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You are here: BAILII >> Databases >> The Dubai International Financial Centre >> Nuruddin v Nihaal [2024] DIFC SCT 365 (27 November 2024) URL: http://www.bailii.org/ae/cases/DIFC/2024/DSCT_365.html Cite as: [2024] DIFC SCT 365 |
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Nuruddin v Nihaal [2024] DIFC SCT 365
November 27, 2024 SCT - JUDGMENTS AND ORDERS
Claim No: SCT 365/2024
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS
BEFORE H.E. JUSTICE MAHA AL MHEIRIBETWEEN
NURUDDIN
Claimant
and
NIHAAL
Defendant
Hearing : 17 September 2024 Judgment : 27 November 2024 JUDGMENT OF H.E. JUSTICE MAHA AL MHEIRI
UPON this Claim being filed on 12 August 2024
AND UPON a hearing being held before H.E. Justice Maha Al Mheiri on 17 September 2024, with the Claimant and the Defendant’s representative in attendance
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1. The Claimant’s claim seeking reinstatement to his position as Managing Director or an equivalent role with the Defendant company is dismissed.
2. The Claimant’s claim seeking damages for breach of Employment Contract is dismissed.
3. The Claimant’s claim for interest, costs and other relief is dismissed.
Issued by:
Delvin Sumo
SCT Judge and Assistant Registrar
Date of issue: 27 November 2024
At: 11amTHE REASONS
Parties
1. Nuruddin (hereafter the “Claimant”) is an individual formerly employed as a Managing Director of Nihaal (hereafter the “Defendant”).
2. The Defendant is a financial services company located in the Dubai International Financial Centre (“DIFC”) and is fully licensed and regulated by the Dubai Financial Services Authority (“DFSA”).
Preceding History
3. On 12 August 2024, the Claimant filed a claim with particulars of claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking the following relief from the Defendant following his immediate termination for cause on 22 February 2024:
(a) Reinstatement to his previous position as Managing Director or an equivalent role within the Defendant company;
(b) Order requiring the Defendant to pay the Claimant a sum of AED 500,000 for breach of Employment Contract;
(c) Interest at 9% (for a period as the Court thinks fit) in accordance with Article 39 of the DIFC Law No.10 or 2004, and Practice Direction No 4 of 2017;
(d) Costs;
(e) Any other relief that the Court deems fit in the interest of justice and equity.
4. The Defendant filed an Acknowledgment of Service, and a Defence dated 19 August 2024, disputing the entirety of the Claimant’s claim and requesting the Court to dismiss the Claimant’s claim.
5. The matter was called for Consultation before SCT Judge Maitha AlShehhi on 28 August 2024, with the parties failing to reach an agreement.
6. In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a Hearing held on 17 September 2024. The hearing was attended by the Claimant, and the Defendant’s representative.
7. Both parties had the opportunity to provide their oral submissions to me. Having reviewed all documentation on the Court file to date, I shall consider the issues set before me.
The Claim and Defence
8. The Claimant contends that he entered an Employment Contract with the Defendant on 3 September 2015 (which was amended on 25 February 2020) with his start date being 10 January 2016 serving a position as Managing Director and Head of Middle East Team 1 for the Defendant’s private banking business (hereafter the ‘Employment Contract’)
9. The Claimant’s Employment Contract was terminated on 22 February 2024 with immediate effect for cause. The Claimant contends that his employment with the Defendant was terminated in contravention of applicable laws, established procedure and the Defendant’s own disciplinary directives.
10. The Claimant alleges that the termination was unjust, unfair and illegal and a breach of the Employment Contract. The termination which took place on 22 February 2024 and was based on allegations of misconduct, specifically the failure to disclose outside business interest in a company called Nizana (“Nizana”) registered in onshore Dubai, which the Claimant claims were unfounded and false.
