number of respects the course of events as revealed in the evidence departed from the pleaded cases. On the cases of the parties as ultimately presented, Mr Adil principally contended that a purported termination of his employment on 30 June 2013 was ineffective and he remained employed until his resignation on 28November 2013, and Frontline principally contended that the employment was terminated for cause on 30 June 2013. It will be necessary to describe what happened, and the parties’ contentions, in some detail.
5. For the reasons which follow, in my opinion –
(a) the employment was terminated on 30 June 2013;
(b) the termination was not for cause, but pursuant to a contractual right to terminate without notice on payment in lieu of the notice entitlement;
(c) Mr Adil is entitled to a total recovery of USD 359,411.12 in AED equivalent and a penalty amount calculated at USD 1,643.84 from and including 15 July 2013.
(d) the breaches of contract and of fiduciary duty are not made out;
(e) Frontline is not entitled to the other relief claimed in the counterclaim.
6. The delivery of these reasons has taken longer than I would have wished. Settlement negotiations displaced time for oral submissions on the allotted hearing days. The happy event of marriage of one Counsel intervened in the exchange of written submissions. I then requested further submissions, including orally, which were arranged for the next occasion of my coming to Dubai. These circumstances explain the delay, which is nonetheless regrettable.
2. The Parties
7. Mr Adil obtained the degrees of Bachelor of Arts (Political Science) and Bachelor of Laws from Mumbai University, and Master of Business Administration from Cornell University. He gained qualification as a Certified Practicing Accountant. From 1980 he held positions with entities concerned with retail businesses, particularly involving alcoholic beverages.
8. In mid-2010 he and his son Samir established a partnership, Adil Global & Sons (“AGS”), principally to carry on the business of exporting alcoholic products from India to African markets such as Benin, Kenya and Ghana. Samir was the majority partner, and Mr Adil’s role was limited to establishing relationships and contacts and providing strategic input. AGS plays a limited part in the events to be described.
9. Frontline is a company ultimately controlled by Mr Suresh Chaturvedi, an Indian national resident and based in Mumbai. Other companies controlled by Mr Chaturvedi (at least de facto), which also play parts in the events to be described, include Overseas Infrastructure Alliance (India) Pvt Ltd (“OIA”), an Indian company, and Project Development & Engineering Ltd (“PDEL”), a Mauritian company. Mr Chaturvedi appears to have had many years of business experience, but any formal qualifications and his business history were not detailed in the evidence.
10. Mr Adil and Mr Chaturvedi became acquainted in about 2002. In about August 2010 Mr Adil began to provide consultancy services to OIA, through AGS, in particular in developing a strategy for growth and diversification. The consultative discussions included, but were not limited to, establishing a business in Dubai to provide advice and financial services in support of infrastructure project development; according to the minutes of a meeting on 18 September 2010, to “enable OIA to be an early mover in the financial services in select sub-Saharan African countries”.
11. In the result, on 28 June 2011 Frontline was incorporated in the DIFC, to provide “government consultancy and project advisory services”. It was licensed as a non-regulated entity, and could not conduct investment activities. The shareholders were companies ultimately controlled by Mr Chaturvedi.
3. The Contract
12. Mr Chaturvedi became the Chairman of Frontline. He invited Mr Adil to become its Managing Director. After discussions, to some of which I will return, Mr Adil agreed to relocate from India to Dubai and take up that position.
13. Mr Chaturvedi asked Mr Adil to provide one of his old employment contracts. Mr Adil sent him a copy of the contract under which, from 2006 to 2009, he had been Managing Director South Asia of Diageo Plc (“the Diageo contract”). At about the end of July 2011 Mr Chaturvedi sent Mr Adil a draft employment contract largely based on the Diageo contract.
14. In early August 2011 the two men met and discussed the draft; again, I will return to some of the discussions. The Contract, in the form of the draft, was signed on 20 August 2011.
15. The Contract began –
“The following Contract of Employment (“Agreement”) sets out the terms and conditions of your employment with Frontline Development Partners Limited (hereinafter called “the Company”).
Any changes to the terms and conditions stated below will be notified to you in writing and as such will constitute final variations to your contract of employment. The company is at its discretion entitled to change any of the terms and conditions stated below and any such change/s will become part of this contract of service as if incorporated herein on the company notifying you the change.
In this statement [sic] “Group” mean those companies, which comprise the Frontline Development Partners Limited Group of companies, as constituted from time to time.”
16. Boxes then recorded employment as Managing Director commencing on 1 September 2011, at a “gross salary” of USD 600,000 per annum payable in equivalent AED monthly in arrears and with annual leave in accordance with DIFC Employment Law No 4 of 2005 including amendments thereto.
17. Clause 1 provided –
“1. APPOINTMENT AND POSITION
You are employed by the Company in the position of Managing Director. We recognize your employment with the Company from 1st September, 2011. You shall be in exclusive employment with the Company for a period of five (5) English calendar years on a full time basis and on such terms and conditions as contained herein, unless its earlier determination/termination in accordance with this Agreement and the requirements of applicable British laws.
You shall be located at the Corporate Office of the Company in Dubai. However, your services can be transferred to any place within the country or abroad at any time depending on the business exigencies or other requirements of work. You will be given notice in writing of any such transfer and, with effect from the date specified in such notice; you will become employed by the Transferee. Your continuity of employment and your terms and conditions of employment (including this term), will, of course, be preserved.
As Managing Director, you should be available for the work of the company at any part of the day, 365 days a year basis and the compensation package stipulated by this contract is all inclusive including the abnormal hours of work, working on holidays, if any that you may be required to put in having regard to level of appointment, needs of the company, and the demands of the work situation though the Company’s business hours are normally 9.30 A M to 5.30 P M and the company works on 5 day week schedule.”
18. Clause 2 provided –
“2. YOUR DUTIES
(a) perform to the best of your abilities and knowledge the duties assigned to you;
(b) act in the Company’s best interests;
(c) comply with all policies of the Company in place from time to time;
(d) comply with all law applicable to your position and the duties assigned to you; and
(e) report to the person or persons nominated by the Company from time to time.”
19. By Clause 4, Mr Adil was “entitled to a fully maintained company car” up to a stated purchase value.
20. Clause 3, under the heading “YOUR SALARY”, provided that Mr Adil –
“…will receive a gross basic salary of USD 600,000 (US Dollars Six Hundred Thousand only) per annum equivalent in United Arab Emirates Dirham (AED) which will be paid in 12 equal monthly instalments”.
There was then provision for review of the salary. So far as appears, it was never reviewed pursuant to this provision.
21. Clauses 5, 6 and 7 provided –
Gratuity payments will be in accordance with the Company scheme.
6. FRONTLINE DEVELOPMENT PARTNERS LIMITED EXECUTIVE INCENTIVE PLAN (EIP)
This is an annual incentive plan based on the Company’s achievement of Operating Profit targets and your individual performance. Any bonus will be calculated on a pro-rata basis for completed months during the current financial year.
The plan is applicable to employees who have at least one complete calendar month’s service.
Each year your declared bonus will be determined based on your individual performance against objectives and leadership capabilities.
Payments under this scheme are made once the annual results have been audited and are subject to normal deductions of income tax and other Applicable taxes, if any.
Further explanation of the plan mechanics can be found in the EIP plan summary available from your local HR team. Details of business performance targets for the 2011 (F11) plan year will also be provided under separate cover.
Any payments made under this plan are at the complete discretion of the Chief Executive of Frontline Development Partners Limited Business Solutions.
- EQUITY GRANT
You will be granted Equity Grant of total value of USD 500,000 (US Dollars Five Hundred Thousand only) per annum equivalent in United Arab Emirates Dirhams (AED) in various Companies of the Group”
22. By Clause 11, the Claimant was “eligible for corporate membership of one club in Dubai”.
23. Clause 12 provided –
You will be eligible for a company provided driver with a cost up to maximum of $5,000 (US Dollars Five Thousand only) equivalent in United Arab Emirates Dirham (AED) per annum. This is inclusive of all expenses related to driver.”
24. Clause 19 provided –
“19. NO SIMULTANEOUS EMPLOYMENT
While in the employment of this Company you will not, under any circumstances, be permitted to work for any other firm of persons, either whole time or part-time, nor in any way be associated with any firm of persons as Advisor, Director, Partner, whether paid or not for your services, without the prior written permission of the Company. In case this condition is contravened, your employment will be deemed to have ceased in terms of this appointment as a result of misconduct and a breach of your obligations under this letter of appointment.”
25. Clauses 21 and 22 made extensive provision in relation to confidential information and intellectual property. I do not set them out or further describe them; as later indicated, Frontline did not seriously seek to make out a case for relief to protect confidential information or intellectual property.
26. Clauses 23 and 24 provided –
“23. OBLIGATIONS DURING YOUR EMPLOYMENT
During your employment you will be expected to:
- Well and faithfully serve the Company and use all proper means in-your power to maintain, improve and extend the business of the Company, and any company in the Frontline Development Partners Limited group and to protect and further the reputation and interests of the Company, and any company in the Frontline Development Partners Limited group.
- Perform and observe such instructions as may reasonably be assigned or communicated to you by your manager.
- Devote the whole of your time and attention during business hours to your duties as an employee. You will not at any time, without the written consent of your line manager be directly engaged, concerned or interested in or connected with any other company, business or concern (except as the holder of shares, stock, debenture stock in any other company quoted or dealt on any recognized stock exchange).24. TERMINATION
Save for in circumstances where dismissal without notice is justified, your employment may be terminated at any time by you giving the Company 3 months written notice or by the Company giving you 6 months written notice or by paying you an amount equal to your base salary in lieu of notice for that period.
The Company reserves the following rights:
(a) to terminate your employment without notice and to pay you a sum of lieu of your notice entitlement or the balance of it (as the case may be) being a sum equivalent to your gross basic salary (after the deduction of any income tax or other social security contributions as required) which shall be taken to adequately compensate you in respect of salary and contractual benefit entitlements during the period for which you are being paid in lieu;
(b) to continue to pay you normally during your period of notice but to provide you with alternative duties commensurate with your status;
(c) to specify that you will be required not to carry out your duties and not to provide you with any duties during all or part of your notice period (hereinafter referred to as “Garden Leave”). The Company may also exclude you from any premises of the Company or any company in the Frontline Development Partners Limited group. You shall continue to receive your full salary and all other contractual benefits during Garden Leave. However, during Garden Leave, you will continue to be required to hold yourself available to assist with answering any questions or dealing with any other matters relating to your work and you will remain an employee of the Company and will not be in a position to take up new employment until such time as your period of employment with the Company terminates. You may also be subject to such other conditions during Garden Leave as your manager considers appropriate.
(d) Terminate your employment at any time without notice if you:
(i) disobey a lawful direction of the Company;
(ii) are guilty of other serious misconduct;
(iii) behave contrary to Company expectations of responsible behaviour; or
(iv) breach any other material provision of this Agreement including paragraphs 2, 20, 21, 22, 23 and the Frontline Development Partners Limited Code of conduct.
(collectively, “Gross Misconduct”)”
27. Clause 26 provided for restraint on Mr Adil’s activities after termination. Again, I do not set it out or further describe it, because Frontline did not seriously seek to make out a case to restrain Mr Adil in post-termination employment or engagement.
28. Clause 29 provided that the Contract was governed by the laws applicable in the United Kingdom, and for the exclusive jurisdiction “of the courts of London of this Agreement”.
29. Clause 32 of the Contract included –
“The terms and conditions of employment set out in this Agreement supersede any prior oral or written agreements with you. This Agreement may only be altered in writing signed by both parties.”
30. The Diageo contract was not in evidence, but it is clear enough that its adoption as the basis for the Contract was not particularly appropriate. For example, there was no evidence of, or even that Frontline had, a scheme for gratuity payments (cl 5), and it did not have an executive incentive plan (cl 6). Clauses 16 and 24 (d) (iv) referred to compliance with an attached Code of Conduct, but none was attached. Whether the provision for an equity grant (cl 7), which was of some importance in the proceedings, was taken from the Diageo contract is not clear.
31. Neither party invoked the governing law and exclusive jurisdiction clause (cl 29) in the proceedings.
4. The Fronteira Connection
32. It is convenient to introduce at this point the Mozambican company Fronteira, LDA (“Fronteira”).
33. According to Mr Adil, in February 2011 he was in Mozambique making a presentation to the Government in the course of his consultancy for OIA. The sale of alcoholic beverages being of interest to him, he noted an opportunity for AGS to produce such beverages in Mozambique. Over the next months he investigated further as his consultancy took him there, and in late June 2011 he reached a handshake agreement with two local partners for a 51/49 percent shared company producing and selling alcoholic beverages in Mozambique. The AGS contribution was to be USD 600,000, alcohol production technology, and the services of Samir full time and Mr Adil for “strategic input”.
34. Still according to Mr Adil, Mr Chaturvedi had accompanied him on some of his visits to Mozambique, and prior to reaching an agreement with the local partners Mr Adil told Mr Chaturvedi that alcohol manufacturing in Mozambique was a good business proposition; whereupon Mr Chaturvedi “said something along the lines of: ‘Asif, because I introduced you to Mozambique, if you do any liquor venture or other venture in Mozambique, I want right of first refusal’”.
35. Mr Adil said that when he was asked to become Managing Director of Frontline, Mr Chaturvedi expressed interest in investing with him in what AGS was doing in Mozambique. Mr Adil took this to mean invest personally, since Frontline’s business was not alcohol manufacturing and alcohol-related business was prohibited in the UAE
36. On Mr Adil’s evidence, the co-investment became linked with the terms of his employment. Mr Adil had told Mr Chaturvedi that he wanted at least the same remuneration as in his earlier employment, being USD 1.1 million per annum. The discussion of co-investment continued, still according to Mr Adil –
“93. SC [Mr Chaturvedi] told me that FDPL [Frontline] would pay me a basic salary of USD 50,000 per month. SC explained that the differential between the yearly basic salary FDPL would pay me and the salary I had asked for (i.e. USD 500,000) would be paid to me as balance compensation or an incentive payment, which I was to invest in ventures like Fronteira. He then would then match the payment with his own funds and provide it to me to invest in Fronteira.
94. So for example, if I was paid USD 500,000 as balance compensation/incentive payment and I invested that in Fronteira, SC would then also invest USD 500,000 in Fronteira. As SC would be matching my balance compensation/incentive payment, it would result in a situation whereby SC and I would be partners in joint ventures like Fronteira. The idea was that SC wanted to partner with me in a number of businesses.”
37. Later, when they were discussing the draft Contract –
“101. Given I was satisfied with my basic remuneration, I went on to discuss the balance compensation / incentive payment. Clause 7 of the Employment Contract referred to the discussion we had had about the balance compensation /incentive payment. However, it did not properly reflect our discussion in that it characterised the payment as an “Equity Grant”, and furthermore said that I would be granted equity in “various companies of the Group”. I did not know what that meant and so I asked SC. He told me that because he was investing in Fronteira, that would then become a group company.
a. As far as a corporate structure is concerned there is no “Group”, but SC used the word to characterise the companies that he had an interest in. For example, there was OIA and FDPL, which were completely separate entities albeit owned by the same person in some shape or form. I told him I did not agree with his interpretation that Fronteira would become a “Group” company, but was willing to go along with it.
103. He also said to me that clause 7 would allow us to partner with each other in other suitable ventures as we had discussed.
104. I asked him when the balance compensation/incentive payment would be paid. He said it would be paid at the end of each quarter.
105. At this point he informed me that he was likely to match my balance compensation through a company called PDEL, which was in Mauritius….
111. In approximately December 2011, SC confirmed that he would be matching my balance compensation/incentive payment/Equity Grant through PDEL, which would mean that Fronteira would become a joint venture between SC and myself pursuant to clause 7 of my Employment Contract. I asked him who PDEL was. SC told me that PDEL was a trust company beneficially owned by him but managed by FITCO [First Island Trust Company] in Mauritius and by PP Shah and Associates in India”….
38. Mr Chaturvedi gave a different account of the Fronteira connection. According to him, between 1 September 2011 and February 2012 when setting up Frontline, Mr Adil “identified several projects amongst which one particular project was a liquor project in Mozambique on which the Claimant commenced working on behalf of the Defendant”. He said that Mr Adil “was entrusted with setting up and growing the venture’s operations”, that he (Mr Chaturvedi) directed Mr Adil to set up the joint venture company, and that “Fronteira” was a play on “Frontline”. He said that it was agreed that Mr Adil would be given an equity stake in the new venture, which would be funded by PDEL: PDEL would provide USD 600,000 being USD 300,000 for its own share and USD 300,000 as the cost of Mr Adil’s equity share. Mr Adil was to draft a Shareholders Agreement under which PDEL and he would each hold 25.5 percent of the share capital of the company and two third parties would hold the remaining 49 percent.
39. Other than by this different account, Mr Chaturvedi did not deny Mr Adil’s account of their discussions about the equity grant. In his witness statement he asserted that an equity grant was a grant of shares and could not be a payment of money, like a deal of his witness statement effectively a submission, and said that Mr Adil had attempted to mix the concepts of equity grant and incentives and had tried to portray them as synonymous “whereas this was never the understanding”. In cross-examination he said, in answer to a question that he agreed to pay USD 500,000 by way of balance compensation to invest in joint venture companies, that “The way it has been put is not right”, and then denied a similar question; but he agreed that he said that “money would be provided through PDEL, contribution will be provided through PDEL”.
40. In his witness statement in reply Mr Adil specifically denied that the Mozambique liquor project was at Mr Chaturvedi’s direction, and affirmed that it was commenced before he became employed at Frontline and that Mr Chaturvedi asked to be involved. He said that the name “Fronteira” was chosen by the local partners, and meant “border” in Portuguese and was not a play on “Frontline”. He also specifically denied Mr Chaturvedi’s evidence concerning PDEL providing USD 300,000 as the cost of his equity share; he affirmed that he was to contribute and pay for his equity share from his balance compensation/incentive money, and said that it was a matter for Mr Chaturvedi that his (Mr Chaturvedi’s) money came from PDEL.
41. On either account, there was to be co-investment and PDEL was to invest USD 300,000 in Fronteira on its own account. As will be seen, this happened.
5. The Fronteira Shareholders Agreement
42. The local partners set up Fronteira as the vehicle for the venture. It was incorporated in November 2011, with Mr Adil and the two local partners as shareholders.
43. Between February and July 2012 PDEL paid approximately USD 325,000 to suppliers of machinery and equipment for the Fronteira production facility, some in February and some in June/July. I have stated an approximate figure because the figures in evidence differed, probably because of the use of different exchange rates in converting the underlying Indian National Rupees; nothing turns on arriving at precise figures. Mr Adil also made a number of advance payments to various suppliers. He said that he asked about his balance compensation/incentive payments and was told funds were short; he made the payments himself and assumed there would be later reconciliation.
