Bassam Khalifa v S.W.I.F.T. (Dubai) Limited [2020] DIFC CA 005

Claim No. CA 005/2020

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 APPEAL
BEFORE CHIEF JUSTICE ZAKI AZMI, JUSTICE ROGER GILES AND H.E. JUSTICE SHAMLAN AL SAWALEHI

BASSAM KHALIFA

Claimant/Respondent

and

S.W.I.F.T. (DUBAI) LIMITED

Defendant/Appellant

JUDGMENT

ORDER

UPON the Order of H.E Justice Omar Al Muhairi dated 8 July 2020 granting permission to appeal against the Order of H.E Justice Omar Al Muhairi dated 8 April 2020

AND UPON hearing the Counsel for the Appellant and Counsel for the Respondent at a hearing on 30 September 2020

AND UPON reading the submissions and evidence filed and recorded in the Court file

IT IS HEREBY ORDERED THAT:

1. The declaration made under paragraph 1 of the Order dated 8 April 2020 made by H.E. Justice Omar Al Muhairi (“Declaration 1” or “First Declaration”), is set aside, and in lieu thereof, it is determined, on Issue 5(a), that the Claimant is not entitled to relief from the Court in respect of the alleged contravention of Article 64(3)(c) of the Operating Law.

2. Appeal otherwise dismissed.

3. The parties are to exchange and file written submissions, within 14 days, not exceeding four pages in length, stating the costs order(s) sought and why the order(s) should be made. The Court shall determine costs on the written submissions.

Issued by:
Nour Hineidi
Registrar
Date of issue: 2 November 2020
Time: 2.30pm

JUDGMENT

CHIEF JUSTICE ZAKI AZMI

1. I have had the benefit of reading in draft the judgment of my brother Justice Roger Giles, now finalised below, and I agree fully with his reasoning and conclusion.

JUSTICE ROGER GILES

2. The Claimant was employed by the Defendant as a Senior Account Director under an employment contract governed by the DIFC Employment Law, Law No 4 of 2005 (since repealed, see now Law No 2 of 2019). In early 2019 the Defendant terminated his employment. The termination is disputed; the Claimant says it occurred on 19 February 2019 but in breach of contract, the Defendant says it occurred lawfully on 17 February 2019.

3. The Claimant brought proceedings against the Defendant in the Small Claims Tribunal (“SCT”) on 9 May 2019. The proceedings were subsequently transferred to the Court of First Instance (“CFI”) under a Claim Form filed on 8 July 2019.

4. By his particulars of claim accompanying the Claim Form, the Claimant alleged that the principal reason for the termination was because he had made whistleblowing disclosures, being protected disclosures under Article 64 of the DIFC Operating Law, Law No. 7 of 2018 (the “Operating Law”), alternatively because he had assisted the Defendant to comply with its disclosure obligation under Article 62(1) of the Operating Law; and that the termination was also in breach of contract because he was not given his contractual notice or payment in lieu of notice. He claimed damages under the Operating Law for detriment and dismissal suffered by reason of making the disclosures, and damages for wrongful dismissal including the penalty under Article 18 of the Employment Law.

5. In August 2019, the Defendant made payments totalling AED 455,555 to the Claimant, without admission of liability, in relation to the damages claimed for wrongful dismissal – no doubt intending to prevent further penalty accruing under Article 18 in the event that it was held that the termination was in breach of contract. As well as a defence contesting the Claimant’s claim, by a counterclaim filed on 1 September 2019 the Defendant claimed restitution of the payments on unjust enrichment grounds.

6. At a CMC on 14 November 2018, the Deputy Chief Justice (the “Judge“) ordered the trial of certain “preliminary issues”, being:

7. After a hearing on 17 March 2020, the Judge gave judgment on the preliminary issues on 8 April 2020. The Claimant had abandoned reliance on Article 62(6) of the Operating Law, and issue 5(b) did not need to be decided. As to the remaining issues, His Excellency declared:

8. The Judge declared also that on the basis of his judgment and determination of the preliminary issues, the Claimant’s claim should proceed and the matter was to be listed for a full hearing.

