Claim No: CA 003/2013

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 THE CHIEF JUSTICE MICHAEL HWANG, JUSTICE ROGER GILES AND H.E. JUSTICE OMAR AL MUHAIRI

 

BETWEEN

MARWAN LUTFI

                                                                                                Claimant/Appellant

and

 

THE DUBAI INTERNATIONAL FINANCIAL CENTRE AUTHORITY

                                                                                                Defendant/Respondent 

 

Hearing:             18 May 2014

Counsel:              James Wynne and Layla Bunni (Starr & Partners) for the Claimant/Appellant

    Graham Lovett and Stefanie Szabo (Clifford Chance) for the Defendant/Respondent

Submissions:    12 June 2014, 30 June 2014 and 14 July 2014

Judgment:          26 November 2014


 

 JUDGMENT


 

  Summary of Judgment

The Appellant, Marwan Lutfi sought an appeal from the lower court judgment of then Deputy Chief Justice Sir Anthony Colman that dismissed the Appellant’s claim of unlawful dismissal, unlawful discrimination on the grounds of marital status and defamation in favor of Defendant, Dubai International Financial Centre Authority (“DIFCA”). The grounds for the appeal include failure to apply the proper legal tests in determining dismissal, misdirection in finding the Defendant discharged the burden of proving Appellant’s dismissal was the result of a bona fide occupational requirement, misdirection in finding the Appellant was not entitled to investigative hearings and incorrect application of Article 63 of the DIFC Employment Law of 2005 with regards to gratuity payment.

The Court of Appeal dismissed the Appellant’s appeal and upheld the decision of the lower court. With regard to dismissal, the Court held that the Respondent terminated the Appellant for the purpose of implementing the Employment Policy and was not refusing to continue to employ Appellant or discriminating against him because of his marital status. As for unfair dismissal, this principle did not exist in DIFC laws and the unamended Employment Law makes no provision for an employee to claim unfair dismissal. On the issue of gratuity, the Appellant is not entitled to receive an end of service gratuity because he was enrolled in the UAE pension scheme in accordance with Federal Law No. 7 of 1999 as amended by Federal Law No. 7 of 2007, and Article 60(5) of the unamended Employment Law. Accordingly, the Appellant’s appeal and claim for relief was dismissed with costs.

  This summary is not part of the Judgment and should not be cited as such 

 ORDER

UPON hearing Counsel for the Appellant and Counsel for the Respondent on 18 May 2014

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

IT IS HEREBY ORDERED THAT:

1. The Appellant’s appeal is dismissed.

2. Costs shall be paid to the Respondent by the Appellant within 14 days of the date of this order, the amount of which shall be assessed, if not agreed, by the Registrar.

 

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue:  26 November 2014

At: 4pm

 

H.E. JUSTICE OMAR AL MUHAIRI:

1. Before the DIFC Court of Appeal is the Appellant, Marwan Lutfi (“ML”), a former employee of the Respondent, the Dubai International Financial Centre Authority (“DIFCA”).  ML filed a Notice of Appeal on 15 August 2013, requesting an oral hearing to appeal against the Judgment of the Deputy Chief Justice (as then was) Sir Anthony Colman (“DCJ Colman”) dated 10 July 2013 in the matter CFI-003-2012. Leave to Appeal was granted on 3 October 2013 by Chief Justice Michael Hwang.

2. ML sets out multiple grounds for appeal including:

(1)  failure to apply the proper legal tests in determining whether dismissal was due to marital status;

(2)   misdirection in finding that the Respondent discharged the burden of proving ML’s dismissal was the result of a bona fide occupational requirement;

(3)   misdirection in finding ML was not entitled to any investigative hearings; and

(4)   incorrect application of Article 63 of the DIFC Employment Law of 2005 (“the unamended Employment Law”) with regards to gratuity payment.

Background

3. On 20 March 2012, ML filed the initial claim that gave rise to the Court of First Instance case, CFI-003-2012, asserting unlawful dismissal on substantive and procedural grounds, unlawful discrimination on the grounds of marital status pursuant to Article 56 of the unamended Employment Law and defamation. ML sought the following remedies:

(1)  reinstatement of employment together with payment of wages lost;

(2)   damages for breach of contract;

(3)   punitive damages;

(4)   compensation pursuant to Article 68(2)(b) of the unamended Employment Law; and

(5)   any payments due and owing under Article 68(2)(e).

4. ML commenced employment with Respondent in 2003, and by 2006 he was appointed as the Director of Business Development and the Head of Insurance and Reinsurance. He then left to form a regional private equity firm until he was asked by the then Governor of the DIFC, HE Ahmed Humaid Al Tayer (“Mr Al Tayer”), to return to DIFCA. ML subsequently entered into an employment contract with the Respondent on 9 March 2010 as Joint Deputy CEO and Head of Business Development.

5. ML was responsible for 12 departments and 115 employees. In the course of his first six months of employment, ML reconstructed DIFCA’s business development facilities to incorporate six divisions, one of which was Insurance and Business Entities under the management of Hana Al Herz (“HAH”). Impressed by the abilities of HAH, ML put her in charge of both Insurance and Business Entities and Retail and Events in early 2011.