11. Nizana was formed on 16 November 2016. The Claimant, alongside Noshaad (“Noshaad”), an individual that was previously a client of the Claimant’s, and Nudar (“Nudar”), former employee of the Defendant, who was also the Claimant’s manager and long-standing friend, were listed as shareholders and directors of Nizana. The Claimant and Nudar held 33% of the shareholding in Nizana, whilst Noshaad held 34% of the shareholding. The Claimant claims he had transferred his shares to Noshaad and a resolution was passed to remove him as Director, both to have effect from 8 September 2021. The Defendant claims these documents were not registered and that the Claimant remains Director and shareholder of Nizana. The Claimant also claims that Nizana was a dormant company from 2017, until 2021 when Noshaad wanted to reinstate it. The Defendant disputes this and provides evidence to suggest company was not dormant and Claimant played an active role as Nizana’s Director, which was in direct conflict with his duties to his other clients and the Defendant.
12. The Defendant alleges that it was contacted by a third party on 18 December 2023, regarding’s complaints made by Noshaad who was onboarded as a client of the Defendant a week after the Claimant joined as an employee on 10 January 2016. The Defendant alleges that at all material times the Claimant was the relationship manager for Noshaad. The Claimant however, disputes this, claiming he was not a relationship manager for Noshaad whilst an employee for the Defendant.
13. The Claimant claims that the complaint made by the third party has never been disclosed to the Claimant by the Defendant to date despite requests to see it. The Defendant claims that it is not required to show the original complaint to the Claimant, but that a summary of the complaint was given to the Defendant. I note that the original complaint the Defendant received has not been provided as evidence to the Court in these proceedings. I also note the Defendant states in the termination letter dated 22 February 2024 that “the complaint itself appears on the face of it to be without merit”. However, it was the factual allegations contained in the Complaint which concerned the Defendant and therefore an external law firm was appointed to undertake an independent investigation into those facts.
14. The Claimant was interviewed by the external law firm on 18 January 2024 (the first meeting) and again on 24 January 2024 (the second meeting). Transcripts for both meetings have been presented as evidence by the Defendant in these proceedings. The Claimant claims that process followed by the Defendant during the termination process was in contravention of the Defendant’s own procedural guidelines. The Claimant claims he not given proper and adequate notice of the complaint made against him, not heard by proper committee or a given a fair hearing. He was not spoken to by his line manager, or HR prior to the meeting and had been ambushed by the external lawyers. The Defendant claims that the meeting was voluntary, and the Claimant was not required to attend or answer the questions put to him if he did not want to.
15. The Claimant claims he was unaware that the meeting was taking place by external lawyers appointed to investigate the allegations against him, which he claims he was not made aware of until the meeting itself. The Claimant also alleges that he was not given sufficient time to collate documentation in his defence or instruct a legal representation. The Claimant alleges this was in contravention of clause 5 of the Conduct Risk and Employee Misconduct Directive (“CREM Directive”) which states the following:
“Nihaal owes duty of care to all employees and is responsible for a fair, equal and consistent procedure, and treatment to the impacted employees, which includes provision of necessary details and notice to allow impacted employees to prepare and/or submit their responses”.
16. Furthermore, the Claimant relies on Clause 7 of CREM Directive to suggest that the proper body to conduct the disciplinary review should consist of“respective Line Managers, representatives from local Human Resources, Legal and Compliance”,and not the external lawyers. However, I note clause 7 continues to state that“in cases of severe or complex breaches, external legal advisory might be involved as necessary”.The Defendant claims that because the Claimant held a senior employee position, and from 8 August 2019 was also a DFSA Authorised Individual (senior manager), was a reason for an external body to be appointed to conduct an impartial investigation.
17. The termination letter dated 22 February 2024 provided the reasons for termination with immediate effect for cause. In summary the letter states the following, I also summarise the Claimant’s responses to the allegations:
(a) That the Claimant failed to disclose his outside business interest in Nizanawhich he was a director and shareholder of since November 2016. This was in direct contravention of the Defendant’s Outside Business Interest policy. The Claimant denies this, on the basis that Nizanawas a holding company, that he was never an active Director, the company was dormant from end of 2017, and that he transferred his shareholding and directorship in 2021 to Noshaad when Noshaad wanted to reinstate the company on 15 July 2021.