44. In March 2012, after the first PDEL payments, Mr Adil was told by Mr Paresh Shah of PP Shah and Associates that PDEL would not provide more money until a shareholders agreement had been executed. According to Mr Adil, it was agreed jointly to instruct a lawyer but that shares would be assigned to an individual when all his contribution had been paid.
45. A draft shareholders agreement was provided on or about 18 May 2012, prepared by lawyers jointly instructed by OIA and Fronteira.
46. According to Mr Chaturvedi, but denied by Mr Asif, on about 28 May 2012 there was a discussion “during which it was confirmed that a transfer of shares to PDEL would take place wherein 25.5% shares would be transferred from [Mr Adil] to PDEL”.
47. On 28 or 29 May 2012 a FITCO representative emailed Mr Adil asking for “a copy of shareholder’s [sic] agreement, share transfer form, share certificate or similar confirming the transfer of shares to PDEL”. Mr Adil replied –
“We have prepared the Share Transfer and Shareholders Agreement which are attached with this email. These will be executed during my current trip to Mozambique beginning May 30th, 2012. In the meanwhile, I ask you to immediately release the sums of money that have been discussed with Mr Paresh Shah as this is most critical.”
The attachments to the email were not in evidence. No form of share transfer at all was in evidence, but there were forms of shareholders agreement.
48. On 30 May 2012 Mr Adil obtained the execution of the local partners and himself executed the shareholders agreement. The version so executed differed in some respects from an unsigned version in evidence, possibly an earlier draft but the evidence does not permit a finding. Early in June 2012 he provided an executed copy to Mr Purshottam Maheshwari of OIA, effectively Mr Chaturvedi’s Chief Accountant, for execution by PDEL.
49. The shareholders agreement as so executed was expressed to be between PDEL, Mr Adil, the two local partners and Fronteira. It recorded the current “shareholding pattern”, being 510 shares for PDEL and Mr Adil and the balance for the local partners. Equity and loan contributions were to be in proportion to shareholdings: nothing else was said about current contributions. In the unsigned version just mentioned it was said that “[c]ontributions of USD 300,000 each have been received by the Company from all the shareholders”. As part of the provisions for the operation of Fronteira Mr Adil was designated as Managing Director, with power of delegation.
50. The shareholders agreement was not executed by PDEL. On 26 June 2012 Mr Shah emailed Mr Adil asking for a number of changes. His email began –
“PDEL is awaiting share certificate and as discussed in Mumbai the amended shareholder’s [sic] [agreement incorporating the following issues –
a) Mr Asif Adil can sell his shares with the consent of PDEL and PDEL investment of USD 600,000 is recovered
51. Mr Adil’s reply on the same day commented on the changes, and included as to a) above, “Only to extent of USD 300,000 as the balance is compensation – please draw agreement between the two parties as previously explained”. It also included –
“Share certificate as previously explained can only come when pdel representation [sic] comes to maputo with other shareholder to registrar of companies. You are supposed to give dates of visit.”
52. There was no explicit evidence of any previous explanation, but Mr Adil gave evidence, apparently referring to the occasion when it was agreed to jointly instruct a lawyer, that “PDEL was also informed that in order to register the shares it required the personal attendance of PDEL at the Ministry of Justice Maputo”.
53. The shareholders agreement remained unexecuted by PDEL. PDEL nonetheless made the June/July 2012 payments to suppliers of machinery and equipment.
54. In circumstances not explained in the evidence, on 12 July 2013 Mr Shah sent to Mr Adil an amended shareholders agreement “with minimum correction and in a most conventional form”. The amended agreement was not in evidence.
55. The evidence was then silent as to the form of the shareholders agreement until, on 14 January 2014, Mr Adil sent to Mr Chaturvedi “the final adjunct agreement as per our discussion on Saturday 11th January 2014 in Dubai”. The agreement said that it was an adjunct to “the Fronteira Shareholder Agreement signed in May 2012”, was expressed to be between PDEL and Mr Adil, and recited that they were the shareholders and between them held 51 percent of the equity of Fronteira. It said nothing about Mr Adil selling his shares and recovery of PDEL’s investment. There was no evidence explaining the arriving at the adjunct agreement, and it is not clear that it was executed.
6. The Fronteira Consultancy Agreement
56. A Consultancy Agreement dated 30 May 2012 was also entered into between PDEL, Mr Adil and Fronteira. Fronteira was a party “only as a confirming party”. It was recited that the parties were “in the process of entering into Shareholder Agreement recording their mutual rights and obligations”, and that they had decided to enter into the Consultancy Agreement “to give effect to the agreement and the binding arrangement which the Consultant has entered into in the said Shareholder Agreement”.
57. By the operative clauses of the Consultancy Agreement, PDEL appointed Mr Adil as consultant for a period of ten years commencing from 1 April 2012. The description of his consultancy services was in the terms that he would conduct the business of Fronteira and “constitute [its] operating team”. This was more than a consultancy, but as later appears on either account of its origin it was not truth a consultancy agreement.
58. By clauses 6 and 7 –
“6. As determined by the Company [PDEL], the Consultant shall be entitled to the total consideration agreed, which shall be paid during the first year of service and thereafter Consultant is bound to render services without any further fees during the currency of this agreement. Total consideration payable to the Consultant for such services shall be USD 300,000.
Out of the above stated remuneration, the Company has already paid a remuneration of USD 84,000 to the Consultant and is arranging for another payment of USD 116,000 during 1st week of June 2012.
Balance payment of USD 100,000 shall be paid as and when agreed between the parties.
7. It is agreed that the amount of consideration paid herein shall be invested by the Consultant in the JV Company [Fronteira].”
59. Clause 14 provided that “[d]uring the currency of this Agreement” the consultant would not without written consent of PDEL, “except as otherwise contemplated in terms of this agreement”, be directly or indirectly “engaged in or be financially interested in, nor will support or advise, for consideration or otherwise, any activity or enterprise which competes with the activities of the JV Company”. Nothing in the Consultancy Agreement gave content to the otherwise contemplation.
60. According to Mr Adil, the Consultancy Agreement was entered into at PDEL’s request (Mr Shah and Mr Maheshwari) in order to lock him in with a non-compete clause; and when he was told that “it would be useful” if the USD 300,000 was invested back into Fronteira, he agreed because it was a good idea and Fronteira was his investment also. Mr Adil said that the USD 300,000 was separate from any balance compensation/incentive payment.
61. According to Mr Chaturvedi, the Consultancy Agreement was entered into as a basis for giving Mr Adil his equity share in Fronteira; the USD 300,000 was to be invested in exchange for 25.5 percent of the shares. Still according to Mr Chaturvedi, PDEL paid USD 260,400 to Mr Adil pursuant to the Consultancy Agreement, and an excess payment to the suppliers of machinery and equipment and the shortfall in payment under the Consultancy Agreement “were adjusted against each other to effectively reflect the position that PDEL had made its own contribution of USD 300,000 and had contributed an equivalent amount on behalf of Asif Adil”.
62. Mr Adil said that the $84,000 had not been paid as recorded; it was put to him that he was paid that sum in cash, which he denied. There was no evidence of such a payment from Mr Chaturvedi or anyone else in Frontline’s case.
63. In June 2012 Mr Adil was paid USD 200,000 by PDEL. He said that it was not payment under the Consultancy Agreement, that he held it on trust for PDEL “but has nothing to do with FDPL”. This enigmatic statement was left unexplored in the evidence. Mr Adil said elsewhere that the money was given by PDEL “towards Fronteira”. It was put to him that he was wrongly withholding USD 200,000 of a payment made by PDEL towards its [Frontiera’s ?] share capital, which he denied, and the matter was not effectively taken further.
64. I will return to the question of payment under the Consultancy Agreement in connection with underpayment or overpayment in respect of the equity grant.
65. In August 2012 Mr Adil paid USD 23,600 to PDEL. He said this was a refund of part of its payments to the suppliers of machinery and equipment, to bring its contribution to USD 300,000. The figure was correct on Mr Adil’s calculation of the payments; but as I have said the evidence contained differing figures. Again, nothing turns on this: there was adjustment with a view to bringing the PDEL contribution to USD 300,000. Perhaps obscurely, it was common ground that USD 300,000 of the February and June-July payments by PDEL to the suppliers of machinery and equipment were its investment of USD 300,000 on its own account; because Mr Chaturvedi said that the payment as the cost Mr Adil’s equity share was through the Consultancy Agreement together with adjustment.
7. The 30 June 2013 Meeting
66. At this point I go straight to a meeting between Mr Adil and Mr Chaturvedi on 30 June 2013. I will return to events prior to that date when considering cause for termination.
67. Frontline was fully operative by about the middle of 2012. It is not necessary to describe its activities in any detail. It is sufficient to note that they included developing a cosmetics business in Ethiopia which was handed over to one of Mr Chaturvedi’s companies without fee; a cosmetics business in Mozambique which was brought to readiness for execution with investors; and a Tanzanian alcohol business, Wild Bull Beverages, which was “accepted” by a third party, Jambro Plastics, to implement and take forward and for which Frontline earned a development fee.
68. But Frontline was not yet profitable. As at 30 June 2013 it was in the red to the tune of approximately USD 3 million.
69. At Mr Chaturvedi’s request, he and Mr Adil met at Frontline’s premises in the DIFC on 30 June 2013. According to Mr Adil, Mr Chaturvedi said that the meeting would be about his salary. Mr Chaturvedi did not specifically deny this, or give evidence of telling Mr Adil why he wanted the meeting: he said in his witness statement, expressing his own state of mind, that he wanted to discuss “all the matters which I had discovered”.
70. In his witness statement Mr Chaturvedi said that Mr Adil had been avoiding him, but had finally agreed to meet on 30 June 2013, and –
“33. During the meeting, I asked the Claimant what the plan was for the year 2013 to 2014. I proceeded to ask him about the performance of 2012 to 2013 and as to why targets had not been achieved. I mentioned to him that it seemed inappropriate for him to be paid for working on things that were not related to the Defendant. I also asked him what was happening in relation to the Tanzania liquor project. I asked him about what had become of all the money that he had taken from the Defendant. I finally asked him why PDEL had not been allotted its shares and why there had been delays on account of one reason or to other. He started acting in an erratic manner and began said [sic] “Why don’t you trust me” and “You have no trust in me”.
34. It was at this time that he remarked that “Then should I say that I have been terminated?” to which I said “yes”. He had no answer to any of the questions.”
71. According to Mr Chaturvedi, Mr Adil then said, “My lawyers will reply to you now and I shall send you what I am entitled to”, and –
“36.When I asked why he thought he was entitled to be paid in light of his conduct and the way he had treated my requests for information, he stated that as I had terminated his employment he was entitled to various benefits which he would notify me of the next day. I told him that I was very unhappy at the way he had handled matters and that PDEL had not received their shares despite payments that had been made. I was very frustrated by his stance and attitude.”
72. In his witness statement Mr Adil gave a different account of the meeting –
“167.During the meeting, SC told me that he needed to reduce my salary because FDPL was not making any money. I responded to him saying that we had agreed that it was unlikely that any money would be made in the first year. I also said we were half way through the second year of business and that all the development work that had been completed would bear fruit. It was now a matter of executing the development projects that we had undertaken.
168. I also told him I had taken a significant cut in compensation when I agreed to be employed, and that I was not prepared to take a further cut. I told him that if he felt he needed to reduce my compensation, then I would not agree and therefore the best solution for both of us would be for him to terminate my employment in accordance with the Employment Contract. The reason why I said that was because in my experience when issues are raised about salary, the relationship can deteriorate and I did not want that to happen given our joint business interests.
169. SC responded by saying something along the lines of:
“Asif, if you don’t agree to a reduction then I may have no other choice but to terminate your employment. Let’s meet again on 1 July 2012 at 4pm. You work out what is due to you and you present it to me tomorrow”.
170. From this meeting I understood that my employment had been orally terminated. However, I deny that during the 30 June 2013 meeting SC orally terminated my employment for cause.
171. At no point during the meeting was there any discussion whatsoever of my failure to perform, nor was there any discussion about an alleged failure to provide information regarding the transfer of shares to PDEL. I was not asked to explain any losses sustained by FDPL. Nor was there any request for information apart from a computation of the post termination payment.”
73. Mr Adil said that he took his personal files and belongings from his office on the evening of 30 June 2013.
74. In cross examination, Mr Adil said there was discussion by way of “update on the various projects that were going on”, and when he had occasion to repeat the words of termination they changed a little from “I may have no other choice but to terminate you employment” to “In that case [non-acceptance of reduction in salary] I will terminate you”. The cross-examiner sought to have him accept, and he did accept, that he left the meeting believing that his employment had been orally terminated with immediate effect and that that had been the outcome of the meeting. Although the cross examination then went on to whether there had been cause for termination, it did not include that Mr Chaturvedi had questioned Mr Adil about his performance, or about any cause for termination at all.
75. Mr Chaturvedi’s cross examination cast doubt on the account of the meeting in his witness statement. He agreed that he terminated Mr Adil’s employment. He was asked what his reasons were, and with some difficulty gave five reasons. The reasons were different in a number of respects from the matters on which he said he had questioned Mr Adil; of course, he may not have raised all his reasons with Mr Adil, but one would expect him to have done so, particularly the first of the items in the following summary –
|Witness Statement||Cross Examination|
|Performance and achieving targets||-|
|What was happening in relation to Tanzania liquor project||Representing in a bank report for a loan for a liquor project in Tanzania that he was Managing Director and a 50% shareholder|
|Inappropriate to be paid for working on things not related to Frontline.||Giving excessive time to Fronteira and not enough to Frontline’s projects|
|What had become of all the money taken from Frontline.||Causing payments to him to be shown as an incentive|
|Not allocating PDEL’s shares and why delays||Not transferring PDEL’s share of the Fronteira project|
|-||Emptying out his office at Frontline’s premises|
76. It is convenient to go to the evidence concerning Mr Adil clearing out his office.
77. Mr Chaturvedi said in his witness statement that he was “aware that before this meeting, [Mr Adil] had cleared out his entire office”. The way this was put indicated current awareness rather than awareness at the time. It was not part of what he said he raised with Mr Adil at the 30 June 2013 meeting. In a witness statement bearing the same date as that of Mr Chaturvedi, Mr Loy D’Souza said that on 29 June 2013, a Saturday, he saw Mr Adil’s files and personal possessions being moved from Mr Adil’s office and that at the end of the day it was completely empty. Then in the cross-examination of Mr Chaturvedi, prior clearing out of the office was give as one of his reasons for termination for cause; he said that he saw it for himself on 29 or 30 June 2013.
78. Mr Adil specifically denied that he cleared out his office prior to 30 June 2013, although he said he took some metal bar stools and two or three personal paintings home for a gathering at his house on 29 June 2013. It was not put to Mr Adil in cross-examination that he had cleared out his office prior to the evening of 30 June 2013.
79. I will later deal with the credit of Messrs Adil and Chaturvedi. Anticipating the views there expressed, I do not accept Mr Chaturvedi’s evidence so far as he said that he saw that the office had been cleared out prior to the meeting. Apart from my views aforesaid, in an email to Mr Adil on 21 September 2013 Mr Chaturvedi noted, speaking of post – 30 June 2013 events, that Mr Adil had said “that [he had] cleared [his] personal belongings and vacated the office on June 30th which the Company was not aware of…” Further, in my opinion it is highly improbable that Mr Adil would have acted so as to suggest abandonment of his position; he is a man reasonably astute in his own interests, and even if it be assumed that he foresaw that Mr Chaturvedi would express discontent with his performance as Managing Director, he would not have prejudiced his position in that way.
80. Mr D’Souza was copied into the email of 21 September 2013. It was put to him that he had not corrected Mr Chaturvedi, to whom he was Executive Assistant. He said that the email had already been sent and he did not read it fully. There the matter was left. The reference to vacating the office may not have been something Mr D’Souza would be expected to have noticed and corrected, but nonetheless in my opinion Mr D’Souza’s recollection of 29 June 2013 is not reliable; he may have seen the few items being removed, but that is all.
81. In order better to explain my findings as to the 30 June 2013 meeting, I should first describe subsequent events.
8. Events after the 30 June 2013 Meeting
8.1 Describing why
82. It is necessary to canvass subsequent events first, because an understanding of them assists in deciding whose version of the 30 June 2013 meeting should be accepted, and secondly, because Mr Adil relied on subsequent events for the contention that the purported termination on 30 June 2013 was ineffective. The following account, in which the evidence was at times incomplete, will be supplemented in some respects when I address Frontline’s submissions in support of termination for cause.
8.2 Events from 30 June 2013 to late July 2013
83. There was no evidence that lawyers for Mr Adil became involved at this time; the clear inference is that they did not.
84. On 1 July 2013 Mr Adil gave Mr Chaturvedi a note relevantly as follows –
“CONTRACTUAL AMOUNT DUE TO ASIF ADIL
PER EMPLOYMENT CONTRACT IN LINE WITH UAE LAW
July 1st2013 – December 31st2013
|1)||6 MONTHS COMPENSATION @USD50, 000 PER MONTH||300,000.00|
|2NDQUARTER DUE IN JULY 2013||111,111.00|
|3RDQUARTER DUE IN SEPT 2013||111,111.00|
|4THQUARTER DUE IN DEC 2013||111,111.00|
|3)||CLUB PAYMENTS DUE BUT NOT REIMBURSED @ AED 40,000 FOR 2 YRS||22,000.00|
|4)||CAR (USD 150/DAY x 180 DAYS)||27,000.00|
|5)||ONE WAY AIRTICKET REPATRATION TO COUNTRY OF ORIGIN (DXB/JFK)||5,000.00|
85. In addition, the note recorded that Mr Adil should be immediately removed as a DIFC authorised signatory and his name should be removed from the Frontline website and other communications, and that his employment visa should be cancelled.
86. According to Mr Adil, when he gave Mr Chaturvedi the note they debated items 3 and 4 (club membership and car), and there was a quick discussion about the remaining items but none was disputed. Mr Chaturvedi said something along the lines of, “That’s fine. I’ll make sure you get paid”.
87. Mr Adil emailed Mr Chaturvedi at 11.17am on 2 July 2013 –
“We met at 3pm on 30th June 2013 where you informed me that I was terminated as Managing Director of Frontline Development Partners effective immediately.
I told you that I accepted your termination but it had to be in accordance with the employment contract and there would be a termination payment due. I also told you that this would mean that our association in all other proposed ventures would end which you accepted. You asked me to give you the amount due on 4 pm July 1, 2013.
We met again on July 1, 2013 where I handed you the attached one sheet stating that an amount of USD 687,333.00 was due to me. I now ask that this amount be paid immediately after which we can settle any accounts due to either of us from any of the proposed ventures. I also request that beginning today – July 2nd that my signature or name not to be used in any banking, government or business situation without my prior written consent.”