6. In early 2011, ML began to plan overseas business ventures for the purpose of expanding business in the DIFC. These ventures were directed at markets such as Brazil, China and South Korea, and were conducted by ML, Kevin Birkett, Head of Finance Services and Business Relations, and HAH. ML attended for at least two weeks while HAH and Abdulla Al Awar (“AA”), the CEO of the DIFCA, attended for part of that time.

7. During the course of 2011, ML and HAH developed an increasingly close working relationship. Although HAH was immediately answerable to ML as her line manager, they were both in positions of major managerial responsibility. By mid-June 2011, that working relationship became a romantic relationship, and marriage had been discussed. HAH discussed the subject with AA, who asked that, if they decide to proceed with the marriage, no one in the DIFC should be informed. Ultimately, HAH committed herself to marriage with ML, and the Melcha was arranged to take place on 27 July 2011.

8. On 25 July 2011, ML told AA about his intentions to marry HAH. AA did not reveal the fact that HAH had already raised the subject with him, but told ML that DIFCA did not permit married people to report to one another. He did not say it would be impossible for both of them to continue working for the Respondent, but he did ask ML not to discuss the matter with anyone until he had discussed it further with the DIFCA Board. AA promised to come back to ML in a few days.

9. The Melcha took place on 27 July 2011 but this was not disclosed to anyone in DIFCA at the time.

10. After the meeting on 25 July 2011, AA considered whether ML and HAH could be re-deployed in different positions in the DIFCA and took the view that it would not be possible to modify the management structure to accommodate two persons at their level of seniority. AA concluded that the only way to avoid line management between ML and HAH was for one of them to leave DIFCA. On 9 August 2011, AA conveyed this view to the DIFCA Board and expressed the opinion that, if it was ML who was to resign, AA would most probably step in to manage the division in the interim. The Board expressed its agreement with this approach.

11. AA indicated to ML in a meeting on 4 August 2011 that either ML or HAH would definitely have to step down from DIFCA before the end of the year, but that they would have to decide which of them should do so. Although ML sought to persuade AA that both he and HAH were essential to the future business development of the Respondent, AA made it clear that the Employee Policies and Procedures with regard to the employment of relatives (“the EPR”)  must be adhered to, which would require one of them to step down.

12. On 11 August 2011, ML formally notified the Respondent that he and HAH had married.

13. On 25 August 2011, ML informed AA that it had been decided that he would step down, and that HAH would remain employed with the Respondent. AA thereafter decided that he would act in ML’s place, with HAH remaining in her current role.

14. On 6 September 2011, AA subsequently sent a message to all DIFCA staff informing them of the marriage and that AA would be overseeing the Business Development Services Division while ML assisted with corporate level projects to maintain the Centre’s growth. As of 6 September 2011, ML was given the position of Advisor to the CEO, a title that had never previously existed and did not come with any specific responsibilities, as AA took ML off all his management functions in the DIFCA and all contact with previous overseas clients ceased. It was, however, ML’s hope that this position could be a continuing appointment despite AA’s evidence that the position was created against the background that it had been agreed that ML would step down by the end of the year and that the appointment of Advisor to the CEO was a temporary measure given to ML as an opportunity to use the remaining time at the DIFCA to seek alternative employment.

15. Nevertheless, ML hoped that the Defendant would ultimately change its mind and continue to employ him in his new post even after the end of the year. It was made plain to ML, however, that the decision to create the previously non-existent position of Advisor to the CEO could not replace the underlying understanding to which ML had agreed, which was that he would step down by the end of the year.

16. On or about 29 November 2011, a conversation between AA and ML took place in which ML discussed his unsuccessful search for alternative employment. At the same time, AA referred to concerns that ML had unduly favoured HAH by approving her substantial remuneration increases, but ML reminded AA that all those recommended increases had been approved by AA. In the course of that conversation, ML told AA that he would resign if that was what AA wanted but that he would not resign if Mr Al Tayer did not want him to resign. AA indicated that it was not the decision of Mr Al Tayer, and that, when ML resigned, he would be paid his salary for three months instead of requiring him to serve out his notice period under his employment contract.

17. In the meantime, DIFCA’s Audit and Risk Department had conducted an inquiry into the conduct of both ML and HAH for the purpose of ascertaining whether the relationship between ML and HAH had created a conflict of interest prejudicial to the Respondent.

18. The Audit and Risk Department report dated 4 September 2011 concluded that there was a very high indication that both parties had a close private understanding for marriage prior to July 2011, which might have affected the business environment and independent decision making and might independently have affected business results indirectly.

19. This report, of which ML and HAH had no knowledge, recommended the setting-up of a high level committee of DIFCA executives to look further into the issues, and that there should be a review of the main decisions taken by ML over the previous six to twelve months within the potential areas of conflict of interest, and of HAH’s eligibility for salary adjustments and an 80% increase in her compensation in less than six months.

