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Tarig H.A.G. Rahamtalla v Expresso Telecom Group Ltd  DIFC CFI 069
December 07, 2021 court of first instance - Judgments
Claim No. CFI 069/2020
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
TARIG H.A.G. RAHAMTALLA
EXPRESSO TELECOM GROUP LTD
AMENDED JUDGMENT OF JUSTICE SIR PETER GROSS
Hearing : 16 May 2021 Hearing : Sandra Eze instructed by Global Advocacy and Legal Counsel for the Claimant.
Raza Mithani instructed by Khalifa Bin Huwaidan Al Ketbi Advocates & Legal Consultant for the Defendant.
Judgment : 8 August 2021
UPONhearing Counsel for the Claimant and Counsel for the Defendant at a hearing on 16 May 2021
AND UPONreading the submissions filed and recorded on the Court file:
IT IS HEREBY ORDERED THAT:
1. ETG is ordered to pay TR the sum of US$404,897.67, within 28 days of the date of this Judgment.
2. I declare that TR is entitled to a daily payment US$1,052.30 for the period between 18 May 2021 and the date of this Judgment and order that the sum thus calculated should be paid by ETG to TR within 28 days of this Judgment.
Date of issue: 7 December 2021
SCHEDULE OF REASONS
1. The Claimant (“TR”) claims sums said to be due to him from the Defendant (“ETG”), arising out of TR’s employment by ETG and ETG’s termination of that employment.
2. ETG admits some of TR’s claims but denies that it is liable to make any payment to TR; anything otherwise due to TR is extinguished or over-topped by TR’s counterclaim. That counterclaim relates principally to the pivotal – but not the only and certainly not the largest – issue in dispute: namely, whether TR made secret profits from ETG, through Kool Communications FZE (“Kool”) a company controlled by him, whilst in a position of trust with ETG, so that ETG’s termination of TR’s employment constituted “termination for cause”, within the meaning of Art. 63 (1) and (3) ofDIFC Law No. 2 of 2019, the DIFC Employment Law 2019(the“Employment Law”). As will be seen, in the event, the largest issue in dispute concerns TR’s Penalty claim (as it is described below).
3. Much of the factual background is common ground, before the parties’ cases sharply diverge.
4. TR is a British national. ETG is a company registered in theDubai International Financial Centre(“DIFC”), with a registered office in Dubai. The law applicable to this dispute is the Employment Law.
5. TR and ETG entered into an Employment Agreement (the“Agreement”) on 1 February 2013.
6. As recorded in theList of Issues:
“3. Pursuant to the Agreement, the Claimant’s [i.e., TR’s] monthly remuneration consisted of i) Basic salary of US$9,000.00; ii) Living Allowance of US$1,500.00; iii) Transportation and Fuel allowance US$ 1,500.00; and iv) Housing Allowance of US$ 3,000.00.
4. Pursuant to the Agreement, the Claimant was entitled to i) Annual roundtrip air fare tickets for the Claimant and his family….in Business Class to the United Kingdom; and ii) Annual bonus tied to the developing of new revenue channels, the implementation of a performance management system, subject to management discretion and board approval.
5. On 1 July 2014, the parties executed an addendum to the Agreement in which the Defendant [i.e., ETG] agreed to increase the Claimant’s basic monthly pay to US$ US$14,000.00.
6. With effect from 1 June 2015, the Claimant’s pay was increased to US$15,000.00 by virtue of a further addendum to the Agreement.
7. Parties executed a further addendum to the Agreement in 2019 confirming the Claimant’s new appointment as Managing Director of the Defendant’s Senegal office, whilst remaining Vice-President of the Defendant’s Dubai office. In consideration of the Claimant’s new position, the Defendant agreed to pay the Claimant an additional allowance calculated as 12% of the basic pay (US$15,000 x 12% = US$ 1,800.00).”
7. Clearly, over the period described above, the relationship between TR and ETG had flourished. Unfortunately, thereafter, the relationship took a turn for the worse. The history of that deterioration appears largely from the List of Issues and theChronology of Events:
(1) On 9 March 2020, a discussion took place between TR and the CEO and General Manager or Director-Chairman of ETG (as he is variously described in the documents), Mr Sami Yousif Mohamid (“Mr Sami”), in which TR was requested to travel to Sudan to meet Mr Sami. On 10 March 2020, TR received an email instruction to the same effect. On 12 March 2020, TR sent an email to Mr Sami confirming his agreement to travel to Sudan.
(2) Still on 12 March 2020, TR received a letter by email from ETG suspending his employment (the“Suspension Letter”) with immediate effect,“until reviewing the administrative and financial performance of…[ETG]”.
(3) On 14 March 2020, TR travelled to Sudan to meet with Mr Sami as directed.
(4) Between 14 March 2020 and 21 April 2020, TR remained in Sudan due to ongoing meetings with the Investigation Committee established by ETG on 16 March 2020 to investigate TR’s performance (the“Investigation Committee”) and travel restrictions resulting from the pandemic.
(5) On 28 April 2020, TR received a termination of employment letter from ETG (the“Termination Letter”), signed by Mr Sami, via a WhatsApp message. The Termination Letter terminated or purported to terminate TR’s employment, for cause, with effect from 26 April 2020, asserting that TR had:
“Failed in many occasions to abide by the travel policy.
Neglected your rules and responsibilities towards the operating subsidiaries of the company.”
The Termination Letter added that the Investigation Committee would continue its investigation and update TR in due course.
8. TR’s claims and ETG’s counterclaims are set out in a Schedule, helpfully prepared by the parties and compriseAnnex 1to this Judgment. As is apparent, the question whether TR was terminated for cause has, of itself, a major impact on the overall outcome of the litigation. I turn directly to that Issue.