9. This is an appeal by the Defendant from the Judge’s decision of the preliminary issues.

Issue 5(a)

10. The Operating Law and the DIFC Companies Law, Law No 5 of 2019, together replaced with significant modifications and additions the previous DIFC Companies Law, Law No 2 of 2009, in regulating the conduct of business by companies in the DIFC. The Laws came into force on 12 November 2018.

11. The Operating Law essentially provides for the role and powers of the Registrar of Companies (the “Registrar”), including licensing, investigation, inspection and enforcement. It applies to all persons conducting business in or from the DIFC; the Defendant was doing so, and was a Registered Person as referred to therein.

12. Article 64, a new provision not previously found in the old Companies Law or elsewhere in DIFC law, is relevantly in the terms:

13. In the particulars of claim, the Claimant alleged that he made five disclosures falling within Article 64(2) over the period November 2017 to October 2018. He claimed that as a result he was subjected to various detriments, and that the termination of his employment was because he had made the disclosures. He claimed damages under Article 40 of the Operating Law, which is in the terms:

14. Before the Judge, the Defendant submitted that dismissal of an employee for making a whistleblowing disclosure, contrary to Article 64(3)(c), did not give an entitlement to compensation pursuant to Article 40. The First Declaration made by His Excellency, adverse to that submission, was accordingly in terms of power to grant relief in the event of breach of Article 64, without particular application to the Claimant’s dismissal. On appeal, the Defendant submitted also that the Claimant’s dismissal could not attract Article 64(3)(c) because all the disclosures on which he relied were made before the Operating Law came into force. The Claimant did not object to the raising of the new argument on appeal. It is the logically prior question, and it is convenient to deal with it first.

Disclosure before the Operating Law came into force

15. The Defendant’s submission rested on the words “a person who makes” in Article 64(1) and “where a person makes” in Article 64(3). It submitted that the words looked to the future following the Operating Law coming into force, and required that the disclosure be made after it came into force; and it said that there would otherwise be a retrospective operation of the Operating Law, which should not be found without clear words so providing. Since the five disclosures in the particulars of claim predated the Operating Law, it submitted, the Claimant’s making them did not enliven the Article’s protection.

16. The Defendant referred to In re Barretto [1994] QB 392 for similar effect given to words of present tense in the condition for a legislative consequence. Section 16 of the Criminal Justice (International Co-operation) Act 1990 provided for application to vary the amount of a confiscation order and the term of imprisonment fixed in relation to it. The section was expressed to have effect where “the amount which a person is ordered to pay by a confiscation order is less than the amount assessed to be the value of his proceeds of drug trafficking”. Application was made, but the confiscation order in question had been made prior to the Act coming into force. It was held that the section did not apply.

17. One reason was that the section should not be given a retrospective operation so as to increase the offender’s obligations. But as an independent reason Staughton LJ said (at 402):

18. Roch LJ’s reasons included (at 404) that it would have been very simple for Parliament to have included after the words “ordered to pay by a confiscation order” the words “whether made before or after the commencement of this provision”, had Parliament intended s 16 to apply to confiscation orders made prior to it coming into force.

19. The Claimant submitted that the words “a person who makes“ and “where a person makes“ referred to a continuing state of affairs, and should be understood as referring to where the person is someone who has made a disclosure irrespective of when it has been made. He submitted that the operative act in Article 64(3)(c) was the dismissal or other detrimental action, and that provided the person answered the description it was sufficient if that act was after the Operating Law came into force even if the disclosure was not. The reason for that was said to be that otherwise there would be uncertainty with “endless arguments about when this protected disclosure was made”.

20. I am unable to see that the Claimant’s submission is assisted by regard to uncertainty: the making of a disclosure can readily be placed in time. If anything, regard to uncertainty supports the Defendant’s submission, since the employer would otherwise have to canvass possible disclosures over an indeterminate number of years prior to 12 November 2018 when considering dismissal or other action. Retrospectivity does not have the force it had in In re Barretto, because it is correct that the operative act is the dismissal or other detrimental action, and affording protection where the disclosure was before the Operating Law came into force would not penalise the person making the disclosure but rather benefit that person. Retrospectivity has relevance so far as it can be said that the employer would be disadvantaged by having to treat as protected a disclosure that was not protected at the time it was made, although I do not regard that as of any weight. But regard to the use of what Staughton LJ called the legislative present in my view is determinative.