88. Mr Chaturvedi responded at 12.53pm on 2 July 2013. He said that he was “surprised to received [Mr Adil’s] update”, and
“I do not think that the Company/FDP has sent any written communication to you (as per point no.24 on Termination in the Employment Contract dated 20.8.2011).
In your email you have mentioned several points of action to be taken by the Company/FDP, so shall we treat this email as notice from your side to the Company/FDP for discontinuing your service?
Please let me know how you want to take this ahead, so that appropriate steps can be taken.”
89. The response was understandably not satisfactory to Mr Adil, and brought a series of emails from him to Mr Chaturvedi in which he asserted that the email was “only camouflaging your actions to mitigate the termination amount due to me” and asked whether, if his employment had not been terminated, he was required to serve out the entire term of the employment. Only on 8 July 2013 did Mr Chaturvedi respond, saying that he had been unable to reply due to “other pressing matters” and, if anything had to be added to his response of 2 July 2013, he would reply on 10 July 2013.
90. The reply on 10 July 2013 was –
“I refer to my earlier email on the subject and would submit as under, [sic]
I understand that there are claims and the counter claims by us and you such as your absence from the office, avoiding documentation, entering in to transaction without any notice so on and so forth…[sic]
However I thought that communicating on emails is not the right manner to resolve the dispute of every kind as they are so interlinked with each other.
I therefore invite you for a personal meeting to resolve the claims and the counterclaims once and for all,
Let me have your convenient time so that matter can be put to rest,”
91. There were then further exchanges of emails, some of which should be mentioned.
92. Mr Adil replied on 13 July 2013, accusing Mr Chaturvedi of again avoiding answering his earlier questions and saying that “your silence and not answering the questions explains my absence from the office and prevents you from claiming that you and the company have not been fully informed”. A follow-up email accused Mr Chaturvedi of “mala fide intentions”, and said that if he persisted in not answering, Mr Adil would inform the DIFC authorities of “the firm’s behaviour, antecedents and financial situation”.
93. Mr Chaturvedi asked Mr Adil to arrange a visit to the Mozambique liquor plant. Mr Adil saw this as a good leverage point (his words in his witness statement), and replied that the termination payment had first to be resolved. Mr Chaturvedi protested, and Mr Adil replied at length that he was still awaiting answers to his questions and (somewhat inconsistently with leverage) that a visit to the liquor plant “is in no way linked to Frontline”.
94. This brought the reply from Mr Chaturvedi, on 21 July 2013 –
“Your email I have made my position very clear in the first email itself. I’m not able to understand your intention behind writing email. During my inquiry in office, there are several issue pending and you left office without any information. The company is going through all detail and will reply you accordingly. For your absence from office you have taken decision which must be known to you only. I do not understand why you are threatening me every time”
95. In fact, soon after Mr Chaturvedi travelled to Maputo and had access to the liquor plant.
96. Mr Adil was persistent. On 22 July 2013 he emailed –
“Please refer to your first reply email where you state that the company has not issued any written termination to me and asks whether I am resigning. My reply to this states that I have not resigned and you are using the excuse of a written termination as a way to lessen the termination payment due to me - the computation of which on your request was given to you on July 1 2013.
Since then I have repeatedly asked you two simple and straightforward questions which you even now refuse to answer after nine emails :
1 did you orally terminate my services on June 30th 2013?
2 in case your reply to question 1 is NO, then are you prepared to honor the signed employment contract in full between the company and me?
Suresh, the remainder of your email regarding details etc are all after thoughts intended to justify your actions and lessen your financial obligations due under the employment contract.
Finally, my absence from the office is solely due to your continued refusal to answer the two questions listed above and the company is liable to either make the termination payment or pay the compensation due on the dates under the employment contract.
I await your answer to the 2 questions listed above.”
97. At an internal Frontline meeting during July, Mr Chaturvedi told Frontline’s senior employees that Mr Adil was still the Managing Director, and any disagreement was “like a fight between husband and wife and children should stay out of this.’ Mr Adil was not told of this, he found out indirectly. Until late in September 2013, however, he did not attend Frontline’s premises in Dubai.
8.3 The without prejudice negotiations objection
98. Frontline objected to some of the evidence led by Mr Adil of events in the period from late July 2013 to January 2014, on the ground that the evidence was of or recorded without prejudice settlement discussions. Mr Adil took issue with that characterisation, and for other reasons also pressed for the admission of the evidence. My descriptions of the events for this period include rulings on the objection to the evidence.
99. The objection was initially taken by a pre-trial application that specified paragraphs in Mr Adil’s witness statement “be removed from evidence or redacted”, that specified documents referred to the witness statement “be excluded from evidence”, and that “there be no reference to any settlement discussion between the parties in evidence at trial”. The application was not brought on for hearing prior to the trial. At the commencement of the trial I ruled, for reasons given on 31 May 2015, that the evidence in question should be received subject to objection and its admissibility decided as part of the trial hearing and decision.
100. Mr Adil’s submissions included that it was not open to Frontline to take the objection, as it had earlier been determined against it. Mr Adil had requested production of signed copies of the minutes of meetings of 3 October 2013 and 20 January 2014. The minutes were two of the documents to which objection was taken. Frontline had opposed production on the ground that the minutes were subject to without prejudice privilege. On 27 January 2015 H.E. Justice Ali Al Madhani ordered production of the minutes. Mr Adil submitted that the status of the material to which objection was taken, initially it seems meaning all the material and not just the minutes, but later only the minutes, had been decided against Frontline and was res judicata.
101.I do not accept the submission, as to the minutes and a fortiori so far as it was wider. Production and admissibility are distinct. While production of privileged documents may be refused because they are inadmissible, ordering production does not mean that a document is admissible. His Excellency gave no reasons when ordering production of the minutes, and there was not a final judicial decision on their status.
102. Some Principles in connection with the objection are as follows.
103. The without prejudice rule, also described as a privilege, is a rule by which evidence of communications made in genuine negotiations to settle a dispute is not admissible. It rests in part on the public policy –
“…that parties should be encouraged so far as possible to settle their dispute without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations…may be used to their prejudice in the course of the proceedings” (CuttsvHead(1984) Ch 290 at 306 per Oliver LJ).
104. More recent cases have rested it in part also on an implied or express agreement of the parties that their communications will be kept confidential (see for exampleOfulvevBossert(2009) UKHL16; (2009) AC 990): but that is not a complete basis in the case of, for example, the opening communication in settlement negotiations or invocation of the privilege against a third party.
105. Although the underlying rationale is the exclusion of evidence of an admission, the privilege generally extends to all matters disclosed or discussed in the negotiations:Unilever PlcvProctor and Gamble Co(1999) EWCA Civ 3027; (2000) 1 WLR 2436.
106. Often the communications are made expressly without prejudice, although such a statement does not conclusively or automatically give rise to the privilege. The protection of the privilege can arise if it be otherwise found, from the communications themselves and the circumstances in which they took place, that they were made in genuine settlement negotiations (see for exampleRush & Tompkins LtdvGreater London Council(1988) UKHL 7; (1989) AC 1280 at 1299;Dixons Stores Group LtdvThames Television Plc(1993) 1 All ER 349 at 356).
107. But the rule is not absolute. The privilege may be waived, for example if a party relies on communications in its case without objection from the other party (see generallySomatravSinclair Roche and Temperley(2000) EWCA Civ 229; (2000) 1 WLR 2453). As an extension of that principle, if there is reliance on part of the communications without objection, the privilege may be lost as to the balance because -
“[f]airness requires that where a party deploys…without prejudice material as part of its case at trial the other party should be entitled…to rely upon the other without prejudice material which came into existence as part of the same without prejudice process” (SomatravSinclair Roche and Temperleyat ).
108. And there are exceptions to the rule, many of which are collected by Robert Walker LJ inUnilever PlcvProctor and Gamble Coat 2444-5. They include that when the issue is whether without prejudice communications have resulted in a concluded settlement, those communications are admissible (see alsoWalkervWilshire(1889) 23 QBD 335). A fortiori, if the settlement to which the parties have come is relevant, evidence may be given of the settlement agreement (the paradigm case being where a party sues on the settlement agreement).
8.4 Events from late July 2013 to 3 October 2013
109. The starting-point is Mr Chaturvedi’s email of 10 July 2013, in which he referred generally to claims and counterclaims and suggested a meeting “to resolve the claims and counterclaims once and for all”. Nothing came of this at the time. But at some time in the period 22 to 29 July 2013 Mr Adil and Mr Chaturvedi met in Maputo in Mozambique. They had a discussion, and according to Mr Adil after the meeting “the tension between [them] appeared diffused”. Mr Adil’s email of 29 July 2013 to Mr Chaturvedi said that it was “productive and good” that they met, and –
“We agreed that we would meet with Shishir Dalal as a mediator to seek a resolution. To have a productive meeting, please inform me of suitable dates in Mumbai and also give me a written proposal so that we reach speedy conclusion”
110. Mr Dalal was known to both men; he was a consultant to OAI, and in October 2013 became a director of Frontline.
111. The date of 31 July was suggested by Mr Chaturvedi, but was not suitable for Mr Adil. The tension returned. There were more contentious emails. Mr Jomy Jose of Frontline’s accounting staff emailed Mr Adil that he would be paid seven days salary for July, bringing an email from Mr Adil dated 1 August 2013 (to which I will again refer) in which he said that in the absence of reply to the two questions, the full month’s salary plus incentive payment should be paid. Mr Adil also complained about removal of his profile from the Frontline website, which he said shocked him.
112. Nothing was done about July salary, more emails passed with escalating allegations and repeated demands from Mr Adil and with the customary unhelpful replies, if replies at all, from Mr Chaturvedi. The emails included, from Mr Adil, that in the absence of the salary or an answer to the two questions, “The only part I can go by is your action of removal of my name from the website which goes to confirm that you have terminated my services”.
113. On 6 September 2013 Mr Adil emailed to Mr Chaturvedi –
“Since you have chosen to take the legal route, I will also refer this to my lawyers to respond to you.
The evidence of your behaviour and actions over the last several months speaks for itself. However, you do owe me my salary and answers to questions that I have asked you in several emails which you have.”
The reference to a legal route was to a letter sent to Mr Adil and the local partners by PDEL threatening court proceedings in Mozambique.
114. This email was followed by an email on 8 September 2013 from Mr Adil –
“Without prejudice to our legal position I am in Mumbai this week and can meet you individually or jointly with Shishir Dalal to find a solution as we had discussed in Mozambique.”
115. Times and places were suggested. The discussion in Mozambique was the meeting in Maputo in the latter part of July 2013. Mr Adil suggested in his evidence that the “without prejudice to our legal position” referred only to the threatened Mozambique proceedings, but I do not think that is correct; the Maputo discussion preceded those proceedings, and brought the involvement of Mr Dalal.
116. Mr Adil had not been attending Frontline’s premises in Dubai; it seems he spent some time in Mozambique on Fronteira affairs. On about 18 September 2013 he returned to the Dubai premises, saying (without objection) that this was “in accordance with the agreement reached in the Maputo meeting that once production had started I would return to Dubai”. He appears to have carried out normal duties from this time on, or at least as normal as the continued dissension permitted, and on 22 September 2013 a Frontline employee issued a letter for the purposes of him obtaining a visa stating that he was a current employee of Frontline.
117.On 21 September 2013 Mr Chaturvedi sent a long email to Mr Adil. It is a remarkable document, a flow of consciousness larded with vituperation. Unless against Frontline’s interests, it should be viewed with suspicion.
118. The email was said to respond to an email of 9 September 2013, which was not in evidence, and included –
“A. Despite the Company being in continuous communication with you on emails, it has never terminated your services either orally or otherwise; however you have abandoned your post and stayed away from the office whilst writing harassing and aggressive emails. If you had not gone out of the office on your own, under standard practices and in accordance with your employment contract, you would be attending the office regularly. After abandoning the office you had realized that it will be better to now mis-state the facts of termination of your employment by the Company so that you may claim the termination benefits. You have known this and hence repeatedly you had through various emails requested us to terminate your employment or to respond if we have in fact terminated your employment. This is spite of the fact that the Company specifically responded to you stating that your employment was never terminated and you should in fact be attending office and discharging your duties. Despite this response by the Company, you continued to write several emails raising the same issue again and again with an intent to avoid your duty and obligations under the employment contract and to distract the attention of the Company with frivolous statements and queries, to which the Company saw no merit in responding as many times. In fact, by your own email you state that you have cleared your personal belongings and vacated the office on June 30th which the Company was not aware of but you appear to have done that deliberately and with an intent to abandon the services of the Company, knowing fully well that your services were not terminated and thereafter you have sent several harassing emails (20 as stated in your email) seeking a response whether your services were in fact terminated or not). Knowing this you have written emails questioning the Company which we find devious and inappropriate on your part. In view of the above, there is no question of negotiating any termination amount with you as you appear to have wrongly derived from our discussions since we have clearly demonstrated by our email how you have defaulted on various covenants of your employment contract, to which you have provided no justifiable explanation.
As already indicated, the Company has not terminated your services although it remains fully entitled to do so for the grounds stated in the employment contract and therefore your staying away from the office is abandonment of [illegible] contract and duty towards the Company under the employment contract, for which the Company is fully [illegible] to take action against you. We may also point out that the various issues raised by the Company, yet remain unanswered and it appears that these issues are valid for which you have no answer. We await a response from you on all the questions raised in our earlier email, and in particular, the following as also the issues as have been reproduced in this email at the relevant place for ready reference.
(a) As raised in Paragraph (d) of our earlier email, (i) you are yet to provide us with a valid and rational explanation and statement of accounts on the sum of USD 777,778 that you have withdrawn as advances for projects. We also need you to clarify where these sum of money have been invested for the Company’s projects; (ii) please provide full disclosure of work in relation to proposed liquor projects in Tanzania including written or other documents, memoranda and/or statements. Please also provide details of the various agreements between yourself and Global Fortune and the line of business of Global Fortune.
If the Company does not receive a response to all these valid queries and concerns, we will assume that you have no rational and valid explanation to provide in which case, we will consider ourselves free to proceed against you.”
119. The contrast with Mr Chaturvedi’s evidence that he terminated Mr Adil’s employment for cause on 30 June 2013 is stark. His explanation was that he “wrote with caution”, wanting to “bring [Mr Adil] to the table”. His dealing with the proposition that he lied could only be described as prevaricating.
120. This email brought an immediate response, on the same day, from Mr Adil –
“Am I to understand from your note that you have terminated my services and do not want me to attend the head office in Dubai.
Please clarify as I will be attending office and there has never been any question of abandonment as you claim.
In fact, I request you to pay my past due salary of July and August 2013.”
121. A more full response followed later on the same day. Mr Adil asked that Mr Chaturvedi either formally terminate his services or accept their continuation: “If you do not want me to attend, please put it in writing as then it will be clear that you have terminated me.”
122. Eventually a meeting was held in Mumbai on 3 October 2013. How it came about is unclear, but from the presence of Mr Dalal and the minutes next referred to it must have been, at last, a meeting involving Mr Dalal to seek a resolution.
123.Minutes of the meeting were produced, and were signed by Mr Chaturvedi and Mr Adil. Despite their length, substantial parts should be reproduced –
“Minutes of the Meeting held on 3rd October 2013 in Mumbai.
Sub : Terms of settlement between Mr: Asif Adil and FDP (and its group companies)
- Mr. Suresh Chaturvedi
- Mr. Asif Adil
- Mr. Shishir Dalal
- Mr. P. Maheshwari
Basic Salary Payments:
The Employment Contract will be amended as below:
- It was decided after deliberation that Mr. Asif would be paid basic salary of USD 50,000 per month for a period from 1st July, 2013 to 30th September, 2013 (3 months, amount USD 150,000).
- In addition to this, Mr. Asif shall be paid a monthly salary of USD 40,000 for a period beginning 1st October, 2013 to 31st December, 2013 (i.e USD 40,000 X 3 = USD 120,000).
- Mr. Asif would also be paid a monthly salary of USD 30,000 for a period beginning 1st January, 2014 to 30th April, 2014 (i.e. USD 30,000 x 4 = USD 120,000).
- The Lexus car at cost price of USD 50,000 will be purchased from Mr. Asif (As per original purchase price of car) The club Membership will be provided to Mr. .Asif as per Employment Contract.
All other terms and conditions of Employment Contract dated 20.08.2011 shall remain the same.
- After discussion it was agreed that for the period beginning lst April 2013 till the date Mr. Asif’s contract ends on 30th April, 2014, he would be granted an equity grant of USD 250,000. This would be full and final payment toward Equity Grant. PDEL will match dollar for dollar the total equity grant made upto the amount USD 1.042 million as its contribution as and when required for the project. Out of this PDEL has already paid USD 600,000 hence balance USD 442,000 is required. The necessary documentation like issue of shares, signing of SHA has to be signed immediately.
- The Balance due on the Equity Grant till 31.03.2013 will be paid separately to Mr. Asif.
Expenses on various projects:
- It was agreed that from 1st October, 2013 all expenses relating to projects undertaken by FDP and its group companies viz .Mozambique Venture, Kaya Venture and Tanzania Venture and any other Venture undertaken in future would be reimbursed to FDP by the respective ventures.
Mr. Asif assured that the equity shares in the Mozambique ventures would be issued to FDP group companies as soon as PDEL Director is ready to travel to Maputo and the time taken in the regulatory process in Mozambique. Mr. Asif shall keep the Board of FDP fully briefed on the ongoing performance in various ventures where the FDP group has invested,
The Shareholder Agreement mutually acceptable to both the parties shall be finalized and signed in 15 days from the date of signing this settlement.
The basic premise of the settlement is subject to verification of all expenses by an Independent Chartered Accountant and both the parties confirm that except in circumstances beyond control all the terms of settlement would be adhered to in word and spirit. Any amendments to the terms of settlement shall require consent of both parties in writing.
All payments related as mentioned in the terms of settlement will be released as per schedule attached and subject to signing of Shareholder Agreement and Audit of accounts. as mentioned above.
These terms of settlement are final and binding on both the parties namely: Mr. Asif Adil and FDP group companies.”
124. Attached to the minutes was a schedule which included that the July – September 2013 salary would be paid “On signing of shareholder Agreement and Audit of accounts as Mentioned in General terms”.
