CFI 029/2019 Bassam Khalifa v S.W.I.F.T (Dubai) Limited

Claim No: CFI 029/2019

IN 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
BEFORE H.E. JUSTICE OMAR AL MUHAIRI

BETWEEN

BASSAM KHALIFA

Claimant

and

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

Defendant

JUGDMENT ON THE PRELIMINARY ISSUES OF H.E JUSTICE OMAR AL MUHAIRI

UPON the Claimant’s Claim issued on 8 July 2019

AND UPON the Order of H.E Justice Omar Al Muhairi dated 14 November 2019 for a trial in respect of of the preliminary issues ( the “14 November Order“)

AND UPON the disclosure order of Judicial Officer Nassir Al Nasser dated 18 December 2019 (the “Disclosure Order“)

AND UPON the Defendant’s application dated 24 December 2019, for a de novo review of the Disclosure Order (the “De Novo Application“)

AND UPON the Order of H.E Justice Omar Al Muhairi dated 24 December 2019 setting aside the Disclosure Order of Judicial Officer Nassir Al Nasser (the “Set Aside Order“)

AND UPON the Order of H.E Justice Omar Al Muhairi dated 15 March 2020 dismissing the application to vacate the hearing on 17 March 2020 (the “15 March Order“)

AND UPON the Defendant’s Application notice for an unless order which has been withdrawn (the “Withdrawn Application“)

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at a hearing on 17 March 2020 (the “Hearing“)

AND UPON taking into account DIFC Law No. 7 of 2018 being the Operating Law (the “Operating Law“)

AND UPON taking into account DIFC Law No. 6 of 2018 being the Employment Law (the “Employment Law“)

AND UPON reviewing all other relevant documents on the Court’s file

IT IS HEREBY DECLARED THAT:

1. The Court has the power to grant relief under Article 40 of the Operating Law for losses suffered as a result of breach of Article 64 of the Operating Law.

2. Article 62(6) of the Operating Law is no longer being relied upon by the Claimant and I am no longer required to determine 5(b) of the Preliminary Issues, as set out at paragraph 2 of this judgment.

3. I am unable to fully determine whether the collective payments made to the Claimant fully extinguish liability for damages by reason of breach of contract or penalties under Article 18 of the Employment Law. Having to make such a determination at this stage would require me to determine the more substantive issues between the parties, which requires the testing of evidence at a full hearing.

4. The Claimant’s employment contract with the Defendant dated 16 April 2009 (the “Contract”) was terminated under clause 3, of the Contract, but this does not entitle the Defendant to judgment on its counterclaim. The counterclaim will be determined at trial.

5. On the basis of my judgment and determination of the “agreed preliminary issues,” the Claimant’s claim shall proceed, and the matter is to be listed for a full hearing.

AND IT IS HEREBY ORDERED THAT:

6. The parties are to make written submissions on costs, in respect of the Hearing and the Withdrawn Application, within 14 days from the date of this judgment.

7. The Defendant shall pay 50% the Claimant’s costs of the De Novo application (including the costs of attending the de novo review meeting with H.E. Justice Omar Al Muhairi on 7 January 2020), within 14 days from the date of this judgment.

Issued by:
Nour Hineidi
Deputy Registrar
Date of Issue: 8 April 2020
Time: 5pm

JUDGMENT

1. This judgment is in respect of:

The Preliminary Issues

2. These are the Preliminary Issues:

3. There had been some contention throughout the hearing that the list of “agreed preliminary issues” were not, in fact, agreed and the Claimant was acting as a litigant in person at the time of their alleged agreement. In any event, the purpose of the hearing and my task is to determine the Preliminary Issues. Whether the parties agree to preliminary issues is only of relevance in considering the question of costs.

