Claim No. SCT 225/2022
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum,
Ruler of Dubai
IN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS
BEFORE H.E. JUSTICE MAHA AL MHEIRI
BETWEEN
LARTI
Claimant
and
LOTSU
Defendant
| Hearing : | 21 July 2022 |
|---|---|
| Further Submissions : | 1 August 2022 |
| Judgment : | 10 August 2022 |
JUDGMENT OF H.E. JUSTICE MAHA AL MHEIRI
UPON this Claim being filed on 8 June 2022
AND UPON a hearing having been listed before H.E. Justice Maha Al Mheiri on 21 July 2022 with the Claimant’s representative and the Defendant in attendance
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1. The Defendant shall pay the Claimant the amount of AED 337,418.
2. The Defendant shall pay the Claimant a portion of the Court fee in the amount of AED 6,748.36.
3. In addition, pursuant to DIFC Courts Practice Direction 4 of 2017 the Defendant shall pay interest on the judgment sum to the Claimant from the date of this judgment, until the date of full payment, at the rate of 9% annually.
Issued by:
Hayley Norton
SCT Judge
Date of issue: 10 August 2022
At: 4pm
THE REASONS
The Parties
1. The claimant is Larti, a DIFC registered company (the “Claimant”). Mr Ladit in his capacity as a Senior Executive Officer is acting on behalf of the Claimant.
2. The defendant is Lotsu (the “Defendant”), an individual that was employed by the Claimant’s company.
Background and the Preceding History
3. The underlying dispute pertains to the Defendant’s employment by the Claimant under an employment contract dated 19 December 2017 (the “Employment Contract”).
4. On 31 January 2022, the Defendant resigned from the Claimant’s company by way of email. As part of the email, the Defendant sought from the Claimant that his resignation be tendered with immediate effect.
5. On 8 June 2022, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) claiming various sums set out as follows:
(a) Full payment of the Defendant’s outstanding debt amounting to AED 337,418 (the “Loan”);
(b) Indemnification for not having handed over his business contacts and leads developed throughout the past 4 years in the amount of AED 40,000;
(c) Failure from the Defendant to serve his notice period in the amount of AED 21,333; and
(d) Interest for failure to pay the Loan as per article 118 of the DIFC Contract Law No.6 of 2004 for late payment, starting from 1 February 2022.
6. On 6 November 2019, the Defendant filed an Acknowledgment of Service and Counterclaim claiming various sums set out as follows:
(a) End of Service gratuity in the amount of AED 228,633; and
(b) Share of Revenues from Lrty in the amount of AED 55,461.
7. On 13 July 2022, the parties attended a consultation before SCT Judge Ayman Mahmoud Saey, however they were unable to reach a settlement. As stipulated under the rules and procedures of the DIFC Courts SCT, this matter was duly referred to me for determination. As such a hearing was listed before me for 21 July 2022.
The Claim
8. As part of the Claimant’s case, it is asserted that the Defendant was employed in the capacity of Head of Corporate Advisory which commenced from 1 January 2018 until the date of his departure which took effect on 31 January 2022. The Claimant argues that following the Defendant’s immediate resignation, the Claimant was left with various debts which were not settled by the Defendant prior to his resignation.
9. The Claimant sought to agree a payable sum with the Defendant, following his immediate resignation. The proposed amount by the Claimant was rejected by the Defendant. Based on the Defendant’s rejection, the Claimant proceeded to file its Claims with the SCT. Each claim filed by the Claimant will be set out under the Discussion section.
10. I note that the total amount claimed by the Claimant is AED 398,751. Further, the Claimant also seeks interest as set out under article 118 of the DIFC Contract Law No.6 of 2004 for failure to pay the Loan amount of AED 337,418, starting from 1 February 2022.
The Defence and Counterclaim
11. The Defendant refutes the Claimant’s allegations arguing that he settled the unpaid Loan amount, however the remaining claims are disputed by the Defendant.
12. Further, as part of the Defendant’s submissions, he argues that the Claimant is in breach of the Employment Contract due to its failure to pay his end of service entitlements. The Defendant also states that the Claimant failed to pay him his share revenue from Lrty amounting to AED 55,461.