125. A further page was said by Mr Chaturvedi to have been part of the minutes. It was not. It was dated 9 October 2013, and included references to the minutes dated 3 October 2013. It was signed by Mr Chaturvedi and Mr Adil at a later date, and was an “Action Plan and Time Schedule” for various acts (for example, signing the shareholder agreement) and payments (including “Balance of Equity Grant up to 31.3.203”, “Equity Grant from 01.4.13 to 30.4.14” and “PDEL Equity as progress of projects”). It included that payment of salary for July – September 2013 and “Balance of Equity Grant up to 31.3.2013” was “subject to compliance of above schedule”, and also recorded “Equity Grant” of USD 250,000 from 1 April 2013 to 30 April 2014 “as progress of projects”, and it concluded –
“Note: (Schedule of payment is subject to completion of all above mentioned documents and action)”
126. Mr Adil gave evidence, which was not objected to on without prejudice grounds, that at the meeting Mr Maheshwari produced a document (“Ex 31”) –
127. Neither Mr Chaturvedi nor Mr Maheshwari contested this in his evidence, or offered an explanation for Ex 31.
128. I go to the objection on without prejudice grounds. As later revised, the paragraphs and document relating to the period to 3 October 2013 to which objection was taken were paras 204 from “including” to “projects”, 205 to 210, 211 from “including” to “Tanzania”, 212 to 214, 218 and 219 of Mr Adil’s witness statement, and signed and unsigned minutes of meeting dated 3 October 2013.
129. The specified paragraphs of Mr Adil’s witness statement up to and including para 214 are largely accounts of or a statement of what had happened at the meeting in Maputo to which Mr Adil’s email of 29 July 2013 referred. There was then dispute, at the least, over Mr Adil’s claim to a termination pay-out or alternatively reinstatement and also, notwithstanding the generality with which it was expressed, Mr Chaturvedi’s assertion of counterclaims in his email of 10 July 2013. At the meeting it was agreed that Mr Dalal should assist as mediator in settling a range of issues, not just the matter of a termination payment; it is sufficient to instance the transfer of shares in Fronteira.
130. The communications at the meeting, although prior to any involvement of Mr Dalal, were the commencement of a settlement process. The settlement process continued, although with interludes of contention; it was suggested that it be taken up in the email of 8 September 2013, and it came to fruition in the meeting of 3 October 2013. The minutes sub-described themselves as terms of settlement, and from their content they were meant to bring a resolution to many matters between Mr Adil and Mr Chaturvedi and his companies.
131. Mr Adil submitted that the communications were no more than commercial discussions, a renegotiation of his employment contract, but it is plain from the Maputo meeting and from the eventual 3 October 2013 agreement that, even if that is a correct partial description, they were much more than that. He also submitted that there was no longer a dispute when Mr Chaturvedi’s email of 21 September 2013 said that his employment had not been terminated, and put that matter to rest. It is plain, however, that dispute remained, which was resolved by the October agreement; Mr Adil certainly did not accept that position in his emails replying to the email of 21 September 2013.
132. In my view, there were negotiations to settle a dispute attracting the privilege. With the exception of para 212 from “and in time” and para 213, which are not evidence of communications, and subject to Mr Adil’s submissions on waiver, the paragraphs up to and including para 214 are not admissible.
133. Paragraph 218 is a state of mind of Mr Adil, referring to something said by Mr Chaturvedi at the Maputo The state of mind is not relevant, and the reference is privileged; again subject to waiver, the paragraph is not admissible.
134. Paragraph 219 refers to and sets out an extract from an email dated 1 August 2013 from Mr Adil to Mr Chaturvedi. The email contains a reference apparently to something said at the Maputo But it was not sent as part of the settlement process; it was provoked by Mr Jose’s advice that seven days July salary would be paid and (as earlier mentioned) complained that in the absence of reply to the two questions, the full month’s salary plus incentive payment should be paid. Mr Chaturvedi did not object to the email. The objection to the paragraph is therefore pointless, and the email provides evidence (for whatever significance it may have) that at the Maputo meeting Mr Chaturvedi “made an oral proposal regarding salary reduction”.
135. The minutes of the 3 October 2013 meeting, however, are admissible. They record a settlement agreement then made, expressed to be final and binding although arguably conditional upon an audit of expenses. It is relevant in the proceedings as a restatement if the legal relationship on which the parties then acted, at least for Mr Adil’s contention that the Contract survived a purported termination on 30 June 2013, and also as subsequent conduct of the parties to which regard may be had in interpreting the Contract (DIFC Contract Law, Law No 6 of 2004 (“the Contract Law”), Article 51(c)).
136. In this connection, Frontline submitted that without prejudice privilege attaches to a concluded settlement agreement. A moment’s contemplation of suing on the settlement agreement defies that bold proposition; indeed, evidence of the negotiations is admissible in aid of construction of the settlement agreement (Oceanbulk Shipping & Trading SAvTMT Asia Ltd(2010) UKSC 44; (2011) 1 AC 662).
137. In support of the submission Frontline cited first, an observation of Lord Griffiths inRush & Tompkins LtdvGreater London Councilat 1300 rejecting “that if the negotiations succeed and a settlement is concluded the privilege goes, having served its purpose”. But his Lordship was addressing the communications in the negotiations and not the settlement agreement; this does not assist Frontline.
138. Secondly, Frontline cited the decision of the Court of Appeal for British Columbia inBC Children’s HospitalvAir Products Canada Ltd BCCA 177; (2003) 11 BCLR (4th) 281; (2003) 224 DLR (4th) 23. One party in a multi-party case sought production of a settlement agreement between other parties with a view to proving an amount payable to one of the other parties, apparently in order to argue it that would go to reducing that party’s claim against it. The majority (Hall and Ryan JJ) upheld the trial judge’s decision “that the settlement agreement should not be produced because its relevance had not been demonstrated” (at ), which appears to have underlain their discussion of its status and the observation that it was “shielded from production because of privilege” (ibid).
139. I do not think that this assists Frontline either. Where relevance is demonstrated, disclosure of settlement agreements has been ordered in British Columbia as an exception where the interests of justice override the public interest in encouraging settlement (egDos SantosvSun Life Assurance Co of Canada(2005) BCCA 4; (2005) 249 DLR (4th) 416). This balancing of interests is not the approach in English Law, where disclosure of or of parts of a settlement agreement if relevant is ordered in England (egGnitrow LtdvCape Plc(2000) 1 WLR 2327;Cadogan Petroleum PlcvTolley(2009) EWHC (Ch) 3291; (2010) EWHC (Ch) 1107). BC Children’s Hospitalv AirProducts Canada Ltdwas a discovery case, not an admissibility case, in connection with production to a third party. The treatment of the settlement agreement as privileged does not go beyond declining discovery to a third party in the absence of relevance. In my view, it does not support the proposition advanced by Frontline.
140. Mr Adil submitted that any privilege had been waived “by referring to the communications in [Frontline’s] Amended Defence and Counterclaim and other communications”. As developed, the submission was directed only to the 3 October 2013 minutes. Since the minutes are admissible in any event, it is not necessary to deal with the submission; but the minutes are not identified to in the Amended Defence and Counterclaim which refers, without significant detail, to entry into “lengthy discussions and protracted correspondence, with a view to resolving the Claimants’ alleged entitlements arising out of the termination of [the Contract]”. Mr Adil also submitted that any privilege attached to the minutes had been waived by a reference to them in a letter from Frontline’s lawyers. It is sufficient to say that this is without substance.
141. I add the following.
142. First, Mr Adil gave the evidence of Ex 31, and in paras 246-252 of his witness statement (which were not objected to) gave a summary of agreements at the meeting and referred to the preparation of and agreement on the minutes. There was also a deal of cross-examination in wider areas of the evidence to which objection was taken, without objection or preservation of the objection as the case may be. There may well have been wholesale waiver, as to the minutes or more widely. Mr Adil did not rely on these matters, and for that reason I do not take them further.
143. Secondly, and distinct from wholesale waiver, Mr Chaturvedi was cross-examined extensively on the meeting in Maputo. No objection was taken to the cross-examination. From it can be taken that according to Mr Adil, Mr Chaturvedi said that he did not want to terminate the employment and was upset with Mr Adil, and “Why don’t you come back to [Frontline]”; while according to Mr Chaturvedi he said, “That contract is terminated. Let’s discuss new way. Let’s start new way…”. Even if there was not wholesale waiver, I do not think that the without prejudice privilege attaches to this, and it provides some context to what followed up to the 3 October 2013 agreement.
144. My account of the events for this period seeks to abide by these rulings.
8.5Events from 3 October 2013 to 20 January 2014
145. Following the 3 October 2013 meeting, Mr Adil devoted time to the procurement and development of projects for Frontline. Again, he appears to have carried out normal duties. They included authorising payroll cheques and signing other cheques, and Frontline paid some travel and telephone expenses.
146. Mr Adil had discussions with Mr Chaturvedi about an additional USD 200,000 in capital needed for Fronteira; Mr Chaturvedi agreed to contribute a further USD 100,000, but PDEL did not do so and Mr Adil provided the full amount. No money was paid as his past or new salary, or as equity grant.
147. Then came an email of 27 November 2013 concerning recording of money paid to Mr Adil as advance or incentive, see later in these reasons in relation to misappropriation of funds as a cause for termination. Mr Adil said that he regarded this as “the final straw”. On 28 November 2013 he wrote to Mr Chaturvedi –
“In accordance with the signed employment contract, I am hereby submitting my resignation as the Managing Director of Frontline Development Partners effective Tuesday 3rd December 2013.
As approved by you, I have been working out of Maputo, Mozambique since July 4th 2013 and request that all my past dues including salary and incentive payments from July 2013 be made to me.
I await your instructions on the 3 months notice period as per the employment contract. Lastly, I request that my DIFC employment visa be cancelled expeditiously on payment of all arrears due.
It has been a pleasure working with you and I wish you the very best in your endeavors.”
148. The statement in the second sentence of this letter, that Mr Adil had been working out of Maputo since 4 July 2013 as approved by Mr Chaturvedi, was not correct. Mr Adil may have been in Maputo for much of the time from 4 July 2013, but his assertions (more than once) of absence from the office until he received answers to the two questions, and Mr Chaturvedi’s stonewalling replies, belie it. While Mr Adil was taxed in cross examination with the last sentence, it is clear that it was no more than a formal expression of good will. The dealings between Mr Adil and Mr Chaturvedi revealed in the evidence are quite to the contrary.
149. So far as the evidence showed, there was no response from Mr Chaturvedi or Frontline to the resignation letter. But shortly thereafter Mr Adil “bumped into” Mr Chaturvedi at Dubai According to Mr Adil, Mr Chaturvedi “said that we both should [be?] given another chance to a reconciliation on what had been agreed previously”, and that Mr Jaswinder Sohail, a new PDEL director, “would come to Maputo and get everything sorted out, and that payment would be made to me pursuant to the Minutes of Meeting dated 3 October 2013”.
150. There followed communications between Mr Adil, Mr Sohail, Mr Dalal and Mr Chaturvedi, sometimes contentious. They included, according to Mr Adil, him making “a final attempt to settle matters amicably” by letting Mr Chaturvedi know that he would be in Mumbai on a particular date, he thinking they might be able to meet face to face “to resolve the dispute between us”.
151. In a telephone discussion on 8 January 2014 a number of matters were agreed, and on 10 January 2014 Mr Adil emailed Mr Chaturvedi suggesting a deadline to “bring to a close this protracted negotiation”. Some more matters were agreed at a meeting on 10 January 2014. As earlier noted, a draft adjunct agreement was prepared in relation to the Fronteira shareholders agreement.
152. Mr Adil and Mr Chaturvedi then met in Mumbai on 20 January 2014. Minutes of their meeting were prepared. The minutes recorded that a number of “points” were “discussed and agreed to”; they concerned expenses incurred for a number of projects and included that there would be an audit of capital expenses and a further meeting on 30 January or 1 February 2014.
153. Again as later revised, the paragraphs and documents relating to this period to which objection was taken were paras 280 to 282, 285 to 287, 289, 291, 293, 295, 296, 298, 300 and 301 of Mr Adil’s witness statement, the minutes of meeting dated 20 January 2014, and the emails Adil to Chaturvedi 15 December 2013; Chaturvedi to Adil 22 December 2013 and reply 22 December 2013; Chaturvedi to Adil 29 December 2013; Adil to Chaturvedi undated; Chaturvedi to Dalal 2 January 2014; Adil to Chaturvedi 2 January 2014; Adil to Chaturvedi 8 January 2014; Adil to Chaturvedi 10 January 2014; and Adil to Chaturvedi 12 January 2014.
154. It is abundantly clear from their communications over this period that the parties were again in dispute, and were negotiating in an endeavour to settle their disputes; they included dispute over honouring the 3 October 2013 agreement. The without prejudice rule is attracted. Translating this to Frontline’s objections, and subject to Mr Adil’s submissions on waiver –
- paragraphs 281, 282, 285 to 287, 291, 293, 295, 296, 298, 300 and 301 of Mr Adil’s witness statement are inadmissible;
- paragraph 280 is the evidence of “bumping into” at Dubai airport, and para 289 is nothing to do with settlement negotiations; both are not privileged and are admissible;
- of the emails, those of 15 December, 22 December, Adil to Chaturvedi; and 29 December 2013 and 2 January, 8 January, 10 January and 12 January 2014 are inadmissible, but that of 22 December 2012 Chaturvedi to Adil is admissible because it was the subject of para 284 of Mr Adil’s witness statement to which objection was not taken.
- what were said to be agreements on 8 and 10 January 2014 were steps in the negotiations, not themselves final, and the meeting of 20 January 2014 was the same; there was not a settlement, and the minutes are also inadmissible.
155. Mr Adil submitted that there had been waiver in relation to the minutes of the 20 January 2014 meeting because they were disclosed without objection in Frontline’s production of documents. To repeat, production of documents and admissibility are distinct. Production between the parties to the minutes was not a waiver.
156. Again, my account of the events for this period seeks to abide by these rulings.
157. Frontline’s objection extended to some evidence relating to this period, being paras 302, 304 and 306 of Mr Adil’s witness statement and emails Dalal to Chaturvedi and others and attachment dated 27 January 2014 and Adil to Chaturvedi dated 27 January 2014.
158. The audit process envisaged as at 20 January 2014, in which Mr Dalal was involved, brought an email from him dated 27 January 2014 with comments for Mr Adil’s response. Mr Adil replied on the same day. These were continuation of the negotiations, and para 302 of the witness statement and the two emails are not admissible.
159. On 27 January 2014 Mr Adil wrote to Mr Chaturvedi and Mr Dalal saying that there were “logical and straight forward answers”, but expressing discomfort with continuing as there was a lack of trust between he and Mr Chaturvedi, and –
“I suggest we amicably disengage from each other - pay each other what is fair and due and move on where we can both be happy and at least see other straight in the eye when we meet. I also ask you accept my resignation from Frontline which was given to you on November 30th 2013.”
160. This was not fruitful. The next email from Mr Chaturvedi dated 29 January 2014 was distinctly antagonistic, and included that Mr Adil should attend to the audit process and should return to work in Dubai. It also included, “I think you should appreciate that I have given you equity in my group company, as per the clause in your appointment letter”. This could only refer to Fronteira and cl 7 of the Contract.
161. At the end of January 2014 Mr Adil and Mr Chaturvedi had a telephone conversation in which, according to Mr Adil, they “agreed to meet in the second half of February in Dubai to explore a resolution”. An email from Mr Adil to Mr Chaturvedi on 1 February 2014 recorded that agreement. Something else said in the conversation was the subject of para 304 of the witness statement; there was continuation of negotiations, and para 304 is not admissible.
162. Plainly, matters then deteriorated. So far as the evidence went, the next event was that on 4 March 2014 Mr Adil’s assistant told him that she had been instructed no longer to report to him. Then on 10 March 2014, Mr Chaturvedi and Mr Dalal as directors of Frontline –
“Resolved unaminously that
- Asif Adil’s name shall be removed as Authorised Signatory from HSBC Bank as he has resigned from the position of Director of the company via letter dated 28th Nov 13 [sic].
- Asif Adil’s resignation be informed to DIFC and his name shall be removed from the position of Director as well as Authorised Signatory from DIFC records.”
163. There is again an evidentiary gap until on 27 April 2014 Al Tamimi & Co, lawyers for Frontline, wrote to Hamdan Alhami & Associates, lawyers for Mr Adil –
“We refer to our letter to your client, Mr. Asif Adil, dated 18 March 2014, to your response to this letter sent to us by fax on 19 March 2014, and to the minutes of the meeting held on 3 October 2013 in Mumbai setting out the “terms of settlement” between our respective clients.
Due to the persistent material breach of these terms of settlement by your client, our client hereby gives notice of their termination with immediate effect.
We trust you will bring this termination notice to your client’s immediate attention.
Our client’s rights are reserved.”
164. Identification of this letter was the sole subject of para 306 of Mr Adil’s witness statement. No objection was taken to the letter, and for that reason and also because it is not part of the process of negotiation the paragraph is admissible.
165.The letters of 18 and 19 March 2014 were not in evidence, although in evidence in support of the without prejudice objection the former was described as a letter “detailing [Mr Adil’s] lack of compliance with his obligations and asking him to comply with those obligations without delay”. When and specifically why lawyers became involved is not clear.
9. The credit of Messrs Adil and Chaturvedi
166. Mr Adil was the only witness in his case. Called in Frontline’s case were Mr Chaturvedi, Mr D’Souza, Mr Maheshwari and Mr Al Debri. I have already considered Mr D’Souza’s evidence. There is no need to comment on the rather peripheral evidence of Messrs Maheshwari and Al Debri.
167. Mr Adil was detailed in his evidence, rather combative under cross-examination and exact sometimes to the point of pedantry. He was not above the leverage earlier mentioned, or departing from accuracy as in the resignation letter in relation to working out of Maputo. In his evidence he was concerned to convey his position on the issues in the case and, for example, to characterise the negotiations towards or at the 3 October 2013 meeting, favourably to his case, as no more than renegotiation of his employment contract. As later appears, his evidence concerning payments of his balance compensation/incentive was rather inconsistent, and in these areas in particular his evidence must be assessed against objective facts and the probabilities with particular care. I am nonetheless satisfied that he had a good recollection and that as a historian of events, of who said what to whom and who did what, his evidence is generally reliable.
168. The same cannot be said of Mr Chaturvedi. The many occasions on which he did not remember in the witness box would cause one to doubt any professed remembrance, but added to that are his extraordinary responses to Mr Adil’s requests for clarification of his position, and what might charitably be called a flexible attitude to proprieties and keeping his word. He could only be described as evasive in many of his answers in cross examination. In my view, he was prepared to say anything at the time of his dealings with Mr Adil in order to achieve his purposes, and the same as a witness, without regard to truth or accuracy. I would not accept his evidence unless supported by objective facts or high probability, and generally prefer the factual evidence of Mr Adil where there is conflict between them.
10. There Was Termination on 30 June 2013, Not For Cause
169. At least at trial, it was common ground that Mr Adil’s employment was orally terminated on 30 June 2013; that is, that what was said was to that effect. As I have noted, Mr Adil agreed to that in cross-examination, and Mr Chaturvedi also said explicitly, “I terminated his employment”.