20. The 4 September 2011 report identified the risk that the pre-marital relationship between ML and HAH might, by reason of conflict of interest, have caused the taking of decisions detrimental to the DIFCA. This gave rise to the decision of DIFCA’s Audit Committee on 11 October 2011 to suspend both ML and HAH. The decision was to the effect that, having been suspended, they should both “resign peacefully” or be subjected to special investigation “to look into the matter and face the consequences up to termination.”

21. On 30 November 2011, Hussain Al Qemzi (“HAQ”), the Chairman of the Audit Committee, telephoned AA and followed up by way of e-mail requesting AA “effective today” to suspend both ML and HAH, including their emails and access to DIFCA and to confiscate any and all company assets from them. The email ended with “Please revert to me today with your confirmation on the above.”

22. After a failed attempt by AA to amicably resolve the situation by attempting to persuade ML to tender his resignation rather than to threaten him and HAH with suspension, AA complied with HAQ’s instructions and accordingly instructed Hani Hirzallah, Head of Human Capital, to inform ML and HAH that they were suspended with immediate effect. Mr Hirzallah then called both HAH and ML and informed each of them that they must either submit their resignation immediately or be suspended. Both ML and HAH refused to resign. A short time later, Mr Hirzallah sent a message notifying ML of his suspension with immediate effect until further notice by the Audit Committee and that his access to the premises and company emails would be suspended. Further, all company assets in ML’s possession were to be returned by the morning of Sunday 4 December 2011.

23. On the next working day, 4 December 2011, AA sent a formal letter of termination to ML informing him of his termination on the grounds that, under the DIFCA EPR, employment of relatives was generally not allowed, and that there was no other suitable position for him in the organization. AA further clarified that ML would receive all entitlements as per his Employment Contract and that he was not required to serve the notice period, which would be paid in full together with any applicable benefits.

The Parties’ Submissions

24. Paragraph 3 above outlines ML’s claims in the CFI.

25. In response, the submissions of the Defendant claim that the contract of employment was terminated because there was an on-going failure to comply with the EPR Policy and by reason of an actual conflict of interest arising out of his marriage to HAH. Additionally, the termination of the employment contract was not discriminatory on the basis of ML’s marital status as ML was not required to resign “because of” his marital status, rather because he was in a conflict of interest situation on account of non-compliance with the EPR Policy.

26. As for the claim for defamation, the Defendant asserted that there was no evidence that DIFCA’s conduct in its treatment of ML damaged his reputation.

Lower Courts’ Finding

Discrimination

27. DCJ Colman ruled that the restriction on the employment of relatives is a general widespread practice in the UAE and that the important feature of the EPR Policy is that it was aimed at relationships between employees likely to give rise to the risk of biased decision-taking and not because of the marital status as such of any given employee. Its target was not the intrinsic status of an individual, but rather the relationship between individuals employed. This differentiated the purpose of the EPR Policy from the purpose of Article 56(1) of the unamended Employment Law. The target at which the latter aimed was an intrinsic characteristic or status of a given person, not the relationships between employees likely to give rise to a conflict of interest.

28. DCJ Colman further concluded in paragraph 58 of his judgment that, in availing itself of the express provisions of Clause 9 of the contract of employment, the Defendant terminated ML for the purpose of implementing the EPR Policy and was not refusing to continue to employ ML or discriminating against him “because of his marital status” within the meaning of Article 56(2) of the unamended Employment Law.

Unfair Dismissal

29. As for unfair dismissal, the argument was advanced that ML’s termination was unfair and contrary to an implied term of mutual trust and confidence, fair dealing, good faith and reasonableness that the employer should act in accordance within its power to terminate. DCJ Colman rejected this unfair dismissal argument as he did equally in the related case between HAH and DIFCA. He explained that any introduction of implied terms would be problematic as such terms were difficult to define and uncertain in terms of application. Furthermore, the introduction of any such principle otherwise than by legislation would be wrong and inconsistent with the fundamental principle of the primacy of the express terms of a contract, subject only to the introduction of inconsistent implied terms by legislation.

Defamation and End of Service Gratuity

30. The claim for defamation failed as no evidence existed of any damage to ML’s reputation by reason of the manner in which he was dismissed.

31. Lastly, DCJ Colman ruled that the claim for end of service gratuity also failed. The Defendant enrolled ML in the UAE Pension Scheme in accordance with Federal Law No.7 of 1999 and Article 61 of the unamended Employment Law and was therefore not eligible to receive gratuity.

32. In conclusion, DCJ Colman dismissed the claim for damages for unfair dismissal, the claim for defamation and the claim for failure to pay end of service gratuity.

The Appellant’s Arguments for Appeal

33. On 15 August 2013, ML filed an appeal notice against the judgment of DCJ Colman in which DCJ Colman dismissed each of ML’s claims against DIFCA.