4. The facts of this case are relatively straightforward. The Claimant was employed by the Defendant as a commercial manager under the Contract. During his employment the Claimant alleges that he became aware of fraudulent activity by his then manager. He reported the fraudulent activity to the Chief Auditor of the Defendant, who drafted a complaint for the Claimant to submit. The Claimant submitted the complaint and an investigation was undertaken by the Defendant’s Chief Auditor. The findings in the investigation appear to be disputed; however, as a result of the investigation no further action was taken by the Defendant. Later, the Defendant initially purported to terminate the Contract for cause, namely the Claimant’s performance, but later conceded that the Contract was terminated without cause. The Claimant’s claim is that he is afforded protection as a whistleblower under the Operating Law, and that the termination of his Contract was in contravention of the Operating Law. He further alleges that the Contract was terminated as a direct result of him making the complaint and that he has suffered detriment as a result.

5. I shall now turn to each of the aforementioned preliminary issues in turn.

Preliminary Issue 5(a)

6. In determining this question, the Court must be cautious of the clear distinction between the Employment Law and the Operating Law. While the Claimant submits that a claim could be made by a whistleblower under both laws, the Claimant is clear that this claim is made solely under Article 64 of the Operating Law.

7. Article 64(1) of the Operating Law states:

A person who makes a disclosure of information specified in Article 64(2) to the Registrar, the Registered Person’s auditor or a member of the audit team, a Director or other Officer of a Registered Person, is entitled to the protection set out in Article 64(3)(c).

8. Such a disclosure under Article 64(2)(b) shall “relate to a reasonable suspicion that the Registered Person has or may have contravened a provision of this Law, the Regulations or any other Legislation administered by the Registrar.”

9. Article 64(3)(c) states:

Such person shall not be dismissed from his current employment, or otherwise subject to any action by the employer or any related party of the employer which is reasonably likely to cause detriment to that person.

10. The Claimant pleads that his entitlement for relief, in the form of a number of declarations and damages, arises under Article 40(1) of the Operating Law, which states:

Where a person intentionally, recklessly or negligently commits a breach of any requirement, duty, prohibition, responsibility or obligation which is imposed by or under this Law or Legislation administered by the Registrar, the person is liable to compensate any other person for any loss or damage caused to that other person as a result of such conduct, and is otherwise liable to restore such other person to the position they were in prior to such conduct.

11. I further note that clause 16 of the Contract incorporates internal regulations into the Contract requiring the Claimant to comply with the same. The Claimant was required to report conflicts of interest and other specified activities, under the Defendant’s Code of Conduct, to the Chief Auditor. The Code of Conduct further states under the heading “Respecting the Code of Conduct and Reporting” that “failure to respect the code of conduct could result in disciplinary action in accordance with the appropriate procedures in each country.”

12. In addition, the Claimant was required to report financial malpractice and any action contrary to the Defendant’s Code of Conduct, on reasonable suspicion of such activity, to the Chief Auditor, under the Defendant’s Whistleblowing Procedure. At part 4.5 of the Defendant’s Whistleblowing Procedure a whistleblower is afforded protection from dismissal, sanction or reprimand, so long as the complaint is made in good faith.

13. As such, under the terms of the Contract, if the Claimant had a reasonable suspicion that someone at the Defendant company was acting in contrary to the Defendant’s Code of Conduct, or partaking in financial malpractice or undertaking any other stipulated activity, then the Claimant had a contractual obligation to report the same to the Defendant. On the Claimant’s case, it would appear that he has followed the procedure as set out the Contract. Whether the matters complained of by the Claimant fall within Article 64 of the Operating Law is a matter to be determined at the final hearing.

14. In my judgment, Article 40 clearly expresses that the Court has an array of remedies available to it, in circumstances where there has been a breach of the Operating Law, which the Claimant alleges in this case is Article 64. Should the Court determine that the Claimant is entitled to protection under Article 64 of the Operating Law and the Claimant is found to have suffered detriment as a result, I consider that the Court is entitled to grant relief in accordance with Article 40 of the Operating Law. Should the requirements of Article 40 be met by any breach of Article 64, other than an innocent one, this Court has the power to remedy any losses suffered as a result to the extent it sees fit, including making an award for damages.