(b) On two occasions in 2022 and 2023 the Claimant made false declarations in his annual Outside Business interest declaration form, which was sent to him via email. In response, the Claimant asserts that he was not aware he was a director of Nizana, he asserts that he might have been when the company was set up by Noshaad in 2016, but he never played an active role as a director. As for his shareholding of 33%, the Claimant alleges that he divested his shareholding to Noshaad on 8 September 2021, and therefore he had reason to believe he was no longer the director or shareholder and had nothing to declare on the forms in 2022 and 2023.
(c) The Defendant questions the provenance of the documents the Claimant has filed with the Court as they were not provided to the Defendant during the investigation meetings. The Defendant suggests the documents the Claimant relies upon were not registered, and therefore the Claimant remained the director and 33% shareholder, and emails dated 2018, referring to the Nisar Project [exhibit D9] and Nourah opportunity [exhibit D16] show the Claimant played an active role in the decision-making process of Nizana. The Claimant contends if he had been given proper and adequate notice of the meetings, he would have been able to collate documents in his defence, and suggest that his inclusion in the email correspondence was purely passive in nature and does not imply active participation, decision-making, or financial interest in the investments made by Nizana.
(d) The Defendant alleges that the Claimant’s position as director and shareholder of Nizana created a conflict of interest with his duties as an employee of the Defendant and his role as relationship manager for the Client, and duties towards other clients, who were found to be co-investors in investments made by Nizana, and who had no knowledge that the Claimant also held interest in Nizana. This was in breach of section 7.4.3 of Nihaal’s Compliance and AML Manual. The Defendant also alleges breaches of Article 16.1.2 and 16.1.3 of the Employment contract. Whereas the Claimant claims he was never the relationship manager for Noshaad whilst employed by the Defendant, and therefore there was no conflict of interest.
(e) The Defendant also alleges that there was a claim made against the Claimant in around February/April 2021, which the Claimant failed to disclose. The Claimant claims that this was settled immediately in July 2021 and therefore he did not have reason to believe it needed to be disclosed at the time. The Claimant presents a Settlement Agreement dated 4 July 2021. However, the Defendant disputes this stating that because the fees described in the Settlement Agreement do not match to that in the email chain between Noshaad’s legal representative and the Claimant’s legal representative, it implies that the matter had been on-going for longer.
18. The Defendant alleges that in consideration of all the above matters, the Claimant fell below the standard expected for a senior employee and the standard expected for a DFSA-Authorised Individual in terms of failing to uphold integrity and due skill care, and diligence.
19. The Claimant challenged his dismissal which is evident by letter dated 9 March 2024. In that letter the Claimant claimed that the entire dismissal process went against the principles of natural justice and fair process in accordance with the spirit of the DIFC Employment Law No. 2 of 2019. In short, the Claimant denied all the breaches the Defendant set out in the termination letter and requested the right to appeal his summary dismissal or summary dismissal being revoked, and termination done with an adequate notice period, with all his entitlements being restored.
Discussion
20. In essence, this is a case concerning immediate termination with cause due to the Claimant failing to disclose and making false declarations regarding his outside business interest which placed him in conflict with his duties towards the Defendant and other clients, including failing to disclose a claim made by the same client in the Dubai Courts. As a result of which the Defendant alleges the Claimant was in breach of his Employment Contract (articles 16.1.2 and 16.1.3) and section 7.4.3 of the Defendant’s Compliance and AML Manual. Following an investigation into the complaint, the Defendant concluded that the Claimant’s conduct fell below the standards expected for a senior employee and the standards set out for a DFSA-Authorised Individual.
21. The question for this Court to decide is whether the Claimant’s employment was terminated in contravention with the following:
(a) ApplicableLaw- DIFC Law No 2 of 2019, as amended by DIFC Law No 4 of 2021 (the DIFC Employment Law)
Article 63 states the following:
“(1) Termination for cause (1) An Employer or an Employee may terminate an Employee’s employment with immediate effect for cause in circumstances where the conduct of one (1) party warrants termination and where a reasonable Employer or Employee 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.
(b)Employment Contract- Summary termination at Clause 11.2 states the following:
“The Employer may further dismiss the Employee without notice where it considers that the Employee’s conduct warrants immediate termination. This includes, but is not limited to in the following cases:
11.2.1 If the Employee is guilty of misconduct.
11.2.5 If the Employee, is proved to have adopted a bad conduct or to have committed an act effecting honesty or honour”.