Discrimination on Grounds of Marital Status

34. The Appellant claims that DCJ Colman’s finding with regard to discrimination on grounds of marital status was perverse because of the fact that the Respondent chose to terminate the Appellant’s employment for the purpose of implementing the EPR Policy was because of his marital status. The Appellant argues that the very implementation of the EPR Policy was due to his marriage, and subsequently falls within the ambit of Article 56(2) of the unamended Employment Law.

35. Additionally, the Appellant claims that DCJ Colman failed to consider the leading authorities and failed to properly analyse the evidence and, as a result, incorrectly applied and relied on the Respondent’s contractual entitlement under Clause 9 of the contract of employment to provide the Appellant with a notice of termination. The fact that notice was provided cannot be used to justify what would otherwise be a discriminatory act under Article 56(2) of the unamended Employment Law.

Breach of Contract Claim

36. With regards to the breach of contract claim, the Appellant argues that DCJ Colman was wrong to reach the conclusion that the Appellant’s dismissal did not require the Respondent to engage in any investigative hearing. Additionally, the Appellant claims that the judgment failed to address the fact that the Respondent did not follow any disciplinary and/or dismissal procedure with the Appellant prior to termination.

End of Service Gratuity

37. The Appellant argues that DCJ Colman incorrectly retrospectively applied Article 61 of the amended Employment Law, which was only enacted on 16 December 2013 and that the unamended Employment Law, which was in force at the time, did not contain any provisions mirroring Article 61 of the amended Employment Law. Additionally, Article 61 of the amended Employment Law is not stated as having retrospective effect.

The Hearing

38. On 18 May 2014, both parties attended a Court of Appeal hearing before the Chief Justice Michael Hwang, Justice Roger Giles and H.E. Justice Omar Al Muhairi.

39. Upon the direction of the presiding judge Chief Justice Michael Hwang, it was ordered that both parties should file and serve further submissions with regard to entitlement to gratuity and entitlement to damages in breach of Article 56 of the unamended Employment Law.

40. Additionally, to cover the possibility of an entitlement to gratuity, the Claimant and the Defendant should file an agreed statement of quantum; if not agreed, separate statements of quantum should be filed.

The Appellant’s Further Submissions

41. On the question of gratuity, the Appellant maintains his argument that the amended Employment Law governing pension for UAE nationals was not in existence nor in force at the date of termination and should not apply. Rather than the amended Employment Law, the Appellant argues that Article 60 of the unamended Employment Law should apply to grant the Appellant entitlement to gratuity.

42. The parties have been unable to agree on a statement of quantum for the calculation of gratuity (assuming that it would be payable).  However, the Appellant relies on the English decisions of Leisure Leagues UK Ltd v Macconnachie [2002] IRLR 600 (EAT) and Yarrow v Edwards Chartered Accountants UKEAT/0116/07 which held that for a person who works 260 days in a year, one day’s salary should be calculated on 1/260th of salary.

43. The Appellant argues that this is in accordance with the unamended Employment Law in force at the date of ML’s termination:

“60. End of service gratuity

(2) “The gratuity payment shall be calculated as follows: (a) Twenty one (21) days’ wage for each year of the first give (5) years of service. (b) Thirty (30) days’ wage for each additional year of service…”

44. As for damages, the Appellant rejects the Respondent’s argument that no other law should apply other than the unamended Employment Law because there is no express limitation of the unamended Employment Law within any Laws and because the unamended Employment Law itself implicitly relies upon the Contract Law for such matters (inter alia) as the formation of a contract and, identifying its terms.

45. Accordingly, the Appellant invites the Court to apply the principles set out within the Law of Damages and Remedies, DIFC Law No. 7 of 2005; Part 3: Damages in the Law of Obligations (in particular Article 23), Right to Damages (Article 24), Full Compensation and (Article 25), Measure of Damages in order to support a finding of unfair dismissal.

The Respondent’s Further Submissions

46. On the issue of gratuity, the Respondent maintains that the Appellant, ML, is not entitled to end of service gratuity because he was automatically enrolled in the Federal Pension scheme provided for by Federal Law No. 7 of 1999. The Respondent asserts that applicable Federal and DIFC laws point to the legislature’s intention for an employee to “opt in” to one scheme only, and that it could not have been the intention of the legislature for employees to be entitled to receive benefits under multiple schemes.

47. The Respondent argues that financial obligations would be unduly onerous on employers if UAE nationals were given the choice to additionally “opt in” and also to receive DIFC gratuities when enrolment in the Federal Pension Scheme is mandated by Federal Law. This would amount to double recovery for the Appellant to seek payment of gratuity when he is eligible to receive only the Federal Pension.

48. Furthermore, the Respondent contends that it is not required that the amended Employment Law be stated as being retrospective for it to have retrospective effect. It is sufficient that both the unamended and amended versions of the Employment Law contain an identical provision at Article (1)(a) of Schedule 1 “Rules of Interpretation,” which states that provisions in the law are inclusive of future amendments, “a statutory provision includes a reference to the statutory provision as amended or re-enacted from time to time.”