15. The wording of question 5(a) is so broad that it would require me to effectively determine the majority of the substantive issues in the case to truly answer this question. Without the benefit of hearing full tested evidence in this matter, I am unable to determine the full extent of question 5(a). However, should the Defendant be found to have breached the requirements of Article 64 of the Operating Law, on the hearing of the substantive issues at trial, then this Court shall have the power to remedy any losses suffered by the Claimant as a result of the Defendant’s breach.

16. As submitted by Mr. Bowden, the fact that Article 40 of the Operating Law falls under the heading “Applications to the Court”, as separate from Article 64, which falls under the heading “General Provisions,” has no bearing on the entitlement or application of such a remedy. In my judgment, Article 40 of the Operating Law is clear that any breach of Article 64, other than an innocent breach, which causes the reporter loss or damage would give rise to a claim for damages for which this Court is entitled to grant relief.

17. Furthermore, the fact that Article 64 of the Operating Law does not contain a similar provision as Article 62 (under (4) and (5)), specifying a party’s right to make an application for relief to the Court, does not restrict the application of Article 40.

Preliminary Issue 5(b)

18. The Claimant has since confirmed that he will no longer be seeking to rely upon Article 62(6) of the Operating Law. On the basis of this concession, I am therefore no longer required to answer this question.

Preliminary Issue 6

19. After termination of his employment, the Claimant received his final salary and other end of employment benefits. As noted at paragraph 51 of Mr. Kemp’s skeleton argument, on 27 August 2019, the Defendant made the following payments to the Claimant, totaling AED 459,705:

20. The Defendant submitted that, by making these payments, they extinguished any liability they may have to the Claimant for breach of Article 64 of the Operating Law. The exact basis upon which this is alleged is not clear in either the pleadings or in submissions. Notwithstanding the above payments, the Claimant asserts that he remains to be paid his bonus entitlements in accordance with the Contract.

21. I cannot see that there is any basis to support the notion that such payments collectively made by the Defendant, noted as “without admission,” would extinguish any liability under Article 64 of the Operating Law.

22. The payments listed at paragraph 51 of Mr Kemp’s skeleton argument relate only to the Contract. The fact of the matter is that he would have been entitled to these payments regardless of whether or not he was a whistleblower and such payments are not linked to a breach of Article 64 of the Operating Law. Even if the Claimant had continued in his employment with the Defendant, he would still have been entitled to these payments upon termination of his employment, whether it was terminated by himself or the Defendant. The Claimant himself would still have been required to work the 2 month notice period and would have received remuneration for the same.

23. Similarly in relation to the Article 18 penalties, the fact that the Defendant failed to make payments due to the Claimant within 14 days of termination of his employment, therefore giving rise to penalties, is an entirely separate matter from whether he has suffered detriment from allegedly being a whistleblower.

24. Whether the collective payment extinguished any further liability for penalties under Article 18 is not a matter I can determine on the evidence before me. The Claimant contends that he remains entitled to payment of a bonus from the Defendant. At least part of this issue is only capable of determination upon hearing the evidence and would also require me to consider some of the more substantive issues between the parties. I therefore adjourn this issue for determination at the final hearing.

Preliminary Issue 7

25. Contrary to its defence, the Defendant now seeks to assert that the Claimant’s employment was terminated without cause, pursuant to clause 3 of the Contract.

26. Clause 3 of the Contract requires either party to give 2 months’ notice of termination of the Contract by way of registered letter. The Defendant concedes that it did not write to the Claimant by way of registered letter. The remainder of clause 3 requires the offending party to compensate the innocent party for the breach. Mr Kemp contended in his submissions that the Defendant had compensated the Claimant for this failure by paying him a salary of 2 months’ notice. This is submission is not a matter for determination of the Preliminary Issues.

27. However, the parties do agree on one crucial matter: that the Claimant’s employment was terminated. How it was terminated, in my view, is of little relevance. If the Defendant now purports that it terminated the Claimant’s employment without cause, having exercised clause 3, as the active party. In agreeing that the Contract was terminated and making no effort to continue his employment, the Claimant must have waived the contractual requirement for notice by way of registered letter. That is not to say the issue of compensation for such a breach has been waived and such a breach may also be of relevance on the issue of detriment should the Claimant be successful in his claim.