21. The words “a person who makes” can be descriptive of the person, although that does not provide the answer to when the person must have made the disclosure. The words “where a person makes” are not descriptive of the person, and their natural meaning is that the person must have made the disclosure in the present; relevantly, in the time of the Operating Law which attaches a consequence to the making of the disclosure. Taken with the second set of words, the first also naturally refer to a person who makes the disclosure in the time of the Operating Law. This is a common use of language in legislation, from which no doubt came the description of the legislative present. The Operating Law is replete with the use of the present tense to refer to something which, from the context, must occur in the time it is in force (or as Staughton LJ put it, looking to the future). Examples are Article 9(11) “a person who fails…”; Article 10(5) and many other Articles providing for a fine “A registered person who fails…”; Article 30(1) “A person who [does/does not/contravenes]…”; Article 30(1) “Where the Registrar considers…”; Article 40(1) “ Where a person … commits…”; and Article 64(4) itself “any person who takes…”.

22. There is no reason not to see the present tense in Article 64(1) and(3) in the same way. The Claimant’s submission requires that the words be changed, not just to the different words of “when a person has made” which would still not answer when the person must have made the disclosure, but by the addition of words to the effect, “whether before or after the Operating Law comes into effect”. The Ruler has not said this, when (as Roch LJ observed) it could readily have been said if the natural meaning was to be modified.

23. It follows, in my view, that the determination of issue 5(a) is that the Claimant is not entitled to relief from the Court in respect of the alleged contravention of Article 64(3)(c) of the Operating Law.

24. I add that in the course of submissions Mr Roger Bowden, appearing for the Claimant, suggested that the Defendant’s submission could readily be overcome by the Claimant making a disclosure again after 12 November 2018, and that he had done so by a letter (which Mr Bowden proffered) from the Claimant’s lawyers to the Defendant’s lawyers dated 17 January 2019. This is beside the point: the issue is determined on the Claimant’s case of the five disclosures in the particulars of claim. It is also ill-founded, since the letter of 17 January 2019 was not a disclosure as specified in Article 64(1).

Entitlement to compensation under Article 40

25. Although this no longer arises, it is an important question and should be determined.

26. At the heart of the Defendant’s submissions before the Judge was that Article 40(1) requires breach of a “requirement, duty, prohibition, responsibility or obligation” imposed under (relevantly) the Operating Law, but that Article 64 did not impose a requirement or other obligation within those words but rather gave an entitlement to protection. The Judge’s reasons did not expressly recognise the submission, but must have rejected it: they included that should the Defendant “be found to have breached the requirements of Article 64“, the Court had the power to remedy any losses suffered by the Claimant as a result of the breach.

27. On appeal, the Defendant submitted that the Judge had erred in this respect, and repeated and elaborated the submissions at first instance. It pointed to instances in the Operating Law or the Companies Law of impositions in the form “a person shall…“ or “a person shall not… “ called a requirement (eg Article 8(3) and many others, including Article 64(4)); a duty (eg Article 63, Companies Law Articles 69 – 76); a prohibition (eg Articles 8(2), 34(1)); or an obligation (eg Articles 20, 62(4)): and it contrasted the description of a protection in Article 64(1), to which may be added the passive in Article 64(3), in the form “the whistleblower shall not be penalised” rather than “a person shall not penalise the whistleblower”, not directly imposing an obligation on anyone.

28. These textual indicators are not persuasive. The passive conveys a prohibition (“the whistleblower shall not be penalised”), and a person breaches the prohibition if the person subjects the whistleblower to a liability, enforces a right or remedy against the whistleblower, or dismisses or otherwise takes action detrimental to the whistleblower. The Operating Law uses other forms of words such as failure to comply with a provision (eg Articles 21(2), 29(2) and (3)) or contravention of a provision (eg Articles 21(1), 34, 37, 62(1) and (6)). Article 40 uses a broad collection of words, catching a wide scope of obligations whether or not expressed as or found referred to as a requirement or one of the other words, and the drafting of the legislation is not tight so as to attract reliance on the description of Article 64(3)(c) as protection. Simply on the words used, Article 40 extends to compensation for dismissal of a whistleblower contrary to Article 64(3)(c).