Termination for Cause: Breach of Fiduciary Duty
9.(A) Introduction:As ultimately developed, ETG’s case, that TR’s employment was terminated for cause, was put under two headings:
(1) secret profits (“Breach of Fiduciary Duty”); and
(2) breach of ETG’s travel policy.
It is convenient to deal under this heading with the issue as to breach of fiduciary duty and to deal separately (later) with the question of ETG’s travel policy.
10.(B) Evidence:Over and above the documentary materials, I heard oral evidence from TR himself and from Mr Mustafa Abdelmalik Mohamed (“Mr Mustafa”), called by ETG. Both witnesses gave measured evidence and, in my judgment, each did his best to assist the Court.
11. TR told the Court that ETG was 100% owned by Sudatel, as I understood it, a Sudanese telecommunications group.
12. In his Witness Statements and orally, TR explained that although, initially, his job title was that of Vice President International Operations, he was, in fact, solely responsible for all operations of the ETG’s Dubai Office – thus, a position akin to the Managing Director – and was also overseeing four operations in West Africa (Ghana, Guinea, Mauritania and Senegal). Subsequently, in 2019, TR was formally appointed Managing Director of the ETG Senegal Office, a role he was, in reality, already undertaking and which he thereafter fulfilled alongside his position as Vice President International operations. TR was very proud of the work he had done at ETG; a substantial loss-making position in 2010 had been transformed into a US$2 million net profit in 2018.
13. The Suspension Letter had come as a shock as he had not received any warnings about any alleged actions or behaviour. That letter had followed a heated or hostile conversation with Mr Sami, understood to be a conversation on 3 March 2020, followed by the conversation on 9 March 2020, referred to above.
14. Notwithstanding this apparently inauspicious background, TR said that in the meetings of the Investigation Committee in March-April 2020, he was not questioned about any purported wrongdoing; instead, those meetings involved presentations by him (TR) as to his achievements at ETG over the past 7 years.
15. TR admitted and averred that he had established Kool in Ras Al Khaimah on 26 January 2016. Its activity was given as“Projects Management & Marketing Consultancy”. An additional licence gave Kool’s activity as“Telecommunications Equipment Trading; Telephones & Telecommunications Equipment Trading”.
16. TR claimed that he had engaged Kool as a“third-party company collecting money transfers on behalf of…”ETG“…after exploring all other viable options to collect outstanding amounts due…”to ETG. Reference was made in TR’s evidence both to sanctions impacting on Sudan and a cashflow crisis affecting ETG. (For the avoidance of any doubt, there was nothing before me to suggest that any sanctions impacted on these proceedings.)
17. TR had not obtained prior approval for setting up Kool but this was not unusual and formed part of his senior role as Vice President. He had acted solely in the interests of ETG and entirely in good faith in doing so.
18. TR gave as an example collecting USD $1 million from a company that had previously refused to transfer funds to ETG’s bank account. That payment had been used to pay a Chinese vendor which had otherwise been minded to cut-off the Sudatel network in Sudan for non-payment.
19. Kool charged ETG between 1% and 1.5% and this charge was, TR said, used to cover transaction costs, the trade licence and“the costs of the company registrations and maintenance”. ETG would usually pay in excess of 2% to any other third-party for the same service.
20. Though the explanation for the arrangements was not entirely clear it appears that Kool acted in its collecting role bothindirectlyand, subsequently,directly. It would appear that, to begin with, an entity calledDiamond(“Diamond”) was acting as collection agent for ETG. TR stated that payers could not accept Diamond as it was not a telecommunications company; Kool, however, was a telecommunications service company. The payment route was from the customer (payer) to Kool, which then transferred the monies to Diamond. It seems that Diamond charged ETG a 3% commission. It may well be that Diamond and Kool shared that commission, but it is unnecessary to explore the matter further – given, as will be seen in a moment TR’s admission as to the sums overall retained by Kool. Subsequently, TR told the Court that he had removed Diamond and that Kool had passed the amounts received from customers directly to ETG.
21. TR maintained that he had no intention of making a profit. TR asserted that all monies collected on behalf of ETG were transferred immediately to ETG’s bank account “in full”. In cross-examination, however, he accepted that some US$71,000 had been retained by Kool. Although there was some debate about the figures in the evidence, I am content to accept and proceed on the footing that Kool retained US$71,000 from its dealings as (indirect and direct) collection agent for ETG.
22. In his evidence, TR said that ETG knew of the existence of Kool and the use he was making of it. However, it became clear in the course of cross-examination that the individual who had the knowledge in question was the Corporate Finance Director in Dubai, a Mr Faizal; that individual was a subordinate of TR. TR accepted that he had not informed his superiors in ETG, stating that he had not needed to do so.
23. The Investigation Committee established by ETG and referred to above, appears to have produced two reports, which were in evidence (the“First Report”and the“Second Report”respectively). Though the First Report is undated, it is referred to in the Second Report as having reported on 28 May 2020. I have no reason to doubt that statement and, insofar as it matters, accept it. The Second Report appears to have been commissioned by Mr Sami on 12 July 2020 as an“additional investigation”into the “Kool case”. It is dated 15 July 2020 and, again, there is no reason to doubt that date.
24. It is noteworthy that the Second Report concludes as follows:
“….the findings of the second report support the hypothesis that Mr Tarig[‘s] wrong-doing was motivated by good intentions and not seeking financial enrichment due to the low earnings amount associated with the case.”
25. Mr Mustafa told the Court that he had been Strategy Director of ETG over the period 2015 – 2020; TR was his“direct manager”until TR left ETG. Following TR’s departure from ETG, Mr Mustafa became acting CEO of ETG – succeeding TR in that post. In that capacity, Mr Mustafa was instructed by the Board to investigate any wrongdoing concerning Kool. Mr Mustafa thus served on the Investigation Committee and signed the Second Report, which included the conclusion noted immediately above.