28. Despite what the remaining part of question 7 states, I do not consider that terminating the Contract under clause 3 would entitle the Defendant to judgment on its counterclaim for unjust enrichment. It does not have the effect of causing the defence to the counterclaim to fall away, nor does it entitle the Defendant in some way to summary judgment, and the Defendant has yet to prove its Counterclaim. Additionally, I cannot see that one would give rise to the other, in my mind the matters are of no relevance to one another. I therefore adjourn the determination of the counterclaim to the final hearing.

Conclusion

29. In my judgment the Court has the power to grant relief under Article 40 of the Operating Law for losses suffered as a result of breach of Article 64 of the Operating Law.

30. Article 62(6) of the Operating Law is no longer being relied upon by the Claimant and I am no longer required to determine 5(b).

31. I am unable to fully determine whether the collective payments made to the Claimant fully extinguish liability for damages by reason of breach of contract or penalties under Article 18 of the Employment Law. Having to make such a determination at this stage would require me to determine the more substantive issues between the parties, which require the testing of evidence at a full hearing.

32. The Contract was terminated under clause 3 but this does not entitle the Defendant to judgment on its Counterclaim. The Counterclaim will fall to be determined at trial.

33. On the basis of my judgment and determination of the “agreed preliminary issues,” the Claimant’s claim shall proceed, and the matter is to be listed for a full hearing and I invite the parties to comply with RDC in this regard.

The Claimant’s Application Notice dated 8 March 2020.

34. I am moving now to address my reasons for the order dated 15 March 2020. As stated at the hearing and with consideration of the witness statements of Ms. Aisha Khokhar and Mr. Bassam Khalifa, the Claimant’s application to vacate the hearing of 17 March 2020, with further directions, is dismissed with Cost. The matters the Claimant was seeking to revisit, had already been determined by the Court. Furthermore, although I am aware that the Claimant had only recently changed legal representatives, the application was made far too late. To allow such an application would give the Claimant a second opportunity to make submissions on the orders sought and cause the parties and the Court significant wasted costs despite having already been determined. The trial of the preliminary issues by the Court have narrowed the issues between the parties.

Costs of the De Novo application

35. Dealing now with Costs of the De Novo application, I note that Mr. Kemp raised at the hearing on 17 March 2020 that the Defendant would like to make submissions on the costs of the De Novo application. As per my order of 21 January 2020 submissions on the costs of the application were to be made within 14 days of issue of the order. The time for making submissions having expired and having only received submissions from the Claimant; However, the Defendant sent an email to the Registry exploring his view by stating that “the Defendant’s costs incurred in relation to preparing and drafting the application for de novo review in the sum of AED 26,835, given that their application for a de novo review was successful (a de novo review was granted), the Defendant should receive 100% of these costs incurred. Being the losing party in the application, it is their view that the Claimant should not receive any of his costs. Also, the parties’ costs in respect of preparing for and attending the de novo review meeting, given that each party was partially successful, we propose that each party bears their own costs or agree for it to be costs in the case. The Defendant’s costs incurred for this are AED 18,990.”

36. According to RDC 38.7, if the Court decides to make an order on costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, while the Court may if it decides to make a different order. I am satisfied that I should depart from the general rule in awarding costs. I order that the Defendant is to pay 50% the Claimant’s costs of the De Novo application and attending the review meeting within 14 days. I consider this proportion to be fair and reasonable given both parties’ relative success in the application and the conduct of the Defendant it was quite unreasonable for the Defendant to refuse disclosure of items 1and 2, as set out in the Claimant’s submissions.

Costs

37. The Defendant indicated that it would like to make submissions on the costs of its Withdrawn Application for an unless order. The parties are to make written submissions on costs, relating to the hearing of 17 March 2020 and the Defendant’s Withdrawn Application, within 14 days of issue of this judgment.

Issued by:
Nour Hineidi
Deputy Registrar
Date of Issue: 8 April 2020
Time: 5pm