49. As for damages, the Respondent maintains that there is no entitlement under DIFC Law to statutory damages for breach of Article 56 of the unamended Employment Law. The Respondent asserts that a claim for discrimination has not been established on the facts; that there is no breach of the discrimination provisions in the unamended Employment Law, and no entitlement to damages, statutory or otherwise arises. The Respondent also maintains that, had a claim for discrimination been made (which it denies), there is no authority under DIFC legal principles that suggests a statutory right to damages arising from a breach of the unamended Employment Law.

50. Furthermore, the Respondent claims that the Appellant was dismissed lawfully and in accordance with the terms of his contract and the unamended Employment Law.

Discussion

Discrimination

51. In June 2011, ML proposed marriage to HAH which she ultimately accepted. They performed the Melcha before the Dubai Courts on 27 July 2011. ML discussed the issue of marriage with AA, who expressed the view that, according to the EPR, it was generally necessary that one of them would need to leave DIFCA if they went ahead with marriage.

52. Plainly, theEPR in regard to the employment of relatives states that:

“1-06.1 Purpose

To provide guidelines designed to avoid the possibility of favoritism or nepotism in the hiring of the DIFC Authority personnel.

1-06.2 Definition

Relative: Husband, wife, father, mother, children, sisters, grandchildren, grandparents, uncles, aunts, nieces, nephews, first cousins and the following in laws: mother, father, sister, brother, son and daughter.

1-05.3 Policies

Employment of relatives is generally not allowed.

 No personnel shall be employed in the same department and/or under the direct or indirect supervision of a relative who has or may have a direct effect on that individual’s progress or performance. No relative shall make recommendations, or in any way participate in decisions pertaining to any matter which may directly affect the appointment, promotion, salary or other status or interest of a relative related to employment.

1-06.4 Procedure

Upon recruitment, promotion, or transfer to any Department, Employees should inform the Human Capital Department of the presence of a relative in DIFC Authority, his/her job title and the department he/she is employed in.

The Human Capital Department should ensure that no employee’s status conflicts with the provisions of this policy.”

53. DCJ Colman made the following remarks in paragraphs 49 to 51 of his judgment:

“49. Although the purpose of that Policy is expressed in a somewhat limited manner – “to provide guidelines designed to avoid the possibility of favoritism or nepotism in the hiring of the DIFC Authority personnel” succeeding provisions strongly suggest that the purpose of the Policy is to prevent biased decision-taking as between relatives which may be detrimental to the Authority. Thus paragraph 1-05.3 provides that “Employment of relatives is generally not allowed”. The policy is then expressed by reference to employment in the same department and/or under direct or indirect supervision of a relative “who has or may have a direct effect on that individual’s progress or performance”. Paragraph 1-06.04, “Procedure”, envisages “recruitment, promotion or transfer to any Department”. The general effect is therefore that the Policy was intended and would be understood to cover internal changes in position within the Authority as well as changes in relationships. Thus, for example, marriage might cause an individual employee to become the son or daughter-in-law of another employee, just as it might cause an existing employee to become the wife or husband of an existing employee.

50. The restriction on the employment of relatives generally is, according to the evidence a widespread practice in the UAE.

51. The final paragraph prescribes that it is the responsibility of the Human Capital Department to ensure that no employee’s status conflicts with the provisions of that Policy. This envisages a pro-active role whereby employment contrary to the provisions of the Policy will be prevented. In this context, although the main substantive paragraph under “Policy” prohibits employment of relatives in the same department or under each other’s supervision and thereby envisages that effect may be given to the Policy by re­deployment within the Authority, there is a general prohibition on the employment of relatives, on the basis of which employment might be wholly terminated if re-deployment within the Authority could not give effect to the Policy.”

54. As explained above in paragraphs 10-22 of this judgment, the Respondent terminated ML for the purpose of implementing the EPR Policy, and was not refusing to continue to employ ML or discriminating against him “because of his marital status” within the meaning of Article 56(2) of the unamended Employment Law.

55. Furthermore, there is no entitlement under DIFC Law to statutory damages for breach of Article 56 of the unamended Employment Law. I accept the Respondent’s submissions that a claim for discrimination has not been established on the facts and that there is no breach of the discrimination provisions in the unamended Employment Law. Nor is there any entitlement to damages, statutory or otherwise, and there is no authority under DIFC law principles that offers a statutory right to damages arising from a breach of the DIFC Employment Law.

56. DCJ Colman was right to hold that the Appellant failed to establish that, in terminating ML’s employment the Respondent was discriminating against him because of, or on the grounds of, his marital status and was simply exercising its contractual right to terminate based on the EPR Policy in order to avoid a conflict of interest situation on account of non-compliance with the Policy.

Unfair Dismissal

57. In my recent judgment in Hana AI Herz v Dubai International Financial Centre Authority,Claim No. CA 004-2013, I held that the unfair dismissal principle did not exist in DIFC Laws at the time. I refer to paragraphs 66 to 70 of that judgment which reads as follows:

“66. The unamended Employment Law makes no provision for an employee to claim unfair dismissal, although it recognises an employee’s right to claim discrimination on the grounds of sex, marital status, race, nationality, mental or physical disability and religion under Article 56.  However, the Employment Law gives power to the Director of Employment Standards to administer the Law and propose regulations under Article 63(1) (g) which state the following:

      “(1) The Director may propose Regulations to the Board of Directors of the DIFC Authority in respect of any matter that facilitates the administration of the Law or further the purpose of the Law, including but not limited to:

(a)   the maximum compensation for discrimination or unfair dismissal.”