26. In cross-examination, Mr Mustafa accepted that the evidence relating to August 2017 suggested that the name of ETG in the transfer instruction had given rise to difficulty in completing a payment intended for it; as he accepted, sanctions were a problem. Mr Mustafa agreed that TR had helped to put arrangements in place for ETG to receive payments. The figure of some US$14 million was mentioned in evidence as having come to ETG via Kool. Mr Mustafa stood by the conclusion in the Second Report that TR had been motivated by good intentions. Put to him that TR was not a person making millions by way of secret profits, he said that he could not confirm that. Put further to him that ETG could not have been unaware of Kool, given the substantial sums coming to ETG Dubai via Kool, Mr Mustafa said that Kool was collecting for all subsidiaries of Sudatel – not simply ETG Dubai. He could not say whether ETG (other than the Corporate Finance Director in Dubai) knew of Kool.
27. Mr Mustafa accepted that the Termination Letter had made no reference to any breach/es of fiduciary duty or conflict of interest or Kool. Though Mr Mustafa had seen both the Suspension Letter and the Termination Letter at the times they were sent, he had not drafted either letter.
28. A further theme raised in cross-examination of Mr Mustafa was this. On 9 June 2020, TR had pressed for payment of end of service entitlements which he claimed were due to him. Two days later (on 11 June 2020), the subject of Kool was raised by ETG. Ms Eze suggested that ETG’s reluctance to pay monies owed to TR resulted in an attempted“cover-up”by way of“false allegations”. Mr Mustafa accepted the dates of the communications in question – as facts – but not the suggestion of false allegations.
29. Ms Eze’s questions focused additionally on the change in leadership at ETG and the relationship between Mr Sami and TR - in particular, the conversation in early March 2020 and the summoning of TR to travel to Sudan. Mr Mustafa said that TR had told him that the new Chairman was not happy with him. When asked whether the real reason for TR’s dismissal was“inter-personal conflict”, Mr Mustafa said that he could not agree.
30. (C)The rival cases:For TR, Ms Eze submitted that there had been no “cause” justifying ETG’s termination of TR’s employment. Given the problems encountered by ETG in collecting payments, TR had stepped in out of a sense of responsibility going above and beyond the call of duty; that did not disclose a breach of fiduciary duty. To the contrary, TR’s actions had helped to solve the problem ETG faced with sanctions (because of its Sudanese links). Moreover, TR not only assisted in addressing the problem – he had succeeded, bringing in millions of US$ via Kool. Kool had not charged a substantial rate; TR had not been enriched – the sum Kool obtained was inconsequential. Mr Mustafa and ETG had reached the very same conclusions as evidenced by the Second Report.
31. In response to a question from the Court that TR’s motives might be irrelevant, Ms Eze submitted that there had been no secret profits; the Corporate Finance Director had known about Kool.
32. TR had been a top performer. The allegations against him had been“made up”. TR had been dismissed for other reasons. There had been an argument between TR and Mr Sami; thereafter he was suspended; subsequently, when he pressed for monies he claimed were owing to him, the allegations of breach of fiduciary duty had arisen. Notably, TR’s employment had been terminated in advance of the completion of the Investigation Committee’s work; timing was a crucial point.
33. For ETG, Mr Mithani submitted that TR’s case was troubling: could it be acceptable to make a secret profit of US$70,000 odd? In Mr Mithani’s submission that was simply wrong. USD $70,00 was not an inconsequential amount – considering, for instance, TR’s salary.
34. The test for secret profits was strict. Intention was irrelevant but here the evidence pointed to an intention to make secret profits. TR had made no disclosure as to Kool to senior management. The Corporate Finance Director did not appear to have known that Kool was owned by TR. Helpful though he had been in his evidence in making the concession that he had retained about USD $71,000, TR had not acted with transparency and had never (hitherto) provided a proper account. So far as concerned Diamond’s 3% commission, the full 3% had not gone to Diamond; Kool’s involvement had been hidden.
35. This had been a very significant matter. TR’s actions could not be justified by excuses such as the need to pay expenses relating to Kool. Expenses of company registration and bank charges did not come close to the US$71,000 retained. In any event, having established Kool, he would have had to pay those expenses in any event. Further, insofar as TR had acted with initiative in addressing the problem of collecting payments, he held a senior management role. He was not, as Mr Mithani put it, entitled to an additional sum for the privilege of doing his job. Still further and as to Ms Eze’s suggestion of ulterior motives underlying TR’s dismissal, the argument contained a fundamental flaw: namely, the breach/es of fiduciary duty were admitted.
36. Reverting to the position of Diamond and the collection of payments due to ETG, TR had indeed devised a solution by inserting Kool into the chain of payments – but that solution was for his own benefit. Diamond had taken 3% and TR had decided to take some of that commission for himself. If the solution had been for ETG’s benefit, he would have accounted for it – but he had never done so.
37. As to the conclusion in the Second Report, Mr Mithani submitted that ETG was not bound by Mr Mustafa’s conclusion and was entitled to reach an alternative conclusion.
38.(D) The legal framework:The legal framework was not in dispute. Arts. 63(1) and (3) of the Employment Law provide as follows:
“(1) An Employer….may terminate an Employee’s employment with immediate effect for cause in circumstances where the conduct of one…party warrants termination and where a reasonable Employer …would have terminated the employment as a consequence thereof.
(3) If an Employer terminates the employment of an Employee for cause pursuant to Article 63(1): (a) the Employee shall not be entitled to receive any payment of Wages in lieu of their notice period; and (b) the Employee’s Gratuity Payment and outstanding Vacation Leave shall be calculated up to the Termination Date.”