170. I accept the evidence of Mr Adil as to what occurred at the meeting of 30 June 2013 in preference to that of Mr Chaturvedi. For a long time thereafter it was not once said that Mr Adil’s employment had been terminated for cause, which could easily have been said, if it were correct, as an answer to his claim for a large sum of money on the basis of termination on notice. In the email at 12.53 on 2 July 2013 Mr Chaturvedi seemed content that the employment should be terminated; why did he not then say that he had terminated it for cause? Thereafter Mr Chaturvedi’s stance was indeterminate until in the email of 21 September 2013 it was said that Frontline had not terminated the employment “although it remains fully entitled to do so”, again not consistent with earlier termination for cause. One may speculate that Mr Chaturvedi meant to keep Mr Adil dangling on a string, perhaps to retain his services at a lesser salary (as to an extent he did) or the better to get in the Fronteira shareholding, but that is speculation and the same could have been done by confirming termination for cause but offering to relent.
171. Mr Adil’s understanding that his employment had been orally terminated is not determinative, but is a correct understanding of what was conveyed at the meeting; that his employment was terminated effective immediately. The acceptance of termination is made clear by his provision of a calculation of a termination payment and request for other action. The submissions on his behalf included that this was only provision of what would be payable if his employment was terminated, a submission made without the benefit of evidence which I do not accept.
172. What was the contractual basis for the termination?
173. Mr Adil told Mr Chaturvedi that any termination had to be in accordance with the Contract, as he repeated in his email of 2 July 2013 with the addition that there would be a termination payment. Mr Chaturvedi invited a statement of what was due to Mr Adil, and must be taken to have acceded to this. Clause 24 of the Contract provided for termination by Frontline (i) on six months written notice, (ii) without notice but with payment of a sum in lieu of notice; or (iii) without notice for cause. In the absence of written (or any) notice or reference to cause for termination, the basis (and the only basis) was (ii).
174. Frontline’s submissions included, in connection with Article 59A of the DIFC Employment Law, Law No 4 of 2005 (“the Employment Law”), that the Article “permits consideration of facts discovered post-termination per Boston Deep Sea Fishing and Ice Company v Ansell (1888) 39 Ch D 339”. As later explained, it is not open to Frontline to rely on the Article. But if a wider appeal to the principle was intended, it should be said that the common law principle that an employee’s dismissal may be justified on grounds on which the employer did not act and of which it was unaware at the time of dismissal is not of present assistance to Frontline. If it be correct that it exercised the contractual right to terminate without notice but with payment in lieu of the notice period, it can not now justify the termination as the exercise at the time of the right to dismiss for cause. The exercise of the contractual right creates rights and obligations, specifically the debt of the payment in lieu of the notice period, which can not be retrospectively undone by later showing a different basis for termination: seeCavenaghvWilliams Evans Ltd(2013) 1 WLR 238 at  – .
- The Termination was Effective
11.1 The asserted defects
175. Mr Adil contended that the oral termination was ineffective because –
(a) Frontline failed to follow the proper mechanism for giving notice under cl 24 of the Contract;
(b) Mr Adil did not accept the termination; and
(c) the parties’ conduct after the termination was “such that it rendered the termination ineffective and evinced an intention to keep the contract alive”.
11.2 Failure to follow the proper mechanism
176. Mr Adil at first submitted that the mechanism provided by cl 24 was written notice, no written notice was given, and so the termination was ineffective. The premise is incorrect. There could be termination by Mr Adil on three months written notice. But there could be termination by Frontline without the six months written notice, but with payment in lieu for the notice period. Notice in the sense of informing Mr Adil was no doubt necessary, and that is what happened at the meeting of 30 June 2013, but no written notice was required.
177. When the course of termination without notice but payment of a sum in lieu of notice was drawn to counsel’s attention, Mr Adil submitted that the oral notice was ineffective because not accompanied by payment of the sum in lieu – indeed, because payment of any sum was denied. I do not think that is a correct understanding of cl 24 of the Contract. There is some support for the submission in the early words “or by paying your…”, but that is fleshed out in the reservation of the right to terminate without notice “and to pay your…”. Reading the clause as a whole, termination without notice attracts liability to pay the sum in lieu, but immediate payment is not a necessary element in effective exercise of the right.
11.3 Acceptance of termination
178. Mr Adil submitted that he did not accept the termination, but continuously sent “emails preserving the status quo”; and that the minutes of the 3 October 2013 meeting recorded amendment to the Contract “which demonstrates that [Mr Adil] was in continuous employment as opposed to new employment”.
179. The submission is odd. If Frontline exercised a right to terminate Mr Adil’s employment, there was no question of acceptance by him; the employment was terminated like it or not. It is also not well founded, in that Mr Adil thereafter acted on the basis that his employment had been terminated by clearing out his office and, more important, by claiming a large sum of money and requiring other action in consequence of the termination. It should be recalled that in his email of 2 July 2013 Mr Adil said that he told Mr Chaturvedi “that I accepted the termination but it had to be in accordance with the employment contract and there would be a termination payment due”.
180. So far as Mr Adil relied for this submission on subsequent emails and the minutes of the 3 October 2013 meeting, his submission more properly was not one of non-acceptance but came within the matters next considered.
11.4 Keeping the Contract alive
181. Mr Adil submitted that the parties’ conduct after the purported oral termination demonstrated that the employment had not in truth terminated. Thus, he said –
(i) Frontline did not carry out proper termination procedures; did not pay the claimed termination amount; did not tell Frontline personnel that he was no longer the Managing Director but rather said that he was still Managing Director; did not remove him as a DIFC authorised signatory until March 2014 and later; did not remove him as an authorised bank signatory until March 2014; and did not pass a board resolution acknowledging that the employment had been terminated until March 2014.
(ii) Rather, Mr Chaturvedi said in his email of 21 September 2013 that Frontline “has never terminated [Mr Adil’s] service either orally or otherwise”; Frontline issued the letter of 22 September 2013 for visa purposes stating that Mr Adil was a current employee; Mr Adil authorised payroll cheques for October staff salaries and signed Frontline cheques; and after the 3 October 2013 meeting Mr Adil was engaged in Frontline’s business, and Frontline paid for his travel to Mozambique in November 2013 and paid telephone bills for his work mobile.
182. To this may be added the earlier submission that Mr Adil sent “emails preserving the status quo” and the 3 October 2013 minutes recorded amendment to the Contract; and, although it was not part of his submissions, that he purported to resign on 30 November 2013 with apparent reference to the Contract.
183. The basis in law for these matters rendering the termination ineffective was not made clear. At trial Frontline foreshadowed a basis in waiver, but it must have recognized that this was unsound because the only submission as to waiver (apart from as to without prejudice privilege) was ascribed to the different matter of reliance on breaches of the Contract. If Mr Adil’s employment under the Contract was duly terminated, the parties’ subsequent conduct may have given rise to a new contract of employment; but that would not negate the termination. The submission required some sort of retrospective validation of employment under the Contract as if the termination on 30 June 2013 had not occurred, but how that could be was not explained.
184. In any event, when the matters on which Frontline relied are placed in context they do not make out continuation of employment under the Contract.
185. The submission as to proper termination procedures referred to written notice, and as earlier explained written notice was not necessary. Many other matters on which Mr Adil relied were unilateral acts of or failures to act by Frontline, and in particular a board resolution was not essential (and does not seem to have been valued in Mr Chaturvedi’s corporate governance). It is necessary to take a wider view.
186. At the beginning Mr Adil asserted termination, and he continued to do so while also questioning whether Frontline wanted him to serve out the term of his employment – and Mr Chaturvedi did not say that he wanted it. Frontline’s internal treatment of Mr Adil as Managing Director, at least until October 2013, was by no means consistent; in August 2013 his name and profile were removed from the website, and in an email to Mr Chaturvedi dated 15 August 2013 he recorded that staff had been instructed not to “attend” to him. The assertion of non-termination in the 21 September 2013 email was wrong (on Mr Chaturvedi’s stance in these proceedings a bare-faced lie), not to be taken at face value, and Mr Adil did not take it as such; he questioned the position. His request for payment for July and August 2013 may have been provoked by the email, but payment was not made.
187. While Mr Asif did return to the Dubai office, that was after the Maputo meeting and it is tolerably clear that it was an interim measure in the hope of salary. When Mr Adil asked for salary for the full month of July, he asked in vain, and he told Mr Chaturvedi that removal of his name from the website “goes to confirm that you have terminated my services”.
188. The 21 September 2013 letter was no doubt a catalyst to the meeting on 3 October 2013 (and was intended as such), but the so-called amendment of the Contract so far as it was effective was in reality as well as in law the making of a new contract of employment. The commencement of the process which ended with the 3 October 2013 agreement was, on either version of what was said at the meeting in Maputo, a fresh start; coming back to Frontline on new terms. The salary was progressively less until 30 April 2014. The equity grant for the year to 30 April 2014 was a quarter of that in the Contract, and the employment apparently ended on 30 April 2014 (the five year term of the Contract would have expired on 31 August 2016). And the new contract was conditional upon, at the least, an audit, and perhaps on other matters as noted in the schedule of payments. Mr Adil’s activities on behalf of Frontline thereafter are attributable to that source of his employment, as is his resignation of 30 November 2013.
189. Mr Chaturvedi’s purposes cannot be found with any certainty, but probably were to bring Mr Adil to the bargaining table with a view to regaining his services at a reduced cost and dealing with the complication of their co-investment. That happened. So far as Mr Adil and Frontline conducted themselves from about the end of July 2013 as if Mr Adil was still Managing Director, their conduct is best seen as ad hoc co-existence as they jockeyed for advantage, until a new employment relationship was created at the 3 October 2013 meeting. I do not think there was continuation of the Contract. At best, there came about a new contract of employment: but Mr Adil did not sue on a new contract.
12. No Amendment to Sue on a New Contract
190. In that connection, Mr Adil submitted that if the Court held that the termination on 30 June 2013 was effective, he should be awarded his salary for the period he worked thereafter. He submitted that this should be done –
(a) because Mr Chaturvedi said in evidence, “by the time [Mr Adil] comes through the office he should be paid and that’s written there in the minutes of the meeting of 3 October”; Mr Adil said that this could be done pursuant to the prayer for further or other relief in the Particulars of Claim and the Court’s powers under of Rule 4 of the Rules (case management) and Article 32 (f) of the DIFC Courts
(b) by amendment of the Particulars of Claim to include the allegation –
“… that by virtue of Mr Asif [sic] attending for work on 18 September 2013 there was a verbal agreement between the parties pursuant to which it was agreed that Mr Asif [sic] would be employed by FDPL as a Managing Director”.
191. The submission is manifestly untenable.
192. Ordering payment of salary is not case management, nor does a power to make orders in the interests of justice warrant an order for payment on a basis not pleaded or otherwise in issue in the proceedings. That is particularly so when Mr Chaturvedi’s statement came back to the 3 October 2013 agreement, which Frontline had purported to terminate by the Al Tamimi and Co letter of 27 April 2014. It is far too late to amend to add a claim on a subsequent verbal (more correctly oral) agreement, quite apart from the deficiencies in the allegation itself (for example, how can attending for work constitute a verbal agreement, and what were its terms?) The issues in the case did not encompass any such agreement, and Frontline could not properly be required to answer the claim on the existing evidence.
193. The submission was supplemented by the further submission that, if the Court were not minded to accede to one of its limbs, Mr Adil “should be awarded the losses he claims for the six month period from 30 June 2013 to 30 December 2013 pursuant to clause 24”. Clause 24 of the Contract does not provide for compensation for losses. It provides, in applicable circumstances, for payment of salary and other employment benefits for a notice period or payment of an amount in lieu of notice. The further submission is equally untenable. It disregards both what cl 24 says and what it does not say.
13. No Cause For Termination
13.1 Frontline’s case on cause
194. In case I am wrong in holding that there was termination but not for cause, I should make findings on whether there was cause for termination; and also because in part Frontline relied for its counterclaim on the conduct said to provide cause for termination.
195. In closing submissions Frontline relied on conduct in four respects as providing cause for termination of Mr Adil’s employment on 30 June 2014. The conduct related to the:
(a) allotment and issue of shares in Fronteira to PDEL;
(b) misappropriation of funds;
(c) provision of accounts; and
(d) a Wild Bull Beverages loan application.
196. Before going to the conduct in these respects, Frontline’s pleaded case should be noted. In the rather prolix Amended Defence and Counterclaim, Frontline alleged a raft of conduct on Mr Adil’s part said to amount to serious misconduct justifying termination for cause pursuant to cl 24 of the Contract. In summary, the conduct was:
(a) failure to create viable commercial opportunity for Frontline or generate revenue, in breach of cl 2 (a) and (b) of the Contract;
(b) failure to “confirm the status of” the Fronteira shareholders agreement, in breach of Frontline’s instructions;
(c) failure to transfer shares in Fronteira to PDEL, in breach of Frontline’s instructions and his fiduciary duty;
(d) instead, transferring 25.5 percent of the share capital “pertaining to PDEL” to himself, being conduct “tantamount to fraud”;
(e) registering Fronteira’s intellectual property rights in his own name, in breach of the Contract and his fiduciary duty, being conduct “amount[ing] to theft of the Defendant’s property”;
(f) supplying services to Fronteira through AGS, in breach of cll 19 and 23 of the Contract and Frontline’s Code of Conduct;
(g) placing a proposal/business plan for his own venture, Wild Bull Beverages, to the United Bank of Africa for the purpose of securing a loan for the venture, in breach of cl 23 of the Contract and his fiduciary duty;
(h) misappropriating USD 777,778, withdrawn from Frontline’s bank account purportedly to pay for development and costs incurred in the setting up of various projects including Fronteira, in breach of the Contract and his fiduciary duty;
(i) constantly failing to meet Mr Chaturvedi or answer his queries, in breach of cl 2(a) and (b) of the Contract; and
(j) on 30 June 2013, refusing to acknowledge his lack of performance, to provide information concerning the transfer of shares to PDEL, to submit an amount of the USD 777 778, to explain Frontline’s heavy losses, or “to cooperate in any way with the reasonable requests for information made by [Mr Chaturvedi] regarding the conduct and performance of [Mr Adil]”, amounting to fundamental breach of cl 23 of the Contract.
197. The pleader did not hold back. He or she included the general allegation that “[s]ince the commencement of his employment, [Mr Adil] sought to deceive and exploit [Frontline] and its associated companies in order to improperly and unlawfully retain ownership and profits from various ventures for himself”.
198. The allegations were wide-ranging, and ill-thought at least to the extent of alleging breach of a non-existent Code of Conduct. Frontline now rests only upon conduct in the four respects earlier noted, and other pleaded allegation to have been abandoned. Within the case now made by Frontline, there is some departure from such of the broadly equivalent pleaded conduct as is maintained. Mr Adil did not object to any such departure, and I will address that case.
199. Frontline’s closing submissions included that the conduct on which it relied was in breach of an implied obligation of good faith and fair dealing, and also referred to Article 59A of the Employment Law apparently as a source of its ability to terminate the employment. The Article and cases on its construction were referred to as relevant law, and although when making submissions on the conduct Frontline did not specifically advert to the Article, it used the language of warranting termination found in it. Article 59A provides –
“59A An employer or an employee may terminate an employee’s employment for cause in circumstances where the conduct of one party warrants termination and where a reasonable employer or employee would have terminated the employment”.
200. Breach of an implied obligation of good faith and fair dealing was not pleaded. It adds nothing, since the Contract provided that Mr Adil should “well and faithfully serve” Frontline (cl 23). But Mr Adil objected to any reliance on Article 59A on the ground that it had not been pleaded, and that the counterclaim had not been defended (this must mean that the defence had not been resisted) on the basis that his conduct warranted termination for cause pursuant to the Article.
201. This objection should be upheld. The concept of conduct warranting termination in the Article appeals to a standard other than breach of contract or of fiduciary duty, one which may possibly be wider than either but in any event can involve a different investigation. Further, the Article adds the integer that a reasonable employer would have terminated the employment, as construed meaning a reasonable employer in the circumstances of Frontline (McDuffvKBH Kaanuun, CA 003/2014, 14 October 2014). In neither of these respects was there an issue at trial, and I accept that Mr Adil’s conduct of his case may have been different if Article 59A had been in play. On the findings later recorded it is unlikely that it would have availed Frontline, but I will not deal with the Article as a source of ability to terminate the employment.
202. As I have earlier noted, Frontline’s submissions included that Article 59A permitted consideration of facts discovered post-termination, with reference toBoston Deep Sea Fishing & Ice Company v Ansell. I will assume that, apart from Article 59A, the common law principle would apply to termination for cause pursuant to cl 24 of the Contract. But the principle does not permit consideration of post-termination conduct as distinct from pre-termination conduct discovered post-termination. To the extent that Frontline relied on acts or omissions after termination, which was not entirely clear since its submissions sometimes lacked detail, that conduct is not available.
13.2 Allotment and issue of shares in Fronteira to PDEL
203. To recall, Mr Chaturvedi said that at the 30 June 2013 meeting he asked Mr Adil “why PDEL had not been allotted its shares and why there had been delays on account of one reason or the other.” I have not accepted this, but there had been communications about PDEL’s shareholding in Fronteira. Frontline submitted that Mr Adil failed “to allot, issue and/or record the ownership of shares of PDEL in Fronteira”, in breach of cl 23 of the Contract and of his fiduciary obligations. It said that PDEL had contributed its USD 300,000, and that Mr Adil had recognised that it was entitled to 25.5 percent of the Fronteira shares; but that Mr Adil “kept 51% of the shared [sic] capital of Fronteira”, that he “stalled” any transfer of share with excuses, and that he used his authority to issue shares in Fronteira as a lever to secure further funding from PDEL or Frontline.
204. I have dealt with the evidence relating to Fronteira and its shareholding earlier in these reasons. I accept Mr Adil’s account of the origin of the Fronteira venture and the agreement upon co-investment in preference to that of Mr Chaturvedi (including, as later discussed, funding to Mr Adil through cl 7 of the Contract). I accept also that it was agreed that shares would be assigned to an individual when all his contribution had been paid; relevantly, that shares would be transferred to PDEL only after it had paid its contribution.
205. Mr Adil held 51 percent of the shares upon incorporation of Fronteira, and these could be no valid complaint of failure to allot shares to PDEL at that time because in November 2011 Mr Chaturvedi’s co-investment had not progressed to nomination of PDEL as the vehicle for it.
206. Mr Adil did not deny that PDEL was entitled to 25.5 percent of the shares in Fronteira, half of the 51 percent he held. It was clear from the shareholders agreement he signed. The question is then one of transfer of shares to PDEL.
207. Mr Adil submitted that so far as an instruction to transfer the shares was given prior to 30 June 2013, the instruction was given by PDEL and not Frontline; therefore, he said, failure to transfer the shares could not be a reason for Frontline terminating his employment. What appears to have lain behind this, although not well articulated, was that if Mr Adil’s evidence of the origin of the Fronteira venture were accepted, the co-investment through Fronteira was a matter between Mr Asif and Mr Chaturvedi, for the latter as a personal investment through PDEL, and did not involve Frontline. Whatever obligation Mr Adil had to see to the transfer of shares, it was owed to PDEL or Mr Chaturvedi; Frontline was not a putative shareholder and could not complain of or rely on failure in the obligation.