67. The relationship between the Appellant and the Respondent is regulated by the unamended Employment Law, which is a DIFC Law.  It sets out at Article 3 all the statutory rights and protections of the employee, and at Article 8 the minimum standard and requirements of employment which the parties cannot contract out of. In substance, then, the Employment Law has a regulatory content, and is the only law that governs the employee who works for any entity having a place of business in the DIFC. Therefore, there is no basis to adopt any other law than the DIFC Employment Law to determine the rights of the Appellant and his contractual relationship with the Respondent is regulated by the DIFC Employment Law. In any event, the Appellant has further failed to establish a legal right to compensation for unfair dismissal.

68. A similar situation arose before the Deputy Chief Justice (as he then was) Michael Hwang in the case of Forsyth Partners Global Distributors Limited, Forsyth Partners Group Holdings Limited and Forsyth Partners (Middle East) Limited, (CFI 005-2007,CFI 006-2007, CFI 007-2007) where he had to decide what was the applicable law relating to preferential debts.  The DIFC Insolvency Law provides for Regulations to be issued providing for the order of preferential debts, but no such Regulations were issued.  The Liquidators invited the Court instead to apply either UAE Law or English Law.  The learned Judge declined to do so, on the grounds that failure on the part of DIFCA to establish which debts were preferential did not mean that UAE Law or English Law applied in default of an express choice of law.  Accordingly, he concluded that, since the legislation intended to establish a regime for preferential debts under DIFC law but the list of preferential debts had not yet been promulgated, he was not supportive of the idea of applying another legal regime relating to preferential debts.

69. Likewise, since the DIFC Employment Law makes provision for Regulations to be issued to provide rights for claims of unfair dismissal, in the absence of such a Regulation, I consider that the Appellant cannot contract out of the DIFC Law.

70. DCJ Colman was correct to rule that any introduction of implied terms such as the duty of good faith, confidentiality, fair dealing and reasonableness, so as to justify the claim of unfair dismissal, would be problematic as such terms would be difficult to define, and uncertain in terms of application, and that, if any such principle of unfair dismissal was to be introduced, it should therefore be by legislation and not by judicial innovation.”

58. I therefore agree with and affirm DCJ Colman’s finding on the issue of unfair dismissal.

The Implied Terms in Contracts and Unfair Terms Law

59. As concluded above, the unamended Employment Law has a regulatory content and was the only law that governed an employee who worked for any entity having a place of business in the DIFC. There is therefore no basis or reason to adopt any other law to determine the rights of the Appellant and contractual relationship with the Respondent when it is regulated by the unamended Employment Law.

60. Furthermore, the Appellant was dismissed lawfully and in accordance with the terms of his contract and the unamended Employment Law. The Respondent made payment in lieu of the notice period resulting in no loss suffered by the Appellant.

61. There is no authority under DIFC Law principles that offer a statutory right to damages arising from a breach of the unamended Employment Law.

62. DCJ Colman was right to rule that the Appellant cannot deploy Article 38 of the Implied Terms in Contracts and Unfair Terms Law in order to mount a claim for unfair or wrongful dismissal because, under the terms of ML’s contract with DIFCA, either the Respondent or the Appellant would be entitled to terminate by giving one month’s notice. If the Appellant was terminated without notice, the Respondent would be under a secondary obligation to compensate the Appellant for lack of notice, but the Appellant was paid an amount well in excess of one month’s salary.

63. I therefore agree with and affirm DCJ Colman’s finding on the issue of implied terms in contracts and unfair terms law.

Gratuity

64. Article 60(5) of the unamended Employment Law provides:

“Where an employer has established a pension scheme for his employees, he shall provide in writing to the employee, prior to the employee commencing work, the option to choose between participating in the pension scheme or receiving the end of service gratuity.”

This article, which provides a mechanism for employees to choose between their employer’s pension scheme or the gratuity provided by their employer under DIFC law, confirms that the intention of the legislature was such that employees have to choose between one scheme or the other, but cannot be entitled to receive both.

65. Article (2) of Federal Law No. 7 of 1999 as amended by Federal Law No. 7 of 2007  in respect of the Federal Authority for Pensions and Social Security states that:

“Without prejudice to any laws or regulations in the State, The employer in the private sector must –enrolled – Subscribes the UAE national employees to the Federal Authority for Pensions and Social Security pension scheme”

66. Article (4) of the Federal Law No. 6 of 1999 in respect of the establishment of  the Federal Authority for Pensions and Social Security provides that:

“The Federal Authority for Pensions and Social Security shall apply the Federal pension scheme to the Civilian employees who registered in to scheme”

67. It is clear that the UAE Government has established a compulsory pension scheme for UAE National employees, which is run by the Federal Authority for Pensions and Social Security. There has been unchallenged evidence put before this Court by both the Appellant and Respondent, acknowledging that DIFCA has an account for UAE employees in The Federal Authority for Pensions and Social Security. Such account is to be held in the name of DIFCA, and will accrue to the employee until termination of employment but before death or retirement.