39. As set out in DIFC Courts Practice, edited by Rupert Reed QC and Tom Montagu-Smith QC (2020) (“DIFC Courts Practice”), at p. 102, termination for cause has been considered in a number of cases before the DIFC Courts. For present purposes, the following extract suffices:
“In McDuff v KBH Kaanuun Ltd  DIFC CA 003 (14 October 2013), Justice Roger Giles held that there were two limbs to the test: (i) whether the employee’s conduct warrants termination; and (ii) whether a reasonable employer would have terminated the employee. As further explained by CJ Hwang in Elseco Limited v Lys  DIFC CA 011 (5 July 2017) at :
‘[T]he first stage of the test is akin to that which is applied at common law for summary dismissal, and does involve some conduct which was fundamentally inconsistent with the employment relationship, seriously incompatible with it or repudiatory of it….. [T]he second stage of the test involves a positive finding as to what a reasonable employer would do, and is in that respect distinct from the unfair dismissal cases in the UK.’”
40. Art. 58(1)(a) of the Employment Law provides that an Employee shall serve their Employer faithfully. AsDIFC Courts Practiceobserves (at pp. 103-4), Art. 58 is to be read together with Arts. 158(2) and 159 of and Schedule 3 to theDIFC Law of Obligations (DIFC Law No. 5 of 2005)(the“Law of Obligations”), which provides that unless demonstrated to the contrary a person acting as an employee owes fiduciary duties to his employer. In the present case it was common ground and, in any event, indisputable, that TR owed fiduciary duties to ETG; the dispute related to whether those duties had been breached.
41. As is clear, the fiduciary duties contained in the Law of Obligations and applicable here, entail that the fiduciary must not put himself into a position where his interest and duty conflict; where there is such a conflict, the fiduciary must account to the principal for any benefit he receives; and the fiduciary must not make any secret profits in the course of the relationship unless the principal has consented on the basis of full disclosure. Moreover, the motives or intentions of the fiduciary and the fact that the principal has benefited from the fiduciary’s actions are neither here nor there: see,Boardman v Phipps  2 AC 46, together with the authorities there cited.
42.(E) Discussion and Decision:This is an unfortunate case. On the evidence, TR was an energetic business executive and successful in the actions he took to collect payments for ETG. Those actions served to benefit ETG and, on the evidence before the Court, resolved a problem ETG had been facing.
43. However, in the course of doing so - and as is admitted - TR benefited himself, by retaining US$71,000 commission for Kool or himself. On the evidence, I find that the existence, operation and ownership of Kool and the retention of the US$71,000 was not disclosed to ETG. None of these matters were disclosed to top management at ETG. There was, accordingly, no question of ETG consenting to the retention by Kool or TR of that sum. The existence of Kool was disclosed to the Corporate Finance Director but not TR’s ownership of Kool. In any event, the Corporate Finance Director was a subordinate of TR, not a superior. It follows that the retention of the US$71,000 for Kool or TR himself did not take place transparently. Indeed, had it been transparent, I would have expected relatively prompt accounting to take place; that did not happen.
44. I am quite unable to treat US$71,000 as ade minimisamount to be ignored. Not least, in the context of TR’s salary, US$71,000 was a not insignificant sum, albeit that the Second Report treated it (very fairly) as a“low earnings amount”.
45. Equally, I am wholly unpersuaded that the US$71,000 did no more than cover TR’s costs (such as registration fees or bank charges). As I am satisfied it went beyond merely covering expenses and, instead, yielded some profit to TR, it is unnecessary to decide whether covering corporate expenses for Kool could properly have been retained as against ETG in this fashion.
46. As is clear in law, the fact that (as the Second Report concluded) TR“was motivated by good intentions”, is neither here nor there. So too, that ETG benefited from TR’s actions to collect payments is likewise irrelevant.
47. I come next to Ms Eze’s contention that the allegations of breach of fiduciary duty had been“made up”, in effect, as a pretext to terminate TR’s employment. As Mr Mithani submitted, these contentions are fatally flawed and doomed to fail. The essential basis for the complaint of breach of fiduciary duty, namely the retention of the US$71,000, is admitted by TR. Thus, so far as the substance of these allegations is concerned, they could not have been made up as it is now known they were true. Further, even if the trigger for TR’s departure had been a personal falling out between him and Mr Sami, it does not assist TR. Moreover, even though TR’s employment was terminated before the Investigation Committee had concluded its work is, on the facts, irrelevant; there had been – as is now apparent – a breach of fiduciary duty.
48. For completeness, I have not lost sight of Mr Mithani’s submission that ETG was not bound by the conclusion in the Second Report. He may well be right that, strictly, ETG is not bound by it. However, I accept that conclusion in the Second Report and, additionally, regard the moderation demonstrated by the Second Report as showing ETG and Mr Mustafa in a favourable light. To my mind, there is no attraction in any attempt to walk away from it.
49. Pulling the threads together, I have concluded that: (1) as is admitted, TR through Kool retained some US$71,000 in the course of collecting payments for ETG; (2) that sum constituted a secret profit; it was not confined to compensating TR for Kool’s expenses; it should have been but was not accounted for to ETG; (3) the sum in question cannot be dismissed asde minimis; (4) proper disclosure to ETG of the existence, operation and ownership of Kool, and the retention of the US$71,000 had not taken place.
50. Against this background, I return to Art. 63 (1) of the Employment Law, discussed above. In my judgment, not without a measure of regret given TR’s prior performance, I readily conclude that ETG has satisfied both limbs of the test. Retaining some US$70,000 by way of secret commission is conduct amply warranting termination of employment. As expressed in the extract fromDIFC Courts Practice(cited above), TR’s conduct was, at the least, seriously incompatible with his employment relationship with ETG and, to my mind, repudiatory of it. Viewed objectively, as required by the second limb, a reasonable employer would have had little hesitation in dismissing an employee for taking or retaining a secret commission of this nature – even taking into account the mitigation to be found in TR’s motives and the benefit to ETG arising from his conduct overall. Secret profits cannot be reconciled with an objective standard for employee conduct. It follows that, on the ground of breach of fiduciary duty, ETG makes good its case that it was entitled to dismiss TR for cause.