208. I have accepted Mr Adil’s evidence of the origin of the Fronteira venture, and the submission is sound up to a point. But it does not recognise Frontline’s reliance on failure to transfer the shares as breach of cl 23 of the Contract. Also not well articulated, it argued that failure to transfer the shares was not only a breach of the obligation to well and faithfully serve Frontline and further its interests (which should not be accepted, because Frontline had no stake in the Fronteira venture), but also of the obligation to further the interests of “any company in the [Frontline] group”.
209. For this argument, it was necessary that PDEL be a company in the Frontline group. “Group” was defined in the Contract, but the definition was in terms of the companies “which comprise the [Frontline] Group of companies, as constituted from time to time”, and took matters no further.
210. So far as the evidence showed, Mr Chaturvedi was the connecting element between Frontline and PDEL. The connection was obscure, through shareholder companies in Frontline in which he had unexplained interests and as “beneficial owner” of PDEL, described as a trust company. However, it will be recalled that in pre-contract discussions between Mr Adil and Mr Chaturvedi, “group” was used to mean companies in which Mr Chaturvedi had an interest; Mr Adil went along with that usage whereby Fronteira would be a group company within cl 7 of the Contract. Regard may be had to the Contract Law, Article 51(a). The parties agreed on their own dictionary for the Contract, and if Mr Chaturvedi had an interest in Fronteira he had an interest in PDEL through which he had that interest. Thus I do not accept Mr Adil’s submission.
211. However, I am not satisfied that prior to or as at 30 June 2013 there was failure to further the interests of PDEL through failure to transfer shares. If there were repeated requests by Mr Chaturvedi, they were met by Mr Adil’s advice that attendance by PDEL in Maputo was necessary.
212. From the earlier account relating to the Fronteira shareholding, in May 2012 Mr Adil sent a “share transfer” to FITCO and in June 2012 he told Mr Shah that “share certificate can only come” when a PDEL representative attended the Registrar
213. There was no specific evidence of further requests in the period to 30 June 2013 that Mr Adil see to the transfer of shares in Fronteira. There was no evidence that a PDEL representative went to Maputo, or that Mr Adil was asked to assist in a visit for the purpose of attending the Registrar of Companies.
214. Mr Chaturvedi said generally that between May 2012 and June 2013 he made “repeated requests” for and “repeatedly contacted” Mr Adil about transferring shares to PDEL, but that Mr Adil failed to do so. No email or other document was in evidence in which he did so. For his part, Mr Adil said that –
“Further, I repeatedly advised PDEL and SC that in order to register the shares in PDEL’s name, the capital contribution needed to be satisfied and that a PDEL representative would need to attend the Ministry of Justice in Mozambique… PDEL did not send a representative, and so the shares were never registered in PDEL’s name”.
215. It may be noted that the minutes of the 3 October 2013 meeting record Mr Adil’s assurance “that the equity shares in the Mozambique ventures [sic] would be issued to FDP group companies as soon as PDEL Director is ready to travel to Maputo…”
216. In my view, on the evidence to 30 June 2013 there was no more than that PDEL asked Mr Adil to transfer the shares to it, he said that a PDEL representative had to come to Maputo, and there it was left. In these circumstances, I do not think it correct to say that there was a failure on Mr Adil’s part.
217. Mr Adil gave as a second prerequisite to transferring the shares that “the capital contribution needed to be satisfied”; that is, that the shares did not have to be transferred because PDEL had not paid its contribution. That is more doubtful.
218.The original agreement was that Mr Chaturvedi would invest USD 300,000 in the Fronteira venture, matching Mr Asif’s USD 300,000: for the present, the question of the source of Mr Asif’s contribution does not matter. By a date in July 2012 PDEL did contribute USD 300,000, by the payments for machinery and equivalent as later adjusted by Mr Adil’s refund. Mr Adil recognised this contribution, in part in anticipation, in his email to Mr Shah on 26 June 2012, “Only to extent of USD 300,000…”.
219. However, the Fronteira venture needed more capital. The evidence was not clear; it seems that by December 2012 the required capital contributions had doubled, and that PDEL did not (at least prior to 30 June 2013) contribute what was required of it.
220. It may be that Mr Adil also was not obliged to transfer the shares because the contribution required of Mr Chaturvedi had increased and the increased contribution had not been paid. The evidence was uncertain, and Mr Adil’s assertions to that effect do not sit well with his apparent acceptance that all that was needed was a PDEL representative in Maputo; see also the minutes of the 3 October 2013 meeting recording that the shares would be “issued” as soon as that happened. I will not take further time on an unnecessary exercise.
13.3 Misappropriation of funds
221. A total of USD 777,778 was paid by Frontline to Mr Adil by cheque or bank transfer between 25 December 2012 and 30 April 2013. Mr Adil contended at trial, as he had when dispute arose when he was still engaged with Frontline, that the payments were on account of his entitlement to what he called balance compensation/incentive payment pursuant to cl 7 of the Contract, and were used as his contribution to the Fronteira venture. Frontline contended that Mr Adil had no entitlement to the money pursuant to cl 7 of the Contract, and that he misappropriated (sometimes reduced to misused) the money.
222. It will be seen that there was nothing clandestine about Mr Adil’s dealing with the money. That he received it was known, and he maintained throughout that he received it as an entitlement pursuant to cl 7 of the Contract. As will appear, in my opinion that is correct.
223. The first payment was made on 25 December 2012, by bank transfer from Frontline’s account to Mr Adil’s account of AED 733,798 (equivalent to USD 200,000). The bank form asked for the purpose of the payment “for regulatory purposes”, and the box was completed “Advance”. The form was signed by Mr Adil and by Mr Anathasankaran, one of Frontline’s accountants. Mr Adil said that he used to sign such documents, and cheques, in blank before going on a business trip or on leave; the evidence included a cheque signed in blank.
224. There was no evidence of Mr Adil requesting that the payment be made, other than from an email from Mr Raghuram, another member of the accounting staff, to Mr Chaturvedi on 24 December 2012. Mr Raghuram said that “Mr Asif wants in his personal account the money USD 200,000 (separate account to be opened shortly)”, but that Mr Maheshwari had reservations and “said that we should not give in Fronteira – in company name instead of personal account”. (This is unfortunately worded, but the intent is clear enough). He said that Mr Maheshwari wanted it checked with Mr Chaturvedi before payment was made.
225. Mr Chaturvedi responded at 3.59pm on 25 December 2012, “Tell Adil to speak to me”. There was no evidence of the two men speaking, and probably they did not because at 4.03pm Mr Chaturvedi emailed Mr Adil, copied to Mr Raghuram –
“Dear Asif, fund are ready you are instructing fund to be transferred in your personal [sic] name I will do that but this money will be adhoc in your name because for MZ project you have to give me detail.”
226. At 4.31pm Mr Adil emailed Mr Chaturvedi in return –
“All payments for Fronteira for purchase of equipment (USD 900000) have so far been routed through myself. Mr Kamlesh [one of the local partners] has also sent me USD 300000 of his own money which has been then used for purchase of various items. Only local payments of USD 200000 have been made in Mozambique customs duties, freight clearing civil works etc. All accounting is readily available.
The reason for this is the following:
1) We would incur an exchange differential on the remittance in and payment out if mozambique of 10 percent which is the spread on exchange rates in addition, there are bank charges etc amounting to a total of 12 to 15 percent. So on a 1 million dollar investment, we would have lost USD 120000 to USD 1500000.
2) Also, there are fees for size of equity contributions which we have avoided incurring
3) Since I am controlling the payment, we have gotten favorable terms and pricing from the suppliers who personally know of me.
Now, instead of equity being contributed by cash, we are contributing to equity by kind which results in the same outcome but saves us a substantial amoun[t] of money.
Once, we have our initial funding done and we get into a business cycle, we will get into a normal cycle.
Please send this as I am already late.”
227. The chain ended with Mr Chaturvedi replying that he had already instructed Mr Raghuram to send the money and “We should discuss detail on this project”.
228. Mr Adil said in his witness statement that this was “a part payment for 16 months from 1 September 2011 to end of December 2012 for my balance compensation/incentive payment (Equity Grant) under my Employment Contract”. He said that he was entitled to USD 666,667 for the 16 months and that he and Mr Chaturvedi met two days later, on 27 December 2012, and “discussed why the money was being routed through my account and…how much balance compensation/incentive payment/Equity Grant had been paid to me up until that point in time, and what was still to be paid”. I will shortly refer to that meeting in more detail.
229. The second and third payments were made on 27 January 2012, by two cheques drawn on Frontline’s account in favour of Mr Adil for AED 734,000 (USD 200,000) and AED 978,668 (USD 266,667) respectively. There was no evidence of accompanying paperwork such as a cheque requisition form. The cheques were signed by Mr Adil and Mr Raghuram.
230. According to Mr Adil, these payments followed from meetings with Mr Chaturvedi on 27 December 2012 and 7 January 2013 in which they discussed joint ventures between them “outside of Frontline”.
231. There were two sets of minutes of the meetings in evidence. Mr Chaturvedi prepared minutes and sent them to Mr Adil for review and comment. Mr Adil sent back revised minutes. Mr Chaturvedi made no comment on the revised minutes, apparently accepting them. The minutes referred to current ventures of two kinds, liquor (Fronteira) and cosmetics. Other non-current ventures were referred to, not consistently between the minutes.
232. Looking only at Mr Chaturvedi’s minutes, they bear out that the ventures were between Mr Adil, Mr Chaturvedi and outside partners – indeed, it is noted that Frontline should be paid a development fee for its “time, money and effort spent for the project”, indicating that Frontline had no entitlement. The liquor venture, that is, Fronteira, was said to have the “size” of USD 1.6 million; that is, by this time the capital requirements have increased from the initial USD 600,000.
233. Mr Adil’s revised minutes are much more full. They include, in relation to the current ventures –
“Both parties then went on to discuss the Fund Requirements of the current businesses. Based on attachment A, it was agreed between both parties that [Mr Chaturvedi] has given USD 200,000 to date. He would give an additional USD 200,000 in 2013 – of which USD 100,000 would be given on behalf of [Mr Adil]. (See attachment A for details). This subscription would bring closure to [Mr Adil’s] 2012 compensation.”
234. They later included, in relation to “Funds Requirements and Contribution
“..The key parameters to consider are;
- The investment requirement of each business
- The percentage contribution being made by all partners
- Asif Adil’s compensation agreement with Mr. Suresh Chaturvedi which is;
- USD 600 thousand annual cash compensation
- USD 500 thousand to be given as an annual equity contribution by Suresh Chaturvedi on behalf of Mr. Asif Adil in various businesses agreed between them.
- Any further equity contribution beyond the annual USD 500 thousand is to be made by Mr. Asif Adil in his personal capacity.
Keeping this in mind, the fund requirements and contribution are shown in attachment A.
1) A total of USD 800 thousand has been contributed by Mr. Suresh Chaturvedi of which USD 400 thousand is for his own account and 400 thousand is on behalf of Mr. Asif Adil.
2) A total of USD 1.2 million is to be contributed by Mr Suresh Chaturvedi in 2013 of which USD 600 thousand is for his own account and USD 600 thousand is on behalf of Mr. Asif Adil. This includes the USD 100 thousand shortfall in contribution against compensation in 2012.
3) A total of USD 2. 1. million is to be contributed in 2014. This amount will come from a contribution of USD 1,550 thousand from Mr. Suresh Chaturvedi of which USD 1,050 thousand is for his own account and USD 500 thousand is on behalf of Mr. Asif Adil. Mr. Asif Adil will also contribute USD 550 thousand from his own resources.”
235. Attachment A was not in evidence.
236. According to Mr Adil, at the end of the 7 January 2013 meeting it was agreed that Mr Chaturvedi would fund USD 400,000 by 15 January 2013, being “the payment owed to me by [Frontline] under clause 7 of the Employment Contract”. Mr Chaturvedi gave no evidence to the contrary.
237. On 24 January 2013 Mr Swamy, another member of Frontline’s accounting staff, emailed Mr Adil asking how he wanted “this amount” to be transferred to his account, that is, in USD or AED, giving the “details” –
“In USD 466,667 In AED 1,712,668
Banking 150,000 550,000
Cosmetic 50,000 183,500
Incentive 266,667 978,888”
238. The two cheques followed. They brought a total payment to Mr Adil of USD 666,667, said to correspond to an amount of USD 500,000 per annum to which Mr Adil said he was entitled to the end of December 2012. It will be noted that USD 266,667 is described as “Incentive”; Mr Adil said that all three amounts should have been described in that way. No questions were asked with a view to showing some other purpose for the USD 200,000 and USD 266,667.
239. The last payment was made on or about 30 April 2013, by bank transfer from Frontline’s account to Mr Adil’s account of the equivalent in AED of USD 111,111. This brought a total payment of USD 777,778. There was no evidence of accompanying paperwork. Mr Adil said that this was his “second year employment incentive”, and that it meant that he was paid what was due under cl 7 of the Contract up to 1 April 2013. Mathematically that is not correct, but it was not questioned.
240. Mr Adil said that the payments were made in relation to three specific projects, liquor (Fronteira), cosmetics and banking; but because he was obliged to invest in ventures in which Mr Chaturvedi had an interest and the latter two were put on hold by Mr Chaturvedi, he put all the money into Fronteira.
241. In June 2013 Mr Maheshwari reviewed Frontline’s accounts and noted that these payments were classified as incentives. He did not think this was right, as Frontline had not become profitable (although so far as appears he was not aware of the discussions between Mr Adil and Mr Chaturvedi concerning additional compensation via cl 7 of the Contract). He enquired of Mr Chaturvedi, who told him to reclassify them as expenses paid in advance for projects undertaken by Mr Adil on Frontline’s behalf.
242. It is relevant briefly to notice events after 30 June 2013.
243. On 27 November 2013 Mr Adil was asked by Mr Jose to sign Frontline’s balance sheet. He saw that an amount of USD 666,667 or thereabouts in AED equivalent was classified as loan/advance to him. He told Mr Jose, as recorded in an email dated 29 November 2013 copied to Mr Chaturvedi, that this was wrong “as it was not an advance but the incentive payment and should be shown as such an expense”.
244. On 29 November 2013 Mr Swamy emailed Mr Adil –
“The amount which was paid as an incentive was shown under the head incentive initially i.e. before June 2013, Mr. Maheshwari reviewed when he visited our office in June month, and said not make any changes till he gives final instruction. Till that point of the period it was under the incentive.
Mr. Maheshwari again visited our office during the month of August when I was on annual leave. In that period, the same entries were reviewed again and had instruction to joy [sic: Jomy] to show under advance.
The amount which was actually paid in Dirhams was shown exactly the same amount was converted in 3.67 which is shown as USD 666,617. It is only an exchange difference it shows.
Jomy has changed the entries on Mr. Maheshwari’s Instruction and not on our own.
I will check with Jomyextactly [sic] what was instruction came from Mr. Maheshwari….”
245. Mr Adil replied on the same day, saying that the amount “is an incentive and expense and should be shown as such” and that Mr Swamy should “go back to the auditor and make the necessary changes”.
246. Nothing was done to change the accounting. In December 2013 Mr Adil was told, in answer to his enquiry, that “It was well informed to the concerned, we are still waiting for their decision”. Thereafter the evidence is silent as to a decision.
247. There are two questions, although they merge. Was Mr Adil entitled to money as what he called balance compensation/incentive payment, at the trial variously equity contribution, compensation and incentive, pursuant to cl 7 of the Contract? If so, were the payments totalling USD 777,778 made in satisfaction of that entitlement?
248. For convenience, I repeat cl 7 of the Contract –
“7 EQUITY GRANT
You will be granted Equity Grant of total value USD 500,000 (US Dollars Five Hundred Thousand only) per annum equivalent in United Arab Emirates Dirham (AED) in various companies of the group”.
249. In his evidence Mr Chaturvedi was dismissive of this provision, saying that an equity grant was a grant of shares and the clause did not provide for payment of money. This was playing with words, and did not assist his credit. The submissions on Frontline’s behalf took the same point, and also played with words in saying that Mr Adil could not be entitled to what he at times called an incentive payment when Frontline was losing money; Mr Adil was accused of dissembling in his description of balance compensation/incentive payment.
250. However, it is abundantly clear that cl 7 of the Contract was intended to, and did, underpin the payment of money to or on behalf of Mr Adil as an addition to his basic salary. Frontline’s submissions went some way towards recognising that Mr Adil was entitled to the payment of money, although contesting that the three payments (or at least the first of them) were in satisfaction of that entitlement.
251. The first question does not need extensive discussion. I accept Mr Adil’s evidence of pre-contract discussions concerning co-investment in Fronteira and payment of an additional USD 500,000 to be invested in ventures like Fronteira, including that cl 7 of the Contract was intended to provide for the payment as additional remuneration. My preference for the evidence of Mr Adil to that of Mr Chaturvedi is directly supported by, amongst other matters –
- Mr Adil’s minutes of the December 2012/January 2013 meetings, on which Mr Chaturvedi made no comment, with their reference to equity contribution;
- The minutes of the 3 October 2013 meeting and the schedule of payments document, which clearly recognised entitlement to additional payment of money as an equity grant;
- The Ex31 calculation of incentives due to Mr Adil;
- Mr Chaturvedi’s email of 29 January 2014 stating that he had “given [Mr Adil] equity in my group company, as per the clause in your appointment letter”.
252. The email of 21 September 2013 also referred to “the arrangement with Fronteira LDA” as part of Mr Adil’s “overall compensation package”, but it is not easy to make sense of what was also said about it. These materials, and they are not exhaustive, show also that the parties conducted themselves on the basis that Mr Adil was entitled to the payment of money, at the time sometimes called compensation or incentive, which could only be in satisfaction of the equity grant provision.
253. At trial Frontline foreshadowed a submission that regard could not be had to the pre-contract discussions because cl 32 of the Contract provided that its terms and conditions superseded any prior oral or written agreements. It is not clear that the submission was eventually made. The pre-contract negotiations and post-contract conduct may both be taken into account in the interpretation of the Contract (Contract Law, Article 51 (a), (c)), and cl 32 does not impede doing so.
254. The parties’ intention can readily come within the language of cl 7. “Equity Grant” is not a term of art. And while “equity” ordinary denotes shareholding, the shareholding can be granted otherwise than by a straightforward issue of shares. It could again be said that the parties wrote their own dictionary in their discussion of how cl 7 would operate; but even without that, a procedure by which A gave money to B which B invested in C, receiving shares in C, came within cl 7 of the Contract. The fact that the money of A (Frontline) went to satisfy an arrangement between B (Mr Adil) and D (Mr Chaturvedi/PDEL) for B’s investment in C (Fronteira) is a reflection on Mr Chaturvedi’s corporate governance, but does not bring down the operation of this clause.