(c)Defendant’s Internal Directive 10663 – Conduct Risk and Employee Misconduct(“CREM Directive”)
Clause 5: Overview of disciplinary levels and other measures“Nihaal owes duty of care to all employees and is responsible for a fair equal and consistent procedure, and treatment to the impacted employees, which includes provision of necessary details and notice to allow impacted employees to prepare and/or submit their responses”.
Section 7(c): Role and Responsibilities, Disciplinary Review“Outcomes of disciplinary review are determined by the pre-defined responsible bodies…. Such bodies consist of the respective Line Manager, representatives from local Human Resources, Legal and Compliance. Ideally such bodies are formed as independent Conduct and Disciplinary Committees for each Nihaal entity. Leadership and chairmanship of such bodies lies with local Human Resources. In cases of severe or complex breaches, external legal advisory might be involved as necessary”.
Section 4: Assessment Criteria, reviewing employee conduct, Employee Seniority“In addition to a thorough and unbiased investigation of the individual case, generally the following criteria needs to be taken into consideration when assessing a disciplinary case. Depending on the nature and extent of the specific circumstances, all or some of the following assessment criteria may be taken into consideration…. (c) What is the employee’s function, hierarchical level and experience? Is the employee in a management role of Risk Taker? Nihaal expects enhanced due diligence from employees in management roles and Risk Takers even above the high standards applying to all other employees”.
(d)DFSA Regulatory Policy and Process Sourcebook,DFSA General Rule 5.3.19(1), and DFSA RPP 2-3-5.
(e)Defendant’s Compliance & AML Manual:Section 7.6 “An Outside Business Interest is any activity where an Employee is engaged in any business that is not one of the Firms. This includes being employed by another person, or serving as an officer, director, partner or consultant, or whether the Employee receives compensation from another organisation, including a family business. It also includes any fees for a work product such as an article or speech or position held at the request of, or as part of the Employee’s role with the Firm. Civic activities such as participating in elected or appointed political posts are also included, as are other community enterprises, and serving as a director, officer or Employee of, or consultant to, a non-profit organisation”.
Section 7.4.1: “A Conflict of Interest exists where Nihaal or its Directors, Senior Managers or Employees: are likely to make a financial gain, or to avoid a financial loss, at the expense of a client; have an interest in the outcome of a service provided to a client or of a transaction carried out on behalf of client, which is distinct form the client’s interest in that outcome; have a financial or other incentive to favour the interest of one client of the interests of (an)other client(s); or receive or will receive from a third party an inducement in relation to a service provided to a client, in the form of monies, goods or services, other than the standard commission or fee for that service.”
22. It is important to note at the outset that it is not the concern of this Court as to whether or not the Claimant is guilty of professional misconduct, rather, to find whether the Defendant has acted reasonably in dismissing the Claimant for misconduct and subsequently withholding the Claimant’s gratuities and monies otherwise due. An authority in disputes such as these is found inBritish Home Stores Ltd v Burchell [1978] IRLR 379 which sets out a framework for Employment Tribunals in deciding whether or not employers have acted reasonably in dismissing employees for misconduct. For the purposes of the alleged misconduct case in front of me, the Burchell ‘test’ can be reduced down to three pertinent questions:
(a) Did the Defendant genuinely believe the Claimant was guilty of the alleged misconduct?
(b) Did the Defendant have genuine grounds to suspect the Claimant’s misconduct?
(c) Did the Defendant carry out as much investigation as was reasonable in the circumstances before making a final decision about the Claimants’ guilt?
23. When assessing the validity of the Claimant’s claim, I shall discuss each of the key issues in this case in turn, taking into consideration the Burchell test in reference to the aforementioned laws governing this dispute.