51. I go on to consider the remaining claims and counterclaims in the light of this conclusion.
Breach of ETG’s Travel PolicyBREACH OF ETG’s TRAVEL POLICY
52. ETG, as already recorded, relies on TR’s alleged breach of its travel policy as entitling it to dismiss TR for cause. In one sense, this is academic, as I have already held that ETG was entitled to terminate TR for cause, on the ground of breach of fiduciary duty. However, I must deal with this issue, as it impacts on the sums due between the parties. That said, I take it relatively shortly. Even assuming (without deciding) that the breach of travel policy alleged in the circumstances of this case was capable of entitling ETG to terminate TR for cause, I am not at all persuaded that ETG has made this claim good on the facts. My reasons follow.
53. As appears fromAnnex 1, ETG counterclaims US$140,957 in respect of TR’s alleged breach of its travel policy. Included in that sum, is an amount of US$8,241, which, it is common ground, TR owes to ETG for the cost of personal travel. If the counterclaim succeeds under this head, then that cost for personal travel forms part of it and should not be double counted; if not, then, as is common ground, the sum for personal travel must be taken into account in arriving at the overall balance between the parties.
54. The nub of ETG’s case was that TR, in breach of its travel policy (as amended), had failed to obtain the necessary prior corporate approval for travel he undertook in 2018-2019, at a cost of US$140,957.
55. TR’s response was short and to the point. In his Witness Statement, he said that the expenses, other than the amount admittedly due for personal travel, were all for business-related trips. He had always notified his superiors in advance. Given that his expenses were always settled, he presumed all was in order; had he been told there was anything amiss with his claim, he would have resolved the matter without delay.
56. In his oral evidence, TR was clear. He was essentially overseeing four West African operations – Ghana, Guinea, Mauritania and Senegal. Necessarily, he travelled often. He shared his plans with his boss, the Sudatel President, before all his travels. Bookings were made through the ETG travel agent. After returning from his travels, he submitted expense claims. hese were verified and cleared by the Finance Director. He was never warned that he had exceeded the budget.
57. In the evidence there was some discussion as to what ETG’s travel policy was and the extent to which TR was aware of it. As it seems to me, all this was beside the point.
58. The ETG allegation of a breach of its travel policy is essentially no more than assertion. There is no contemporaneous evidence to support it. To the contrary, the contemporaneous evidence of the payment of expenses, tells powerfully against any breach of the policy. Even if ETG could somehow overcome that hurdle, for instance by arguing a lack of scrutiny at the time, there is no – certainly no compelling –evidenceas distinct from assertion to make good its claim. I accordingly reject this claim.
59. It follows that ETG is entitled to nothing under this heading, save that TR is liable to it in the amount of US$8,241 for what was admittedly personal travel.
Penalty for Late Payment of (1) End of Service Gratuity and (2) Accrued Annual Leave Salary Balance
60.(A) Introduction and Overview:TR claims US$392,507.90 under each of these heads, thus a total of US$785,015.80. The sums are calculated inAnnex 1, by running the penalty for each claim, cumulatively, from 11 May 2020 (i.e., 14 days from the date TR’s employment was terminated) until 18 May 2021 (whenAnnex 1was finalised), a total 373 days. ETG denies the claims, contending that nothing is due, alternatively no more than a single (not a cumulative) penalty payment for the time the payments have been outstanding. For convenience this claim is referred to as “the Penalty claim”. In monetary terms it is the largest claim in these proceedings.
61. It is to be noted that the Penalty claim relates solely to the penalty for late payment of the End of Service Gratuity (the“Gratuity”) and the payment in respect of Accrued Annual Leave Salary Balance (“Accrued Annual Leave”). ETG’s liability for the Gratuity and Accrued Annual Leave themselves is admitted (see below).
62. Art. 19 of the Employment Law is central to the determination of the Penalty claim and provides as follows:
“Payments following termination
(1) An Employer shall pay to an Employee all Remuneration…..the Gratuity Payment and all accrued Vacation Leave not taken, within fourteen (14) days after the Termination Date.
(2) Subject to the provisions of Article 19(3) and 19(4), an Employee shall be entitled to and the Employer shall pay a penalty equal to an Employee’s Daily Wage for each day the Employer is in arrears of its payment obligations under Article 19(1).
(3) A penalty pursuant to Article 19(2) may only be awarded to an Employee if the amount due and not paid to the Employee in accordance with Article 19(1) is held by a Court to be in excess of the Employee's Weekly Wage.
(4) A penalty pursuant to Article 19(2) will be waived by a Court in respect of any period during which: (a) a dispute is pending in the Court regarding any amount due to the Employee under Article 19(1); or (b) the Employee's unreasonable conduct is the material cause of the Employee failing to receive the amount due from the Employer.”
63. Art. 19(3) provides, in effect, a threshold requirement, guarding against the awarding of nominal amounts:DIFC Courts Practice, at p.105. It is noted for completeness. No question arises under Art. 19(3).
64. TR’s claim is straightforward. Art. 19(2) should be applied, cumulatively, to the late payment of both the Gratuity and Accrued Annual Leave.
65. ETG raises a number of defences in resisting the Penalty claim. First, its counterclaim (the“counterclaim”) overtops TR’s claim, so that nothing was due as ETG was entitled to set-off the counterclaim against sums otherwise owing to TR. In this regard, ETG relies,inter alia, on Art. 20 (c) and (d) of the Employment Law, which provide as follows:
An Employer shall not deduct from an Employee’s Remuneration or accept payment from an Employee, unless:
(c) the deduction or payment is a reimbursement for an overpayment of any Remuneration or expenses, or to recoup benefits utilised by an Employee in excess of their accrued entitlement under their Employment Contract; or
(d) the deduction or payment has been ordered by the Court.”