255. Frontline submitted that because shares in Fronteira were never transferred to PDEL, Fronteira never became a group company within cl 7. It was not essential that the company whose shares were to be received be a group company at the time of the payment, so long as it was to become a group company. PDEL’s entitlement to the shareholding was never in doubt, although the achievement was subject to procedural steps (and perhaps payment of more by way of contribution), and it was regarded as a group company by Mr Chaturvedi, with the acceptance of Mr Adil, from the beginning. There is nothing in this submission.
256. In contesting that the payments were in satisfaction of Mr Adil’s entitlement, as to the December 2012 payment of USD 200,000 Frontline relied on the reference to “advance” and Mr Chaturvedi’s statement that the money “will be adhoc in your name because for MZ project you have to give me detail”. It relied further on Mr Adil’s email of 25 December 2012 referring to routing of all Fronteira payments through himself, submitting that it did not describe the payment as equity contribution, balance compensation and so on.
257. However, this payment must be seen together with the later payments. The meetings in December 2012 / January 2013 sufficiently show that Mr Chaturvedi accepted the payment as part of the equity grant entitlement; that is, Mr Adil did “give [Mr Chaturvedi] detail”, and the money was left in his name (at least until June 2013). The email was rather obscure, but dealt with payments other than an equity grant payment and does not, as was suggested, imply that the purpose of the USD 200,000 was the purchase of equipment for Frontiera to Frontline/PDEL’s account and not that of Mr Adil.
258. The position is even clearer as to the later payments, which followed the discussion of funding requirements for ventures between Mr Chaturvedi and Mr Adil. With customary prevarication, Mr Chaturvedi eventually agreed in cross-examination that he authorised the payment of the USD 466,667 after the meetings of 27 December 2012 and 7 January 2013, himself describing them as “equity contribution” to group companies, although he later sought to resile from that acceptance. He later agreed that the money was paid “for the equity grant”.
259. More detail is not warranted. I return to Ex 31, produced by Frontline for the meeting on 3 October 2013. It showed all the payments presently in question, as past payments, and described them as incentives; that is, equity grant payments. I accept that the payments of the amounts totalling USD 777,778 were pursuant to Mr Adil’s entitlement under cl 7 of the Contract, and answer the second question in the affirmative.
260. Two further matters may be noted. First, Mr Chaturvedi said that on 30 June 2013 he “asked [Mr Adil] about what had become of all the money that he had taken from the Defendant”, and gave as one of his reasons for termination that Mr Adil had caused the payments to him to be shown as an incentive. I have not accepted this. So far as the evidence shows, not until the email of 21 September 2013, or apparently an earlier email not in evidence, was there complaint that Mr Adil had not accounted for USD 777,778 “that you have withdrawn as advances for projects”. Secondly, when Mr Maheshwari inquired of Mr Chaturvedi in June 2013, all Mr Chaturvedi did was direct a reclassification of the first two payments as expenses paid in advance. If the Managing Director had misappropriated or misused a sum in the order of USD 666,000, it called for prompt and decisive action against him. But that did not happen; in due course, it was left to Mr Jose to ask Mr Adil to sign Frontline’s balance sheet. The absence of such action speaks strongly against any misappropriation or misuse of money.
261. I do not accept that, as at 30 June 2013 or at all, there was misappropriation or misuse of the USD 777,778. I add that I would be of the same view even if the minutes of the meeting of 3 October 2013 had been excluded from evidence. It is difficult to see how this allegation of cause for termination could responsibly have been maintained.
13.4 Provision of accounts
262. Frontline submitted that from the commencement of his employment, and in particular during the early part of 2013, Mr Adil had –
“…consistently failed to provide any detail of how the monies, that had been paid to him in order to cover the project costs and expenses associated with Fronteira and/or the Banking and Cosmetics ventures, had been spent.”
263. The premise is that Frontline had paid money on its own account and was entitled to have an accounting. The submission did not explain what money paid to Mr Adil were its subject, but from the cross-examination of Mr Adil it appears to have been the USD 777,778. If it be correct that the USD 777,778 was for Mr Adil’s equity grant, the premise would appear to be unsound. Mr Chaturvedi/PDEL may have been entitled to an accounting as co-venturer, but not Frontline. However, this was not the subject of submissions and I do no more than note it.
264. Frontline relied on what it said was Mr Chaturvedi’s evidence of repeated requests for such information, and on an email from Mr Chaturvedi to Mr Adil on 29 January 2014 which it said corroborated that evidence and confirmed that Mr Adil had failed to provide any or any sufficient account of the money he had received from Frontline for Fronteira. It submitted that Mr Adil’s failure was a breach of cl 23 of the Contract so far as it obliged him to follow management instructions, and of his duty of good faith and fiduciary duty.
265. The evidence of repeated requests for which Frontline gave a reference was scarcely that; just the statement that Mr Adil “simply failed to provide any information as to how these sums of money had been utilised”. In cross-examination Mr Chaturvedi said globally that whenever anyone went to Mr Adil he did not give information, and referred to “numerous correspondence between him and my people to get the accounts”. There was no email or other document in evidence in which Mr Chaturvedi’s “people” asked for information, and I regard this evidence as worthless.
266. The email of 29 January 2014 relevantly read –
“I have spoken. to Mr P Maheshwari and Mr Shishir Dalal and understand that the proper accounts and supportings are not yet submitted to Mr. Shishir for audit.
You will appreciate that for the last six months, you are not attending office as the accounts are not settled, but FDP is paying the salary for your absence. As per MOU dated 3.10.2013, this was discussed and agreed in principle and needs to be honored. As per best practices, one would assume that a professional of your standing must have kept the accounts upto date [sic].
You were supposed to give the accounts and Mr. Shishir to complete the audit within 01 (one) month froth the MOU and you made me to understand that Mr Shishir Dalal is not ready; but this is not the case; as the accounts/papers are being kept at different places and organizing them at one place is taking more time.
This matter should be resolved as early as possible and if you think it will take longer time, then it would be best, if you attend office and the exercise of settling the accounts can be done simultaneously.”
267. This does not support failure to provide accounts or information as to money paid to Mr Adil as cause for termination on 30 June 2013. The email was almost seven months later. The accounting to which it referred was the particular exercise agreed at the 3 October 2013 meeting, see its references to verification of expenses and audit of accounts. There is the assertion that for the last six months Mr Adil is “not attending office as the accounts are not settled”, but that is valueless (and in fact, Mr Adil was back at work for Frontline).
268. There was some evidence, to which Frontline’s submission did not refer, of earlier requests to Mr Adil. Mr Adil agreed in cross-examination that “in the months leading to the termination of [his] employment” he was “asked by Mr Chaturvedi to account for all the sums, the $277,000 that had been transferred to you…”. But he firmly said that he told Mr Chaturvedi that the books of account were in Maputo, and that Mr Chaturvedi could have someone examine them at any time; and further, that Mr Chaturvedi was “fully knowledgeable and in agreement with that was done” as a result of discussion in the meetings on 27 December 2012 and 7 January 2013 and he gave him “as broad information as I had available with me”. It is to be noted that only in Mr Chaturvedi’s email of 21 September 2013, or the earlier email to which it referred of which there was no evidence, is there first mention of accounting for how the USD 777,778 has been spent.
269. The postulated request for detail of how the money had been spent was not easily answered; it would be necessary to look at the books of account. Mr Chaturvedi was not a details man, nor would Mr Adil be expected to have the details at his fingertips. A response that Mr Chaturvedi could have someone look at the books of account was reasonable; so far as appears, he did not take any steps to have that done until the exercise after the 3 October 2013 meeting.
270. As the evidence was left, breach of cl 23 of the Contract as at 30 June 2013, or of a duty of good faith or fiduciary duty, has not been established.
13.5 Wild Bull Beverages loan application
271. In March 2013 Mr Adil prepared and provided to United Bank of Africa an application for a loan of USD 9.5 million to fund an alcoholic beverage business in Tanzania (“the application”). The venture company was Wild Bull Beverages Ltd. The application stated that it was “promoted by two leading luminaries with significant business experience and expertise in alcoholic beverages and the Tanzanian consumer market”, identified as Mr Adil and Oragan Capital Ltd (“Oragan”), a Mauritian company. It was said that Mr Adil and Oragan held equity stakes of 51 percent and 49 percent respectively, and that “a comprehensive shareholder agreement has been drawn between the two parties.”
272. Mr Chaturvedi said in his witness statement that he became aware of the application when reviewing the work of one of Frontline’s “financial associates”, who told him that he had been creating a proposal for a liquor business in Tanzania and provided a copy of the application. It is not clear when this took place. As earlier noted, Mr Chaturvedi said that on 30 June 2013 he asked Mr Adil what was happening in relation to the Tanzania liquor project, but his evidence did not include that he asked about the application.
273. Mr Adil said in his first witness statement that he prepared the application for Frontline on behalf of a Mrs Suchak of Jambro Plastics, and that Oragan was owned by Jambro Plastics. He said that he did so with the knowledge and consent of Mr Chaturvedi. In his witness statement in reply he said that the application was prepared “to ascertain financial institution lending criteria and appetite”, and that he told Mr Chaturvedi of it in March 2013 and Mr Chaturvedi said “that he did not want his name included on the proposal and that he just wanted to be kept updated on major developments”. Mr Adil was not cross-examined on this, and Mr Chaturvedi gave no evidence contesting it.
274. The evidence included a similar application dated 20 June 2013, relevantly with the same features as the March 2013 application save that the co-promoter was not Oragan but Global Fortune Ltd. Frontline’s submissions were directed only to the March 2013 application.
275. Frontline submitted that the application “effectively excludes [it] from having any role to play in the business and any equity stake in it’s [sic] name.” It said that Mr Adil breached cll 19 and 23 of the Contract so far as they prohibited involvement with a business other than Frontline, and by failure “to include [Frontline] within the business of Wild Bull Beverages Ltd” also breached his duty of good faith and his fiduciary duty to act in the best interests of Frontline.
276. It is not clear that Frontline’s arrangement with Mrs Suchak involved it having an equity stake in the liquor business. It matters not. Although not made explicit, on Mr Adil’s evidence (which I accept), the application was to test the financial waters, and was not a true assertion of an Adil shareholding or involvement; and there was not a jot of evidence other than the applications that he had an involvement in the intended business. Mr Chaturvedi knew this. If Frontline was to have an equity in the business, the application does not make out that Mr Adil failed to “include [it] within the business”. Perhaps that is why even on his account of the 30 June 2013 meeting Mr Chaturvedi did not tax Mr Adil with the application, but “asked what was happening in relation to the Tanzania liquor project”. Again, as the evidence was left breach of cll 19 and 23 of the Contract as at 30 June 2013, or of a duty of good faith or fiduciary duty, has not been established.
14. The Counterclaim
14.1 The two parts of the counterclaim
277. The counterclaim fell into two parts, a claim to damages for breaches of the Contract and of fiduciary duty and a claim for other relief.
14.2 The claim to damages
278. In final submissions the only matter taken up by Frontline was misappropriation of funds, with the submission that Mr Adil was in breach of cl 23 of the Contract, that Frontline had lost USD 777,778, and that that sum was claimed by way of damages.
279. I have not accepted that the USD 777,778 was misappropriated or misused, and the counterclaim in relation to damages fails so far as it was maintained.
280. Something further should be said of the claim to damages in the counterclaim.
281. The pleading of the claim to damages was by incorporation –
“58. The Defendant repeats herein the various breaches set out in the preceding paragraphs and counterclaims for damages to be assessed unless specified, for:
(a) poor performance and failing to achieve the budgeted revenue (paragraphs 23-24);
(b) failure to comply with the Defendant’s direction to transfer 25.5% of the share capital in Fronteira to PDEL (paragraphs 25-29);
(c) misuse of the Defendant’s intellectual property (paragraph 30);
(d) related party transactions and losses arising out of any conflict of interest (paragraph 32 and 33)
(e) misappropriation of 777,778 USD (paragraph 34)”
282. No case at all was run of failure in performance.
283. Although failure to transfer shares in Fronteira was maintained as a cause for termination, it was not taken up in Frontline’s submissions on the counterclaim. I have not accepted that there was the necessary breach, but no attempt was made to prove the value of the shareholding or otherwise any loss suffered by Frontline; it is not easy to see how Frontline suffered a loss from failure to transfer shares to PDEL. Perhaps the failure to take this up was recognition that it was hopeless.
284. While there was some passing mention of trade marks in the evidence, no case was run of misuse of intellectual property.
285. From the cross-referenced paragraphs, the related party transactions and conflict of interest were firstly, Mr Adil providing services to Fronteira through AGS and secondly, the Wild Bull Beverages application, in the defence said to be Mr Adil’s own venture (although as Frontline’s case was conducted it was a Frontline venture). From the extent and manner in which these matters were touched on at trial, I think it fair to say that no case was run on the counterclaim. In any event, there was no evidence of loss suffered by Frontline from any breach.
14.3 The claim to other relief
286. In the pleading of the claim to other relief it was alleged –
- that Mr Adil had taken confidential information from Frontline’s premises on 30 June 2013 and used the information for his own purposes; and
- that, if he remained employed by Frontline after 30 June 2013, he breached cll 23 and 26 of the Contract by working for Fronteira “which was incorporated and setup [sic] for the sole benefit of himself”.
287. On neither matter did Frontline maintain a case against Mr Adil. The second matter is totally contrary to Frontline’s case in other respects.
14.4 A comment on the pleaded case
288. In the majority of its allegations, the counterclaim was abandoned. It is not uncommon for pleaded allegations to be abandoned, although the proper practice is openly to announce the abandonment. I have earlier noted the raft of conduct alleged by Frontline as conduct justifying termination for cause, a deal of which was not part of Frontline’s case at trial. It is of the utmost importance that practitioners plead only that which can reasonably be supported. The extent of the discrepancy between Frontline’s pleaded defence and counterclaim and the case it maintained may serve as a reminder of that professional obligation.
15. Overpayment in Relation to the Equity Grant?
15.1 The issue
289. Mr Adil said that he had been entitled to USD 666,667 as at 31 December 2012, and that with the payment of USD 111,111 on 30 April 2013 bringing a total payment of USD 777,778 he was paid his entitlement up to 1 April 2013. Mathematically that is not correct. The annual amount was USD 500,000; from 1 September 2011 to 31 December 2012 the amount was USD 625,000; and to 30 March 2013 the amount was USD 750,000. More correctly on his case, Mr Adil had received part payment of USD 27,778 towards the April – June 2013 quarter. This can be seen in Ex 31, with a balance payable for the three quarters from 1 September 2013 reflecting overpayment in the payments attributed to the year to 31 August 2013. Perhaps strangely, Frontline did not take up the discrepancy with Mr Adil.
290. On Mr Adil’s corrected case, as at 30 June 2013 he had been underpaid in relation to the equity grant to the extent of USD 97,222.
291. Frontline submitted, assuming against itself that Mr Adil was entitled to money as his balance compensation / incentive payment, that he had been overpaid as at 30 June 2013.
292. I have accepted that the USD 777,778 was paid pursuant to Mr Adil’s entitlement under cl 7 of the Contract. That does not necessarily exclude that he had received other such payments, and so been overpaid, although regard to Ex 31 stands against it. It is necessary to address this issue for two reasons. First, the amount outstanding should be ascertained as a step in determining Mr Adil’s recovery in these proceedings. Secondly, Frontline’s submissions included that if Mr Adil was entitled to equity grant money of USD 500,000 per annum, he had received more than his entitlement and should be ordered to repay the overpayment plus interest. The counterclaim had not included any such claim, and the question also arises whether a claim to recover any overpayment should be entertained.
15.2 No overpayment
293. In written submissions Frontline asserted overpayment because, as well as the USD 777,778, Mr Adil had received (a) USD 284, 000 under the Consultancy Agreement and (b) “51 per cent of the equity in Frontiera of which 25.5 per cent was paid by PDEL in the sum of [the money paid to suppliers of plant and machinery].”
294. The second of these can be shortly disposed of. While Mr Adil held 51 per cent of the Frontiera shares, PDEL’s ultimate entitlement to half of that shareholding was not denied. Mr Adil did not relevantly receive the value of the shareholding, let alone receive it in satisfaction of his entitlement under cl 7 of the Contract. Moreover, if Mr Adil be regarded as having the benefit of PDEL’s shareholding, no evidence at all was led of the value of that shareholding; it was not measured by PDEL’s USD 300,000 or such other contribution it had made.
295. The source of the USD 284,000 was not explained, but appears to be the USD 200,000 paid to Mr Adil in June 2012 and the USD 84,000 recorded as paid in the Consultancy Agreement.
296. Mr Adil denied receiving the USD 84,000, and there was no evidence to support that, as was put to him, he had been paid in cash. Although Mr Adil signed the Consultancy Agreement, careful documentation was not the parties’ strong point and I do not regard its reference to payment of USD 84,000 as reliable. Mr Adil denied that the USD 200,000 was payment under the Consultancy Agreement or to do with PDEL, and there was no evidence from Mr Chaturvedi or anyone else explaining the payment; it did not correspond to the USD 116,000 said in the Consultancy Agreement to have been arranged. Mr Chaturvedi’s assertion that USD 260,400 was paid pursuant to the Consultancy Agreement fitted none of these figures, and if the figure was a mistake for USD 284,000 it was no more than an assertion providing no further support. I add to this preference for the evidence of Mr Adil that the USD 300,000 payable under the Consultancy Agreement was consideration for being locked in with a non-complete clause and separate from any balance compensation / incentive payment; it maybe noted that cl 7 of the Consultancy Agreement recorded agreement to invest the money in Frontiera, which would have been unnecessary if cl 7 of the Contract were in play. I am not satisfied that USD 284,000 was paid to Mr Adil as equity grant money.
297. In oral submissions, Frontline asserted overpayment on different grounds; as I understand the submissions, on two different grounds.
298. The first different ground was a variant on the written submissions. It was said that as well as the USD 777,778 Mr Adil had received (a) USD 284,000 under the Consultancy Agreement and (b) USD 300,000 being the payments made by PDEL to suppliers of plant and equipment (I use a round figure). As I have said, I am not satisfied that the USD 284,000 was paid as equity grant money. The PDEL payments were not payments of equity grant money. They were payments by PDEL, not Frontline, and as Mr Chaturvedi’s investment of USD 300,000 to match that of Mr Adil in Frontiera. Hence, amongst other things, Mr Adil’s “only to the extent of USD 300,000…” in his email of 26 June 2012 to Mr Shah, that being the contribution to come (and partly made) by PDEL.