29. There is room for an argument, although it was not put, that Articles 63 (which, although not using that word, protects a person who provides information or a document to the Registrar in good faith) and 64 are alike in encouraging disclosure of noncompliance with legislative obligations, and that the provision for compensation in Article 63(6) but not in Article 64 suggests that the two Articles are outside the general provision for compensation in Article 40 and only the former allows compensation.

30. However, that and the textual argument both encounter a further consideration which underlines the conclusion from the words used. Article 34 is the general contraventions provision, providing for fines as set out in Schedule 2. Individual Articles also provide for the same fines. There is no fine for subjecting the whistleblower to a liability, enforcing a right or remedy against a whistleblower, or dismissing or otherwise taking action detrimental to a whistleblower. Unless Article 40 applies so as to permit compensation, to which its words are quite capable of extending, there is no sanction for such actions and no protection to the whistleblower – the prohibition without a sanction is no protection at all.

31. In my view, therefore, there is an entitlement to compensation under Article 40 if its terms are met. However, that does not alter the determination of issue 5(a) as set out above.

32. I note the Claimant’s submission taking up some legislative history of Article 64. From the consultation papers, the whistleblower protection was intended to reflect an OECD study. It was originally intended to be part of the new Companies Law, intentionally not part of the new Employment Law because the protection was wider than employment related, but ultimately placed in the new Operating Law. But beyond underlining that Article 64(3)(c) is not to be excluded from the reach of Article 40 because it concerns employment, regard to these documents does not assist in determining issue 5(a).

Issue 6

33. In the particulars of claim, the Claimant said that his damages included pay in lieu of notice, loss of salary, loss of bonus, compensation for injury to feelings, and penalty under Article 18 of the Employment Law. It is not clear whether these damages were all claimed as damages for wrongful dismissal as distinct from damages under Article 40 of the Operating Law, but with the possible exception of compensation for injury to feelings they could fall under that head.

34. Before the Judge, the Defendant submitted that the payments made in August 2019 extinguished the Claimant’s claim for damages for wrongful dismissal, including his claim for penalty. It relied in particular on what it said were concessions made by the Claimant at the CMC on 14 November 2018 that nothing further was due to him in relation to his employment. From the Judge’s reasons, the Claimant submitted at first instance that he remained entitled to damages for loss of bonus, and penalty relating thereto.

35. There seems to have been some confusion, in that the Judge was under the misapprehension that the Defendant had submitted that the payments extinguished any liability under Article 64 of the Operating Law. His Excellency correctly rejected that position, but possibly because of the misapprehension did not deal with the submission that they extinguished the claim for damages for wrongful dismissal, or with the Defendant’s reliance on what it said were concessions. As set out above, he declared that he could not determine whether the payments fully extinguished the Defendant’s liability for damages for breach of contract or penalties, and that substantive issues remained which required the testing of evidence at a full hearing.

36. On appeal, the Defendant’s principal ground of appeal was that the Judge erred in holding that substantive issues remained for determination. It relied on the concessions as concluding the issue in its favour. The appeal papers included a transcript of the hearing at the CMC. At an earlier time, the Claimant had been represented, and the particulars of claim were drafted by counsel, but he was unrepresented at the time of the CMC. As extracted from the transcript, the Defendant relied on the following:

37. It may be asked why, if the concessions were so clear, issue 6 was ordered at all. It was asked, and Mr Edward Kemp, appearing for the Defendant, answered that the Judge was asked to include it because the claims were “still in his particulars of claim before the court, notwithstanding what Mr Khalifa has told you today about bringing those employment claims“, and with a view to relying on the concessions in the determination of the issue.

38. It seems unlikely that the Judge regarded the concessions as clear; had he done so, it would have been sufficient to note that the claim to damages for wrongful dismissal was no longer maintained. Reading the transcript of the CMC as a whole, I am not satisfied that the Claimant conceded his claim to damages for wrongful dismissal. The particulars of claim included the claim to a bonus, with potential for significant penalty, and that is not something which would lightly have been jettisoned. Attention was not drawn to that head of his claim, but the Claimant mentioned penalty in the first of the above passages and again after them, as if it was still in play. The explanation may be that the Claimant meant that he was not claiming return to his employment; as the discussion at the CMC developed, the claim under the Operating Law was undoubtedly dominant, but in my view there was not a clear concession that nothing remained due to him in respect of wrongful dismissal.