66. Secondly, ETG relies on the wording “will be waived” in Art. 19 (4) of the Employment Law and submits that either or both Art. 19(4) (a) and (b) are applicable (the“Art. 19(4) defence”). With regard to Art. 19(4)(b), ETG submits that TR’s breach of fiduciary duty constituted unreasonable conduct and was responsible for his failing to receive these amounts.
67. Thirdly, in the circumstances, ETG contends that it “would not be within the spirit” of Art. 19(2) to award TR the “exorbitant” sums claimed (“the spirit of Art. 19(2)”).
68. Fourthly, if (which ETG denies), TR is entitled to any penalty payment, he would not be entitled to separate penalty payments for late payment of the Gratuity and Accrued Annual Leave. As ETG put it, the penalty payment scheme in Art. 19(2) envisaged an overall daily penalty rather than a separate penalty for each of the heads contained in Art. 19(1). TR’s claim is, accordingly, wrongly inflated (an“Inflated Claim”).
69. I shall deal with each defence in turn but, before doing so, I observe that the clear purpose of Art. 19(2) of the Employment Law is to reinforce the obligation on the employer under Art. 19(1) to make the relevant payments specified under Art. 19(1) promptly. Art. 19(2) does so by way of the imposition of a penalty calculated on a daily basis and subject to Arts. 19(3) and 19(4).
70.(B) The counterclaim:As already noted, ETG sought to place some reliance on Art. 20 of the Employment Law. Though its scope of operation is not confined to the circumstances in which Art. 19 applies, Art. 20 is to similar effect, designed to protect employees. Deductions from an employee’s remuneration are not generally allowed; they are permitted in only a limited number of instances, all tightly drawn. I am not persuaded that, on the facts, ETG can bring the case within either Art. 20(c) or (d). No question arises here of reimbursement for an overpayment of Remuneration; nor is ETG recouping benefits. Moreover, no deduction from TR’s Remuneration was ordered by the Court over the relevant period when payment was late. Accordingly, had this defence rested on Art. 20, it would have failed.
71. Matters do not, however, end there. For present purposes, ETG is not confined to Art. 20. I am satisfied that to the extent that the counterclaim is well-founded, ETG is and must be entitled to set off the amount of the counterclaim against any sum otherwise due to TR in respect of his claims, including the Penalty claim.
72. To the extent to which ETG sought to go further still, and to contend that the counterclaim stopped the Penalty claim clock from running, I am not persuaded. First, in the light of this Judgment it is apparent (see below), the counterclaimdoesnot now overtop the claim unless the Penalty claim is left out of account, for which there would be no justification. Secondly, it ispossiblethat there may have been some earlier points in time when the counterclaim did overtop the claim, depending on when particular items of the claim and counterclaim crystallised, before being overtaken by the Penalty claim. However, to ascertain whether and, if so, when and for how long the counterclaim overtopped the claim, would require a fluctuating daily running account, together with a sophisticated and complex calculation. Understandably, ETG did not attempt any such calculation, and, for my part, I cannot accept that the Employment Law, considered in the employment context, envisaged calculations of this nature. There would also be a real risk of double counting the counterclaim if such an exercise was attempted, not to mention raising questions of whether there was a need to takearguableitems into account (for snapshot purposes). Whatever the position may have been had ETG come within Art. 20(c) or (d), at least on the facts of the present case, reliance on the counterclaim is justified in assessing the overall balance between the parties but not for the purpose of attempting to stop the Penalty claim time clock from running.
73.(C) The Art. 19(4) defence:ETG’s next defence related to Art. 19(4) of the Employment Law. I do not, however, think that Art. 19(4) assists ETG.
74. First, as to Art. 19(4)(a), there was no dispute pending in the Court as to any relevant amount due to TR under Art. 19(1); as already seen, the amounts in respect of both the Gratuity and the Accrued Annual Leave are admitted. It does not seem to me that the live disputes in these proceedings as to other amounts due to TR, bring the matter within Art. 19(4)(a). The purpose of Art. 19(1) is to protect the employer against the imposition of a penalty where the amount owing to the employee upon which the penalty will bite isitselfin dispute; that is not this case.
75. Secondly, assuming in ETG’s favour (without deciding) that TR’s breach of fiduciary duty constituted “unreasonable conduct” within Art. 19(4)(b), I am unable to accept that such conduct was “the material cause” of TR failing to receive, timeously, the amount due from ETG. To reiterate, payments in respect of the Gratuity and Accrued Annual Leave are admittedly due to TR regardless of his breach of fiduciary duty; there was nothing to prevent ETG making those payments punctually and stopping the Penalty continuing to accrue; the means of extinguishing or reducing the Penalty claim lay in ETG’s own hands.
76. For completeness, I note that the wording of Art.19(4) is “will be waived”, so suggesting that if a matter does come within either Art. 19(4)(a) or (b), the Court must “waive” a penalty claim to the extent that either sub-paragraph applies. By contrast,DIFC Courts Practice(at p.105) states that these are discretionary matters for the Court. As the issue does not arise for me to resolve, I express no view on this topic.
77.(D) The spirit of Art. 19(2):As recorded above, ETG further contended that it would not be within the spirit of Art. 19(2) to award TR the “exorbitant” sums claimed. In my view, this is hopeless. TR is either entitled to a sum claimed by way of penalty under Art. 19(2) or he is not. If he is not, the point does not arise. If he is, he cannot be deprived of the sum to which he is entitled by an appeal to the “spirit” of Art. 19(2), whatever that is intended to mean. This is a statutory claim under the Employment Law and the Court must give effect to the statute on its proper construction.