68. Furthermore, the application in writing that enrolled ML in the Federal Pension scheme can be established as the “writing” necessary for ML to be opted into the Federal Pension scheme, satisfying Article 60(5) of the unamended Employment Law.

69. However, the legislature’s intent with regard to the Federal Pension scheme and end of service gratuity afforded to employees in the DIFC was for an employee to opt into only one scheme. This intent is manifest in Article 61 of the amended Employment Law, Article 60(5) of the unamended Employment Law and Article (2) of the Federal Law No. 7 of 1999 as amended by Federal Law No. 7 of 2007 in respect of the Federal Authority for Pensions and Social Security.

70. Accordingly, the Appellant is not entitled to receive an end of service gratuity because he was enrolled in the UAE pension scheme in accordance with Federal Law No. 7 of 1999 as amended by Federal Law No. 7 of 2007, and Article 60(5) of the unamended Employment Law.

71. However, the Appellant can claim an end of service gratuity from the Federal Authority for Pensions and Social Security according to the relevant Articles (38, 39, 40 and 41) of Federal Law No. 7 of 1999 as amended by Federal Law No. 7 of 2007.

72. For all of the above reasons, the Appellant’s Appeal and all claims for relief are dismissed.

73. The costs of this appeal are granted to the Respondent as the successful party in these proceedings.  Such costs are to be assessed by the Registrar on the standard basis, if not agreed.

JUSTICE ROGER GILES:

74. This appeal was argued immediately after a related appeal in Hana Al Herz v Dubai International Financial Centre Authority (“the other appeal”).  As in the other appeal, I draw upon the reasons of HE Justice Omar Al Muhairi, in which the facts are outlined, in explaining my agreement with his Honour that the appeal should be dismissed with costs.

75. The two appeals raised similar issues, although there are differences in the facts and particular difference on the issue of discrimination.  I will adopt as appropriate portions of my reasons in the other appeal, with which these reasons should be read.

Breach of the employment agreement

76. I have referred in the other appeal to the disciplinary procedure in the Policies, and to the elements of that procedure on which HAH relied.  The Appellant relied on like elements.

77. The trial judge said at [58] that the Appellant’s dismissal was –

“…not for cause on the grounds of any breach of contract by ML so as to engage the employee’s entitlement to any investigative hearings or grievance procedures”.

78. The Appellant submitted that his Honour was in error in this respect, and in failing to address the fact that no disciplinary and / or dismissal procedure was followed prior to the termination of his employment.  He submitted also that the trial judge was in error in declining to find that implied terms conditioned the route to termination.

79. There was no question of disciplining the Appellant, or taking other action under the disciplinary procedures.  The employment of relatives provisions of the Policies (“the EOR policies”) were seen as requiring that one of the Appellant and HAH leave.  It is doubtful that the Appellant could have been said to be breaching the employment agreement by marrying HAH, but the Respondent was not saying that he was.  There were efforts to resolve the matter by an interim arrangement and agreement, the antithesis of disciplinary action.  As in the other appeal, the Respondent ultimately decided to exercise a contractual right to terminate the Appellant’s employment.  In my opinion, the trial judge was correct in holding that the disciplinary procedure did not apply.

80. Having held that the disciplinary procedure was not engaged, it was not necessary for the trial judge to address that it was not followed.  As in the other appeal, I do not accept the Appellant’s contentions concerning implied terms, see the next part of these reasons.

Invalid termination because of implied terms

81. The employment agreement provided in Clause 9 –

“9. The Employee’s employment shall be for an unlimited period and will remain in force until one Party delivers to the other Party three (3) month’s written notice of termination.”

82. This was materially the same as Clause 8 in HAH’s employment agreement in the other appeal.  The Appellant’s submissions were to the same effect as her submissions in that appeal.

83. I have explained in the other appeal why the exercise of the contractual right to terminate HAH’s employment was not fettered by the implied terms on which she relied.  For the same reasons, I do not accept that the contractual right to terminate the Appellant’s employment was fettered by like implied terms.

Discrimination

84. The Appellant acknowledged that a discriminatory termination would be effective, and confined his case to one of damages for breach of statutory duty.  I express no view on whether, if there were discrimination, the Appellant would be entitled to damages.  The trial judge’s conclusion that there was no infringement of Article 56 of the Employment Law was in my view correct.

85. For convenience, I repeat Article 56 in part –

“56.  Discrimination

(1)  Discrimination for the purposes of this Article means a distinction based on personal characteristics relating to sex, marital status, race, nationality or religion, mental or physical disability that has the effect of imposing burdens, obligations or disadvantages on a person not imposed upon other persons or that withholds or limits access to opportunities, benefits and advantages available to other persons under this Law.  In the case of mental or physical disability, such condition shall not constitute a basis for a discrimination claim unless it is of a long-term nature, generally no less than twelve (12) consecutive months in duration.