299. I recognise, although Frontline’s submissions made no mention of it, that Mr Adil’s evidence was at times at odds with this view of PDEL’s payments. He said at times that PDEL had paid only USD 200,000 of its investment contribution (he seems to have meant the USD 200,000 paid in June 2012, although this is not consistent with him saying he held the money on trust for PDEL and like much else was left unclear), and (to add to the confusion) he sometimes said that PDEL made the payments to suppliers of plant and equipment as his contribution. But that is not consistent with evidence that Mr Chaturvedi was to match Mr Adil’s equity grant contribution through PDEL, with the course of events, with Mr Adil’s explicit description of the USD 777,778 as his balance compensation and with Ex 31. In these respects I do not accept Mr Adil’s characterisation of the payments, made for reasons which are not clear to me. Objectively, and supported by their absence from Ex 31, they were made at the time as Mr Chaturvedi’s matching contribution through PDEL.
300. For the second different ground, although presented in an amalgam with the first, it was suggested that Mr Adil’s minutes of the meetings of 25 December 2012 and 7 February 2013 said that Mr Adil would receive USD 100,000 to “bring closure to [his] 2012 compensation”; that he received USD 100,000 on 27 January 2013 as half the USD 200,000 paid on that date, the balance being a Chaturvedi contribution; and that he also received USD 266,667 on 27 January 2013 and USD 111,111 on 20 April 2013, a total of USD 377,778, which took his equity grant payment (on Frontline’s case, assuming he was entitled to it) beyond 30 June 2013 – an overpayment of USD 127,778.
301. The submission was Counsel’s construct, in effect as a supplementary submission. The construct had not been put to Mr Adil in cross-examination or otherwise made known as an issue: the important procedural fairness of the rule inBrownevDunn(1893) 6 R 67 was not respected, and it must be questioned whether Frontline can be permitted to rely on it.
302. In any event, I do not accept the submission. It suffers from the unexplained absence of ExA to the minutes, which apparently gave details of the payments and requirements between Mr Chaturvedi and Mr Adil. Taking the minutes at face value, they do not refer to equity grant payments for the last quarter of 2011; they say that USD 400,000 has been contributed by Mr Chaturvedi on behalf of Mr Adil, the further USD 100,000 apparently making up the annual USD 500,000. Important to the calculation is that the minutes accurately recorded that USD 400,000 had been paid on behalf of Mr Adil as compensation, which is not supported by anything else in evidence and is not consistent with Mr Adil’s other evidence. Perhaps Mr Adil was writing in round figures; perhaps he was wrong. (I have earlier noted that he was not above departing from accuracy in his dealings with Mr Chaturvedi). On the evidence as a whole, I do not think the figures in the minutes can be taken as definitive; Ex 31 is a considerable difficulty for the submission, to which may be added that the minutes of the 3 October 2013 meeting record future equity grant payment from 1 April 2013, which is inconsistent with any overpayment.
15.3 Entertaining a claim to recover any overpayment
303. Recovery of an overpayment does not arise. However, I should say that if there had been overpayment, entertaining a claim to recover it is considerably problematic. No application to amend the counterclaim was made. If it had been made, it would have faced the difficulty that no issue was raised of how the overpayment came about: was there fraud, was there payment by mistake, and if the latter did the circumstances provide a basis in law for recovery or a defence to recovery? Without final decision on an unnecessary matter, leave to amend may well have been refused.
16.1 The claim
304. On the basis of termination of employment by resignation on 30 November 2013, Mr Adil claimed –
(a) unpaid salary and payment for the three month notice period;
(b) unpaid balance compensation / incentive payment;
(c) gratuity payment pursuant to Article 62 of the Employment Law;
(d) payment in respect of driver’s charges;
(e) out of pocket expenses; and
(f) penalty payment pursuant to Article 18 of the Employment Law.
305. These heads of claim, with the exception of unpaid salary because salary was paid up to date, were adopted in the event of termination on 30 June 2013. Nothing was said of “Abusive Dismissal Compensation”.
16.2 Payment in lieu of noticE
306. On the basis of termination without notice with payment in lieu of notice, Mr Adil is entitled to the amount of his base salary for six months; that is, USD 300,000, payable in the AED equivalent.
16.3 Balance compensation / incentive payment
307. As the parties had conducted themselves by payment of money, USD 97,222 (USD 125,000 less USD 27,778) was outstanding as at 30 June 2013.
308. However, Mr Adil is not entitled to recover that sum as a money payment. His entitlement under cl 7 of the Contract was to equity in group companies. It had been provided by the payment of money which Mr Adil invested in Frontiera, and his investment should have been matched by PDEL; but the money was received under the obligation to invest it and thereby obtain equity. Mr Adil’s loss is not USD 97,222, but the value to him of the equity he would have obtained upon the investment of that sum in Frontiera or another group company. No attempt was made to prove that value. Mr Adil is not entitled to any amount under this head.
309. Article 62 of the Employment Law relevantly provides –
“62. End of service gratuity
(1) Subject to Article 62(5) and (6), an employee who completes continuous employment of one (1) year or more is entitled to a gratuity payment at the termination of the employee’s employment.
(2) The gratuity payment shall be calculated as follows:
(a) twenty one (21) days’ basic wage for each year of the first five (5) years of service.
(b) thirty (30) days’ basic wage for each additional year of service, provided that the total of the gratuity shall not exceed the wages of two (2) years of service.
The daily rate for the employee’s basic wage shall be calculated based on the number of days in the year. The employer may deduct from the gratuity any amounts owed to the employer by the employee.
(3) Where the termination occurs prior to the end of any full year of employment, the gratuity payment shall be calculated on a proportionate basis.
(4) An employee is not entitled to a gratuity payment where the employee has been terminated for cause as defined in Article 59(4)”.
310. Articles 62(5) and (6) are concerned with election between the gratuity and participation in a pension scheme. It will be recalled that cl 5 of the Contract referred to gratuity payments “in accordance with the Company scheme”, but there was no evidence of or that Frontline had a scheme. It was not suggested by Frontline that the entitlement to a gratuity was displaced by election in favour of a pension scheme.
311. “Wages” is defined to mean “all payments made to an employee in return for work done or services provided under the contract of employment”, and “basic wage” is defined so as to exclude allowances of all kinds. The basic wage in Mr Adil’s case was USD 600,000, calculated to a daily rate according to calendar days in a year of USD 1643.84. He is entitled to recover a gratuity of USD 59411.12 payable in AED equivalent.
16.5 Driver’s charges
312. Mr Adil claimed at a monthly rate based on the USD 5000 in cl 12 of the Contract. For two independent reasons, he is not entitled to anything. First, cl 24 of the Contract provides that the payment of base salary “shall be taken to adequately compensate… in respect of…. contractual benefit entitlements” during the six months; so the contractual benefit of a company provided driver could not bring further payment. Secondly, Mr Asif was not entitled to money, but to a company provided driver up to a monetary ceiling. If he was not provided with the driver for a period, he could claim damages for any loss suffered through himself paying for a driver; but there was no evidence of loss.
16.6 Out of pocket expenses
313. The Contract makes no provision for payment of out of pocket expenses. In submissions it was said that the claim was founded on the minutes of the 3 October 2013 meeting so far as they provided for reimbursement under “Expenses on various projects”, treating that provision as part of an amended Contract.
314. The submission is remarkably astray. The relevant part of the minutes provides for reimbursement “to FDP [Frontline] by the respective ventures”, and has nothing to do with reimbursement of out of pocket expenses to Mr Adil by Frontline. It is unnecessary to say, but should also be said, that Mr Adil did not sue on an amended Contract.
16.7 Statutory penalty
315. Article 18 of the Employment Law provides –
“18 Payment where the employment is terminated
- An employer shall pay all wages and any other amount owing to an employee within fourteen (14) days after the employer or employee terminates the employment.
- If an employer fails to pay wages or any other amount owing to an employee in accordance with Article 18 (1), the employer shall pay the employee a penalty equivalent to the last daily wage for each day the employer is in arrears.”
316. “Daily wage” is defined to mean “the compensation received by an employee as wages for services performed during a working day”, and is to be calculated “taking into consideration the total amount of working days in a year”. As earlier noted, “wages” is defined to mean “all payments made to an employee in return for work done or services provided under the contract of employment”.
317. Article 18 (2) came into the Employment Law by DIFC Employment Law Amendment Law, No 3 of 2012 (“the Amending Law”), which also included “and any other amount owing to an employee” in Article 18 (1).
318. It was accepted that Mr Adil’s daily wage was USD 1,643.84. He submitted that he was entitled to that amount for each day from fourteen days after whatever termination date was found; here from 15 July 2013. This became the big ticket item, a claimed penalty in the order of USD 1.5 million.
319. Frontline did not contest that payment of a penalty had been triggered, accepting that at least the gratuity payment was within “any other amount owing to an employee” in the Article. Implicit in this was that the provision was not limited to amounts owing prior to termination, and included amounts which became owing at the moment of and by virtue of the termination. In the absent of a submission and argument to the contrary, I will proceed accordingly.
320. Frontline accepted that Article 18 (2) was cast in mandatory terms. It submitted, however, that a literal application of the Article as a mandatory stipulation would lead to absurd results. A large penalty could become payable if there were failure to pay a small amount, and even if the failure was due to honest mistake. An employee would profit from delaying claiming wages or litigating a disputed claim, and dispute resolution would be compromised by the incentive not to settle a disputed claim. An employer could end up financially penalised in an amount far in excess of any payment for a notice period. In its written submissions Frontline invited the Court to “modify the language of the legislation” to avoid the absurdity, by “imply[ing] a judicial discretion into Article 18 as to whether a penalty should be ordered on the facts of a particular case, and/or the amount of any such penalty”. In oral submissions this was modified to a discretion to mitigate the penalty: it was said that the Court should have a discretion to reduce the prima facie penalty.
321. Frontline cited Lord Wensleydale inGreyvPearson(1857) 6 HLC 61 at 106; 10 ER 1216 at 1251 –
“… in construing… statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified so as to avoid that absurdity and inconsistency, but no further”.
322. To go further and modify the words of Article 18, it referred also to the observations of Lord Reid, dissenting in the result, inFederal Steam Navigation Co LtdvDepartment of Trade and Industry(1974) 1 WLR 505 at 509 –
“Cases where it has properly been held that a word can be struck out of a deed or statute and another substituted can as far as I am aware be grouped under three heads: where without such substitution the provision is unintelligible or absurd or totally unreasonable; where it is unworkable; and where it is totally irreconcilable with the plain intention shown by the rest of the deed or statute. I do not say that in all such case it is proper to strike out
323. Frontline referred to a number of cases said to illustrate construing “shall” as directory or permissive, and submitted that “shall” in Article 18 (2) should be read as “may” so as to make payment of the penalty discretionary.
324. For his part, Mr Adil submitted that the language of Article 18 was mandatory and it was deliberately penal in nature, and (citingRvCity of London Court
325. Each of Frontline and Mr Adil sought support from the purpose stated in Article 3 of the Employment Law, namely –
“(a) provide minimum employment standards to employees based within, or who ordinarily work within or from the DIFC;
- promote the fair treatment of employees and employers; and
- foster employment practices that will contribute to the prosperity of the DIFC.”
326. Frontline submitted that fair treatment of employers called for implying a discretion, and that a discretion which freed employers from harsh operation of the Article would encourage employment and contribute to prosperity within the DIFC; it also suggested that a non-discretionary penalty exceeded minimum employment standards. Mr Adil submitted that a strict reading of Article 18 (2) was consistent with fair treatment in the form of protection of employees, which was also the evident purpose of Article 18 (1).
327. I do not find Article 3 of great assistance. Article 18 stipulates the fairness between employer and employee and the employment standard in the circumstances to which it applies, and detrimental effect on prosperity one way or the other is speculative.
328. As earlier noted, Article 18 was introduced into the Employment Law by the Amending Law in 2012. Prior to that, Article 16 of the unamended Employment Law simply provided that an employer shall pay all wages owing to an employee within seven days after the employer or employee terminates the employment.
329. The Amending Law was preceded by Consultation Paper No 4 dated December 2011, but the paper made no mention of the future Article 18. The researches of Counsel, for which I am most grateful, found no other travaux preparatoires to assist in the construction of Article 18. It is evident, however, that the new Article 18 was deliberately much more stringent than the earlier Article 16; it added “or other amounts” and an explicitly described penalty.
330. Nor did the researches of Counsel find comparable legislation in other common law jurisdictions. In England, there is no relevant penalty provision. In other jurisdictions failure to pay what is due to an employee can attract a penalty, for example in Hong Kong a criminal penalty of a fine of HKD 350,000 and imprisonment for wilfully and without reasonable excuse failing to pay wages and in Australia a pecuniary penalty currently of approximately AED 28,000. These penalties do not go to the employee. The closest comparable found, and it is not very close, is California, where it is provided that “the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefore is commenced “(Labor Code, s 203), but with a cap of 30 days.
331. Article 18 must be construed on its own terms, as a unique provision, and as part of the Employment Law. So far as reference to other jurisdictions may assist, it suggests that the strong terms of the Article were deliberately chosen. They are indeed strong terms: a strict time limit is stated (Article 18 (1)), and failure means that the employer “shall” pay what is described as a penalty. There is no alleviation by regard to wilfulness or reasonable excuse, in Article 18 or elsewhere in the Employment Law.
332. This is the first case in this Court in which Article 18 has called for detailed consideration. Counsel helpfully referred toEbonyvEelis(SCT, H.E. Justice Shamlan Al Sawalehi, 16 July 2014 for the observations (at ) that its purpose is “to deter employers from causing undue delay in the dues owed to its employees” and that it promoted fair treatment of employees and fostered a practice that would contribute to the prosperity of the DIFC. While his Excellency said (at ) that both parties need to show good faith, the penalty in that case for less than the days of default appears to have been due to the maximum claim jurisdiction of the Tribunal.
333. There is some force in Frontline’s instances of possible harsh consequences in the application of the Article, for example if there be genuine dispute over liability to pay the wages or other amount which is ultimately determined against the employer. But I do not think that the invitation to import a discretion into Article 18 (2) should be accepted.
334. Frontline’s submissions failed to recognize the structure and operation of the Article. It does not give the Court the function of imposing a penalty. The penalty falls upon the employer by force of the Article; the Court then may be called on to exercise its ordinary function of ordering payment of the debt thereby created, as with any other debt.
335. Substituting “may” for “shall” in Article 18 (2) would not be at all satisfactory. The Article would then read that “the employer may pay…”, a wording which says nothing of a discretion if a Court is asked to order payment of the penalty; and it could not be thought that the employer had a discretion. More radical surgery is required, such as deletion of the reference to the employer paying a penalty and provision that “the Court may order that the employer pay a penalty equivalent to…”. Even that would have the difficulty that the Court would have an all or nothing discretion, to order the whole penalty or none of it; so additional words would be needed such as, “the Court may order that the employer pay a penalty up to the amount equivalent to…”.
336. This would not be construction of the Article, but rewriting of it. While words may in some circumstances be added to or modified in legislation, the task of the Court remains one of construction: see the observations of Lord Diplock inWentworth SecuritiesvJones(1980) AC 74 at 105-6 –
“My Lords, I am not reluctant to adopt a purposive construction where to apply the literal meaning of the legislative language used would lead to results which would clearly defeat the purpose of the act. But in doing so the task on which a court of justice is engaged remains one of construction; even where this involves reading into the Act words which are not expressly included in it”.
337. His Lordship went on to express the conditions for reading words in, the third being that it must be possible to state with certainty what were the additional words that would have been inserted by the draftsman and approved by Parliament, and said (at 107) –
“Unless this third condition is fulfilled any attempt by a court of justice to repair the omission in the Act cannot be justified as an exercise of its jurisdiction to determine what is the meaning of a written law which Parliament has passed. Such as attempt crosses the boundary between construction and legislation. It becomes a usurpation of a function which under the constitution of this country is vested in the legislation to the exclusion of the courts”.
338. These observations equally apply to the functions of the Ruler as law maker and the Court as interpreter of the laws.
339. Many of Frontline’s cases in which “shall” was said to be directory are better understood as stating the consequences of failing to follow the mandatory language, for exampleSecretary of State for Trade and IndustryvLangridge(1991) Ch 402. None is helpful where, as here, the “shall” is directed to the employer. The employer comes under an obligation to pay to the employee an amount calculated as specified in the Article, specifically described as a penalty and with no room for a lesser amount. If the employer does not pay the amount and the employee sues to recover it, there is no basis for a discretion in the Court to say that only part of the amount must be paid; the Court does not have a discretion to say that only part of a debt must be paid.
340. Frontline submitted that the discretion should be exercised by not awarding any penalty or awarding only a nominal penalty. (As just explained, it is not a case of the Court awarding a penalty, but I pass on). It said that the penalty should be nominal “so as to reflect [Mr Adil’s] misconduct”, and otherwise said that the full penalty amount would be disproportionate (to what, was not stated) and unjust. Nothing else was, said in support of discretionary alleviation of the penalty amount. Presumably the suggested misconduct was the asserted occasions for termination for cause, which I have not accepted. Frontline’s failure to pay the termination payment and the gratuity was quite unjustified. If there were a discretion, the case for its exercise in Frontline’s favour is not attractive; but the submissions were sketchy, and I do not come to an unnecessary decision.
17. Other Matters17.1 Currency
341. Mr Adil is entitled to USD 300,000 and USD 59,411.12 in AED equivalent. Since these amounts were payable on 1 July 2013, my present view is that the exchange rate should be the rate as at that date. There may be a conversion back to USD at the current exchange rate for the purposes of RDC 36 14. Also as a present view, although the penalty accrues daily the final amount is known only when the Court orders payment and the AED equivalent should be at the then exchange rate; if there is then conversion back to USD, the two conversions cancel each other out and need not be undertaken.
342. Mr Adil is entitled to interest on these amounts. As at present advised I see no reason why interest should not be calculated from 1 July 2013 at the rate in PD 1/2009, in the case of the penalty for half the period in order to reflect its daily accrual.
343. Although not on all heads of claim, Mr Adil has been dominantly successful in the proceedings. Subject to any further submissions, if made, my present view is that Frontline should pay Mr Adil’s costs of the proceedings (including of the without prejudice privilege application, which should be formally dismissed).
344. If either party wishes to submit that a different course should be taken as to currency, interest or costs, the directions next made allow for that to be done.
345. I direct –
346. Subject to direction 2, that the parties file agreed draft orders conforming to these reasons, or if draft orders cannot be agreed his or its draft orders, within 14 days.
347. In the event of disagreement -
- if the disagreement is over currency, interest or costs, that the respective draft orders be accompanied by a statement of the reasons for the order(s) sought in that respect not exceeding three pages in length, the opposite party to file a responsive statement not exceeding the same length within a further 14 days;
- if the disagreement is over some other matter, that the respective draft orders be accompanied by a statement of the reasons for the order(s) sought.
348. Unless otherwise directed, any disagreement will be decided on the papers.
Date of issue: 3 April 2016