78.(E) An Inflated Claim:I come next to ETG’s submission that the Penalty claim is inflated because, assuming (contrary to ETG’s primary case) that TR is entitled to something, it is toan overall daily penaltynot a separate penalty for each of the heads contained in Art. 19(1). This question hinges on the true construction of Art. 19(2) (set out above).
79. In my judgment, this ETG submission is correct, and I accept it. First and tellingly, as a matter of language, Art. 19(2), draws a distinction between the Employer’s payment“obligations”(plural) and“a penalty”(singular). Thus, though the Employer may be in breach of a number of payment obligations, the Employee’s entitlement is to a single overall daily penalty equal to the Employee’s daily wage. There is nothing in the language of Art. 19(2) warranting a penalty for each head within Art. 19(1). Secondly, I am fortified in this view by considerations of policy. As a matter of policy, Arts. 19(1) and 19(2) are designed (as already noted) to protect Employees and to incentivise prompt payment by Employers. That objective is, however, amply achieved by a single overall daily penalty. A cumulative penalty for each head within Art. 19(1) strikes me as going beyond the needs of the policy objective and tipping the scales too far in the Employee’s favour, possibly into windfall territory.
80. It follows that TR’s Penalty claim must be reduced from the total figure of US$785,015.80 claimed.
81.(F) Conclusion:Pulling the threads together:
(1) The starting point is that TR is entitled to a single overall amount on the Penalty claim of US$392,507.90, quantified as at 18 May 2021, covering both the Gratuity and Accrued Annual Leave.
(2) From that sum, there falls to be deducted the amount in which ETG’s counterclaim succeeds, set out below.
(3) Next, the period between 18 May 2021 and the date of this Judgment must be accounted for. As it seems to me, the simplest way of doing so is to grant TR a declaration that he is entitled to a daily payment of US$1,052.30 for this period, coupled with an order that ETG should pay to TR the sum thus calculated.
82. Standing back, the amount of the Penalty claim is a strikingly large figure, especially given ETG’s success on the issue of termination for cause. That said, the Employment Law is clear that such a penalty claim survives termination for cause. At all events, to reiterate, the remedy with regard to the Penalty claim lay in ETG’s own hands – making timely payment of the sums due for the Gratuity and Accrued Annual Leave.
Other Claims and Counterclaims
(A) Late payment of salary
83. TR claims US$28,412.10 for late payment of his March 2020 salary. The claim is advanced under Art. 18(1) of the Employment Law. The complaint is that his March salary was paid on 4 May 2020, accordingly 27 days after the end of the statutory period permitted for payment under Art. 18(1), namely, 7 April 2020. As the Claimant has made plain, the claim only relates to the penalty for late payment.
84. ETG resists the claim, contending that it is misconceived; Art. 18(1) does not impose any statutory penalty for payment being made more than 7 days after the Pay Period.
85. So far as it goes, ETG is right. Art. 18(1) cannot, by itself, support this claim. It does not impose any statutory penalty for late payment of salary.
86. That said, Arts. 19(1) and 19(2) remain to be considered as they are capable of supporting such a penalty claim. However, and leaving aside any pleading difficulties, TR faces an insuperable hurdle under this route. So far as relevant, the trigger for an Art. 19 claim is that payment was not made within 14 days after the Termination date.
87. As has been seen, TR was terminated on 26 April 2020. His March salary was paid on 4 May 2020, thus well within a period of 14 days following termination. It follows that the Art. 19 route does not assist TR’s claim.
88. I accordingly dismiss TR’s claim in respect of late payment of his March 2020 salary.
89. TR claims a bonus for 2019 in the amount of US$22,800, pursuant to cl. 2 i of the Agreement, which provides as follows:
“Annual bonus will be tied to developing of new revenue channels, the implementation of a performance management system, subject to Management discretion, and board approval.”
90. Ms Eze submitted that TR was clearly entitled to a bonus for the previous year. He had been a high performer who had turned the company around. Everyone” received a bonus; there was no reason to deprive TR of his.
91. ETG resisted this claim. Mr Mithani accepted that the provision for the payment of a bonus came under the heading of cl.2 in the Agreement, namely “Remuneration”. However, the Agreement made it plain that a bonus payment was discretionary“subject to Management discretion, and board approval”. Moreover, having (justifiably) dismissed TR for cause, for breach of fiduciary duty, it would be perverse to conclude that ETG was liable to pay him a bonus.
92. This matter will not benefit from elaboration. I agree with Mr Mithani, for the reasons he has advanced. TR’s claim for payment of his 2019 bonus must fail.
(C) Per Diem allowance
93. This was a claim advanced by TR for US$21,600 in respect of a “Per Diem” allowance, relating to his time spent in Sudan in March-April 2020 (described above). The allowance was said to be US$600 per day for the 36 days TR was in Sudan.
94. Over the course of TR’s evidence, the following picture emerged. The travel allowance in question was a payment made as a matter of “custom” not policy. ETG’s custom was to make a payment of this nature to those who were not of Sudanese nationality in respect of travel to the Sudan. TR, was a British national who had never previously claimed for time spent in Sudan. On this occasion, he decided to do so. In summary, he was aggrieved as to the ugly manner in which he was treated and the hostile environment he encountered in Sudan on his visit. “Why not claim”, as he put it.
95. As it seems to me, this matter turns on whether TR was entitled to the per diem allowance claimed. If there was such an entitlement, then the fact that TR had not previously claimed for time spent in Sudan would be irrelevant. If, however, the allowance was in essence a discretionary payment for spending time travelling on ETG business to or in Sudan, then, for reasons similar to those applicable to TR’s claim for the bonus, I do not think the claim can be sustained.
96. It is not said that this was an allowance intended to cover accommodation or subsistence or the like. Instead, on the evidence, it appears to be a discretionary payment, ordinarily made to non-Sudanese employees, akin to a bonus or anex gratiapayment for time spent in Sudan on ETG business.