‘Reasonable’ grounds for dismissal
24. The Defendant submits various pieces of evidence regarding the Claimant’s alleged misconduct, namely the failure to disclose his outside business interests specifically in relation to his involvement with Nizana. During the investigation meeting the Claimant asserted that he was a shareholder, holding 33% of shares in Nizana. However, the Claimant has filed to the court documents illustrating that he had transferred his shares to Noshaad. The transcript and the documents filed contradict each other, and no explanation has been provided by the Claimant as to why those documents were not provided in evidence to the Defendant at the investigation stage. The Claimant also asserted the company Nizana was dormant from 2017 (a year after it’s incorporation), and that he did not play an active role as a Director. The Defendant however provides email chains in which the Claimant is copied in concerning investment opportunities being advanced by Nizana. The Claimant suggests that he had given all rights to Noshaad to act as Director and provides a board resolution meeting document dated 9 August 2017, and that he was copied in to emails simply for informational purposes. This document was not provided to the Defendant at the time of the investigation or after, which raises questions regarding its provenance to which the Claimant has not provided any explanation.
25. I find the Claimant’s explanations to the above highly unlikely given that he is an experienced professional employee within the banking industry and would have been aware whether he was named as director and shareholder of a company. Furthermore, the email chains dated 2018 are evident that the company was not dormant in 2017, and that the Claimant played at the very least some role as Director of Nizana. I am also concerned as to why the Claimant failed to disclose such documents as evidence to his employer at the time of the investigations. I accept the Defendant’s submission that the Claimant fell short of the standards expected by someone in his position and standing.
26. Before terminating the Claimant’s contract, the Defendant conducted a thorough investigation into the complaint raised against the Claimant. I can see this from the transcripts of the interview/meetings which took place by the external law firm. I accept the Claimant’s position that the investigation process followed by the Defendant was in contravention of the Defendant’s own policy, namely Directive 10663.
27. I am not presented with any evidence to suggest the Claimant was spoken to by a line manager, or HR regarding the complaint or that he was given notice of the complaint made against him, or what time he had to prepare before the first meeting. However, I note that there were two meetings, and that the Claimant would have been aware after the first meeting of the allegation made against him and when the next meeting was to take place. This would have allowed him to prepare accordingly.
28. I also note the Claimant’s attendance was voluntary. The Claimant did not need to attend without first obtaining legal representation or advice. However, in the absence of evidence suggesting the Claimant was given adequate notice, I find that Defendant was in breach of its own policy. However, I find that despite this the outcome reached by the Defendant even if the correct procedures were complied with, would have led to the same outcome (ie: immediate termination for cause). I find this because due to the absence of evidence by the Claimant to support his claim.
29. The evidence provided by the Defendant, (including email chains of 2018 regarding Project Nisar and Nourah opportunity which demonstrate the Claimant having an active role in Nizana and is further supported by a letter to Nestor by Nizana in August 2017), is more compelling evidence than that provided by the Claimant. Therefore, on the facts before the court, it seems probable that these are substantial grounds upon which the Defendant would suspect the Claimant’s misconduct.
30. For the reasons set out above, and on the lack of compelling evidence by the Claimant before this Court, I do find reasonable grounds upon which the Defendant based their judgment of the Claimant’s alleged misconduct. I thus find that the Claimant’s dismissal was in accordance with Article 63 of Employment Law and Section 11 of the Employment Contract.
31. This is not to say that the Claimant’s version of events is totally implausible. However, based on the evidence before this Court, the Claimant has not met its burden of proof in showing that there were not reasonable grounds to terminate his contract. Without the Claimant proving its claim, the correct course of action is to rely on the original Employment Contract, which must be honoured.
Interest, Costs and other relief
32. The general rule in the SCT regarding legal costs states at Rule 53.70 of the Rules of the DIFC Courts (hereafter “RDC”) that the“SCT may not order a party to a small claim to pay a sum to another party in respect of that other party’s costs, fees and expenses, including those relating to an appeal, except: (1) such part of any Court or Tribunal fees paid by that other party as the SCT may consider appropriate; (2) such further costs as the SCT may assess by the summary procedure and order to be paid by a party who has behaved unreasonably.”
33. In this case, neither party has claimed, nor can either party be said to have behaved “unreasonably” as per the standard required by RDC 53.70(2). Therefore, I am not making an order for costs or interest or any other relief.
34. The Claimant has been unsuccessful on its claims, and therefore the Defendant is not required to reimburse the Claimant for his SCT Court fees or any other relief.
Conclusion
35. The Claimant’s claim is dismissed.
36. There shall be no order as to costs.