39. I note the Defendant’s further ground of appeal, that in his declaration determining issue 6 the Judge wrongly held that there was a liability to penalty under Article 18 of the Employment Law. The Defendant submitted that the error was to be found in the declaration that he could not determine whether the August 2019 payments fully extinguished liability for damages or penalties, and referred also to the Judge’s reasons where he said that the fact that the Defendant failed to make payment due to the Claimant within 14 days of termination of his employment therefore gave rise to penalties and spoke of whether the payments extinguished any further liability for penalties. It said that the italicised words, which are my italics, carried the conclusion that there was a liability.

40. I do not read the declaration, or the reasons, in that way. Having rejected the position that the payments extinguished any liability under Article 64 of the Operating Law, the Judge considered that a full hearing was necessary and left liability for damages or penalties and satisfaction of any liability by the payments for that hearing. It is clear from the reasons that he did not purport to determine that there was a liability, and that the italicised words reflect his recording that the Claimant asserted that he remained to be paid his bonus entitlements.

41. The Claimant did not contend that the declaration should be understood in the manner feared by the Defendant. Mr Bowden said in his oral submissions that “what, if any, Article 18 penalty is payable is absolutely a matter for trial and the Judge did not determine the matter one way or the other”.

Issue 7

42. The Claimant’s employment contract provided in cl 3 for termination by either party “by means of a registered letter to be mailed to the other party before the date of such termination at least two months before that date”, with the proviso, “If either of the parties fails to fulfil this condition, the party shall be liable to compensate the other party with an amount equal to the pay due for the remaining part of the notice period set forth in this clause”. The Defendant did not terminate the Claimant’s employment by a registered letter. It contended that it paid the Claimant up to 17 February 2019, including an amount equal to the two months’ pay; that the termination was therefore lawful; and that the payments made in August 2019 were therefore recoverable on unjust enrichment grounds.

43. It is necessary to set out the Judge’s reasons on this issue:

44. For the Defendant’s ground of appeal, it embraced the declaration that the employment contract was terminated under cl 3. It should be noted, however, that Mr Kemp’s oral submissions included that there was no evidence to support the finding in the italicised words that, on an unspecified date, the Claimant had agreed that his contract was terminated and made no effort to continue his employment, and that it was not open to His Excellency to make the finding. If that be so, the waiver essential to the declaration must go, and with it the ground of appeal. But the Claimant did not appeal against the declaration in this respect.

45. This need not be taken further. For other reasons, the ground of appeal fails.

46. By its ground of appeal, the Defendant took issue with the Judge’s determination only in submitting that, having found that the employment contract was terminated under cl 3, His Excellency erred in declining forthwith to give judgment in its favour on the counterclaim. It submitted, in substance, that if there was termination in accordance with cl 3, restitution of the payments made in August 2019 for unjust enrichment was inevitable in accordance with Damac Park Towers Company Ltd v Ward [2015] DIFC CA 006 (“Ward”), and as a result of the pleaded defence to the counterclaim which was only that the Claimant was entitled to the payments. (It did not mention, and as I understand it did not rely on, the rider to issue 7 “If so, the Defendant’s counterclaim succeeds”: it addressed the matter on its merits.)

47. I do not accept that success in the counterclaim was inevitable. First, as I have earlier indicated the Claimant said that termination occurred on 19 February 2019. The Judge made no finding as when the Claimant’s employment was terminated, when it occurred remains to be determined, and if it was on 19 February 2019 there may still have been an entitlement in the Claimant. Secondly, unjust enrichment is a fact sensitive enquiry, and Ward does not mandate it without attention to the facts in this case; it is a matter for the Defendant to make out, and the defence to the counterclaim does not preclude contest if it be that the Claimant was not entitled to the payments.

48. This appellate court was not invited to determine these matters and is not in a position to do so. Since I do not accept the Defendant’s submission of inevitable success in the counterclaim, the issue must be left for trial.

Orders

49. I propose the following orders:

H.E JUSTICE SHAMLAN AL SAWALEHI

50. I agree with the above and have nothing further to add.

Issued by:
Nour Hineidi
Registrar
Date of issue: 2 November 2020
Time: 2.30pm