13. The unpaid loan payment owed by the Defendant is not disputed, in fact the Defendant requested that the unpaid Loan be deducted from his end of service gratuity which had not been paid by the Claimant.
14. As part of the Defendant’s submissions, each of the Claimant’s claims and reply to the Counterclaims are set out in the Discussion below.
Discussion
19. This dispute is governed by DIFC Employment Law No. 2 of 2019 (the “DIFC Employment Law”) in conjunction with the relevant Employment Contract.
20. In order to determine the Claimant’s claims, the Court must first ascertain the Defendant’s basic salary, to reach a conclusion pertaining to the Claimant’s claims and the Defendant’s Counterclaims.
The Defendant’s remuneration
21. Clause C of the Defendant’s Employment Contract reads as follows:
“You will be awarded a base salary (the “Base Salary”) of AED 40,000 per month for a period of 6 month, exclusive of bonus, dividend payouts and other incentives or variable compensation, subject to the condition that the present Agreement is not terminated on your end before a period of one year. It is important to note this arrangement of Base Salary is extendable for a further period and for an amount, solely at the discretion of the SEO. It is further important to note that the Base Salary should be reimbursed to the company by way of adjustment against the overall compensation structure as set-out in schedule 1 of this agreement, only after the overall compensation exceeds, USD 150,000.” [sic].
22. The Claimant submits that in December 2017, it was agreed that the Defendant would be hired on a revenue share basis only, receiving up to 65% of the Corporate Advisory commission. However, the Defendant raised financial constraints and requested an advance of the equivalent of a monthly base salary of AED 40,000 for six months, reimbursable once the Defendant would reach a revenue of USD 150,000 in the Corporate Advisory division.
23. The Claimant asserts that the Defendant was offered a position akin to an equity partner status, in terms of his remuneration, with no contribution to costs and expenses owed by the Claimant’s business, such as his associate monthly salary and all related pro rata costs linked to the operation of the Claimant.
24. The Court agrees with the Claimant submissions in that the Defendant’s Employment Contract is not based on a monthly basic salary. Therefore, the AED 40,000 that was offered at the beginning of the Defendant’s employment was an exception to the normal arrangement, being remuneration on a profit basis.
The Claimant’s Claims
Indemnification for not handing over business contacts and leads
25. The Claimant seeks payment from the Defendant in the amount of AED 40,000 as compensation for failing to complete a handover of his activities, including the business leads and contacts which he had developed over the course of 5 years whilst he was employed by the Claimant. The Claimant estimates a sum of AED 40,000 based on the remuneration offered to the Defendant under the Employment Contract.
26. The Defendant refutes the Claimant’s allegations being that all details and information related to active assignments and client relationships were all properly documented and filed in the company archives.
27. The challenges which the Claimant was confronted with, albeit unfortunate, had not sufficiently discharged the burden which the Claimant was expected to prove that undue damage was suffered based on the Defendant’s behaviour. We acknowledge that an employer/employee relationship can be terminated at any stage during the course of employment, and should that occur, the employer should expect some form of inconvenience. I do not find it appropriate to order any compensation to be paid to the Claimant as it is my view that the Claimant failed to provide evidence demonstrating that harm was caused to the business due to the Defendant’s behaviour. The Defendant argues that all information and details related to active assignments and client relationships were documents. That being said, the Defendant submitted a statement of truth confirming that he had submitted all information related to the Claimant’s business contacts and leads prior to his resignation.
28. Accordingly, I dismiss the Claimant’s claim for indemnification for not handing over business contacts and leads.
Failure to serve notice period
29. The Claimant’s seeks payment from the Defendant of AED 21,333 due to his failure to serve his notice from 1 to 16 February 2022, after a deduction of 8 working days annual leave.
30. The Defendant argued that once he became aware that his notice period was due to end on 20 February, he continued to work, albeit from home in compliance with his notice period requirements, and was available for business calls and meetings, if and when necessary.
31. The Claimant did not sufficiently discharge the onus of proof demonstrating that its company had suffered undue damage based on the Defendant’s action or inaction. I do not find it appropriate to order any compensation to be paid to the Claimant. It is my view that the Claimant failed to provide any evidence demonstrating that harm was caused to its business due to the Defendant’s failure to serve his full notice period. Therefore, I dismiss the Claimant’s claim for compensation in lieu of notice period.