97. In the circumstances, I feel bound to conclude that this claim fails. Given that TR was summoned to Sudan for purposes related to an investigation of his alleged wrongdoing and that – whatever the imperfections of the investigation – the claim for breach of fiduciary duty turned out to be well-founded, there is no proper basis for allowing TR’s claim for a per diem allowance.
(D) Agreed amounts:
98. I now list, without elaboration, the followingagreedoutcomes and amounts:
(1)Payment in lieu of 90-Day Notice Period:Nothing is due, in light of my conclusion that TR was terminated for cause.
(2) The Gratuity: US$76,265.71
(3) Accrued Annual Leave: US$7,693.54
(4) Annual Return Airfare: US$7,671.52
(5) Repatriation Ticket: US$15,000.00
(6) Air tickets – personal travel: US$8,241.00
(7) Repayment of personal loan: US$40,386.00
99.TR’s claim:For the reasons already given, TR’s claim succeeds in the following amounts:
1 The Gratuity US$76,265.71 2 Accrued Annual Leave US$7,693.54 3 The Penalty Claim US$392,507.90 4 Annual Return Airfare US$7,671.52 5 Repatriation Ticket US$15,000.00 Total: US$499,138.67
100. As highlighted by the asterisk (*) and as already foreshadowed, the Penalty claim is quantified as at 18 May 2021 and must be augmented by taking into account the period between 18 May 2021 and the date of this Judgment. That matter is addressed in the declaration and order below.
101.ETG’s counterclaim:For the reasons already given, ETG’s counterclaim succeeds in the following amounts:
1 Breach of Fiduciary Duty US$71,000.00 2 Air tickets – personal travel US$8,241.00 3 Repayment of personal loan US$40,386.00 Total: US$119,627.00
102. It follows that ETG is liable to pay TR the amount by which TR’s claim overtops ETG’s counterclaim, namelyUS$379.511.67.
(1) ETG is ordered to pay TR the sum of US$379.511.67, within 28 days of the date of this Judgment;
(2) I declare that TR is entitled to a daily payment US$1,052.30 for the period between 18 May 2021 and the date of this Judgment and order that the sum thus calculated should be paid by ETG to TR within 28 days of this Judgment.
104. As to interest and costs, I further order that the Parties should deliver short written submissions to the Court, within 28 days of this Judgment, having first exchanged those submissions between themselves.
TERMINATION WITHOUT CAUSE HEAD OF CLAIM C’S CONTENTION ($) D’S CONTENTION ($) 1 Penalty for Late Payment of March 2020 Salary 28,412.10 0 2 Bonus (2019) 22,800.00 0 3 Per DiemAllowance 21,600.00 0 4 Payment in Lieu of 90-Day Notice Period 94,707.00 94,707.00 5 End of Service Gratuity 79,890.37
(51,780.82 + 28,109.55) (First 5 years = US$51,780.82)
Remaining time (inc. 90 days’ notice period) - US$ 493.15 (daily wage) x 30 days = US$14,794.50 x 1.9 (1y 10m 26 days) = 28,109.55)
76,263.82 6 Accrued Annual Leave Salary Balance 14,006.11
(13.31 (inc. 6 days accrued during 90-day notice period) x 1052.30 (daily wage)
7,691.94 7 Penalty for Late Payment of End of Service Gratuity 297,800.90
(calculated from 09 August 2020 (i.e., end of notice period (25 July 2020) + 14 days) up to 18 May 2021= 283 days)
0, or $103,126.15 in the alternative 8 Penalty for Late Payment of Accrued Annual Leave 297,800.90
(calculated from 09 August 2020 (i.e. end of notice period (25 July 2020) + 14 days, up to 18 May 2021= 283 days))
9 Annual Return Airfare 7,671.52 7,671.52 10 Repatriation Ticket 15,000.00 15,000.00 Total 879,688.90 201,334.28 or 304,460.43
TERMINATION FOR CAUSE HEAD OF CLAIM C’S CONTENTION ($) D’S CONTENTION ($) 1 Penalty for Late Payment of March 2020 Salary 28,412.10 0 2 Bonus (2019) 22,800.00 0 3 Per DiemAllowance 21,600.00 0 4 Payment in Lieu of 90-Day Notice Period 0 0 5 End of Service Gratuity 76,265.71 (51,780.82 + 24,484.90)
(First 5 years = US$51,780.82)
Remaining time (up to date of termination (26 April 2020)– US$ 493.15 x 30 days = US$14,794.50 x 1.655 (1y 7m 26 days) = 24,484.90)
76,265.71 6 Accrued Annual Leave Salary Balance 7,693.54
(7.31 x daily wage of 1052.30)
7,693.54 7 Penalty for Late Payment of End of Service Gratuity 392,507.90
(from 11 May 2020 (i.e., 14 days from date of termination; 26 April 2020) to 18 May 2021 = 373 days)
0, or $103,126.15 in the alternative 8 Penalty for Late Payment of Accrued Annual Leave 392,507.90
(from 11 May 2020 (i.e., 14 days from date of termination; 26 April 2020) to 18 May 2021 = 373 days)
9 Annual Return Airfare 7,671.52 7,671.52 10 Repatriation Ticket 15,000.00 15,000.00 Total 964,458.67 201,334.28 or 304,460.43 DEFENDANT’S COUNTERCLAIM HEAD OF COUNTERCLAIM C’S CONTENTION ($) D’S CONTENTION ($) 1 Secret Profits/ Breach of Fiduciary Duty Nil 77,714 2 Breach of Travel Policy – Unauthorised Travel Expenses Nil 140,957 3 Cost of Air Tickets in respect of C’s personal travel 8,241 8,241 4 Repayment of Personal Loan 40,386 40,386 Total Counterclaim 48,627 259,057 or 126,341