Interest of debt amount
32. The Claimant seeks to be paid interest on the debt amount for failure to pay the Loan as per article 118 of the DIFC Contract Law No.6 of 2004 for late payment, starting from 1 February 2022.
33. Article 118 of the DIFC Contract Law No.6 of 2004 stipulates the following:
“118. Interest for failure to pay money
(1) If a party does not pay a sum of money when it falls due the aggrieved party is entitled to interest upon that sum from the time when payment is due to the time of payment whether or not the non-payment is excused.
(2) The rate of interest shall be the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment.
(3) The aggrieved party is entitled to additional damages if the non-payment caused it a greater harm.”
34. At the hearing, both parties were invited to produce documents pertaining to the Loan agreement which was signed between the Claimant and the Defendant. Both parties denied signing any form of document.
35. As such the Court finds no legal basis in ordering the Defendant to pay interest on the Loan amount. Further, Article 118 is not applicable under these circumstances, as there was no time limit requiring the Defendant to repay this amount. The Court shall order the Defendant to pay post judgment interest on the debt amount.
The Defendant’s Counterclaims
End of Service Gratuity and Contributions to Qualifying Scheme
36. Article 66 of the DIFC Employment Law stipulates that:
“(1) An Employee who is not required to be registered with the GPSSA under Article 65(1), and who completes continuous employment of at least one (1) year or more with their Employer, before or after the Qualifying Scheme Commencement Date, is entitled to a Gratuity Payment for any period of service prior to the Qualifying Scheme Commencement Date on the termination of their employment. A period of service referred to in this Article 66(1) includes any period of Secondment.
(2) An Employee’s Gratuity Payment shall be calculated as follows::
a. an amount equal to twenty one (21) days of the Employee’s Basic Wage for each year of the first five (5) years of service prior to the Qualifying Scheme Commencement Date; and
b. (b) an amount equal to thirty (30) days of the Employee’s Basic Wage for each additional year of service prior to the Qualifying Scheme Commencement Date,” [sic].
37. As part of the Claimant submissions, they argued that the Defendant did not mention his entitlement to any gratuity payment or DEWS contribution. In the absence of any basic wages, the Defendant was mindful that he was not entitled to any end of service benefit nor DEWS contribution. Therefore, he recognised that nothing was being calculated and accrued until end of January 2020 by the Claimant’s external finance officer. Further, no DEWS account had been set up for him for monthly contribution, unlike other members of his team. The Defendant’s position had been reviewed and approved by Claimant's external finance officer and two discrete auditors over the course of 4 years.
38. The Defendant refutes the Claimant’s submissions, arguing that according to his Employment Contract, he is entitled to end of service gratuity in the amount of AED 228,633.
39. The Court agrees with the Claimant’s submissions, in the absence of a basic wage, the Defendant is not entitled to be paid any end of service gratuity, as the mechanism for calculating the end of service depends entirely on the employee’s basic salary. Therefore, in accordance with the above, the Defendant’s claim in relation to end of service shall be dismissed.
Share of Revenues from Lrty
40. During 2018, the Claimant signed a mandate with a client, Lrty, to arrange financing. The assignment took almost a year to close. Once the assignment was completed, the Claimant raised an invoice of AED 259,950 as a success fee. As the deal had been introduced by an introducer, the Claimant was expected to distribute a pre-agreed share of the success fee to the introducer, which amounted to AED 85,325.
41. The Claimant should pay the Defendant by virtue of his contractual arrangement with the Claimant 65% of AED 85,325 being AED 55,461.
42. As part of the Claimant’s submissions, they argued that they have not been paid the amount arising from the deal, accordingly the Defendant is not entitled to any share revenue. Therefore, the Court shall dismiss the Defendant’s Counterclaim in the amount of AED 55,461.
Conclusion
43. Based on the above, I find that the Defendant shall pay the Claimant the amount of AED 337,418 in respect of outstanding debt.
44. I am of the view that, as the Claimant has been unsuccessful on some of its claims, it should only be entitled to recover a portion of the fee in respect of the claim for which he has been successful. The Defendant shall pay the Claimant the amount of AED 6,748.36 being the court fee to be paid for the judgment sum granted to the Claimant.