(2)  An employer shall not:

(a)   refuse to employ or refuse to continue to employ a person; or

(b)   discriminate against a person regarding employment or any term or condition of employment,

because of that person’s sex, marital status, race, nationality, religion, mental or physical disability, unless there is a bona fide occupational requirement.”

86. The trial judge noted the Appellant’s submission to the effect that discrimination meant treating a person less favourably than others would be treated in the same circumstances on one of the enumerated grounds, and also –

“30. It is provided by Article 56(5) that the Director (of Employment Standards) “may determine what constitutes a bona fide occupational requirement in this Article”.  However, the Director not having done so, it is submitted that a requirement will be “bona fide” for the purpose of Article 56(2) only if it is reasonable, proportionate and pursues a legitimate aim and is necessary for the achievement of that aim.  The burden for bringing the employer within the bona fide occupational requirement exception rests with the employer.”

87. The trial judge said of the EOR policy –

“52 For present purposes the important feature of the Policy is that it is aimed at relationships between employees likely to give rise to the risk of biased decision-taking and not per se at the personal status of any given employee.  Its target is the relationship between individuals employed or who may be employed by the Authority and not at the intrinsic status of an individual.  Thus the Authority may decide not to employ a potential employee or to promote an existing employee because of the relationship (including the advent of marriage) to an existing employee”.

88. The trial judge distinguished the purpose of the EOR policy from the purpose of Article 56 (1) of the Employment Law.  The target of the former was not the intrinsic status of the employee, but the relationship with another employee, and there were many relevant relationships apart from that of marriage.  The target of the latter was the intrinsic status of the employee.  His Honour observed at [53] that –

“…refusing to employ a woman solely because she is married or becomes married to another employee does not infringe Article 56 (2): but for the other employee she would have been employed, whether she were married or not”.

89. His Honour concluded at [58] that in terminating the Appellant’s employment –

“In availing itself of the express provisions of clause 9 of the contract of employment [the Respondent] was, in my judgment, therefore using that termination facility for the purpose of implementing the EOR Policy and was not refusing to continue to employ ML or discriminating against him ‘because of his marital status’ within the meaning of Article 56 (2) of the Employment Law No. 4 of 2005”.

90. The trial judge went on to say –

“60. As I have already indicated, the Defendant has argued that, if the termination of the contract were discriminatory, it had made good the exception of “bona fide occupational requirement” in Article 56(2) of the Employment Law.  Having regard to my decision that the termination was not discriminatory, this point does not arise.  However, if my decision on discrimination is wrong. I have no doubt that the Defendant discharged the burden of proving that dismissal was the result of a bona fide occupational requirement.  Such requirement arose because it was impermissible under the EOR Policy and because of the Conflict of Interest Policy to retain ML and HAH in a direct reporting line and because, due to their seniority, there was no alternative vacant post to which either could be re-deployed.  Were both to be kept on but outside the reporting line, one of them would inevitably have to be employed in a down-graded job, as was the case with ML.  The Defendant was not obliged to keep on the payroll employees who were unsuited to the only available jobs.

61. I would therefore have concluded that on these grounds also there was no breach of Article 56”.

91. The Appellant’s submissions on appeal were extensive, and were of three kinds.

92. As in the other appeal, the Appellant submitted that the trial judge had erred in law in failing to infer discrimination in accordance with King v The Great Britain China Centre (1991) IRLR 513 at [38].  He went so far as to submit that once it might be inferred that marriage might have “had an influence on the process”, it was for the Respondent to show that “it was not marriage”; at another point, that once there was enough material to infer discrimination, it was for the Respondent to disprove it.  That is not correct, and is contrary to King v The Great Britain China Centre.  I adopt in this respect what I have said in my reasons in the other appeal.

93. The Appellant then submitted that it was sufficient that marital status had “a significant influence on the outcome” (referring to Nagarajan v London Regional Transport (1999) IRLR 572 at [19]), and that the trial judge had failed properly to analyse the evidence; had he done so, he said, a clear inference would have been available that “a significant motive within the reasons for the treatment of [the Appellant] was his marital status”.  Two matters in particular were put forward.  One was that the Respondent did not sufficiently try to relocate the Appellant to a position where the EOR policy was not infringed; it was said that AA had accepted in cross-examination that “a simple change in reporting line” could have been considered, but was not.  The other was that AA was motivated by animosity against the Appellant in connection with the marriage and used the EOR policy as a way of getting rid of him.  It was suggested that the EOR policy was implemented as a convenient route to dismissal because of the marriage.

94. The trial judge accepted AA’s evidence that there was no suitable alternative position to which the Appellant or HAH could be deployed to avoid infringing the EOR policy; indeed, AA strove to deal with the problem in other ways.  The evidence of AA in cross-examination included that a change in reporting line was an option, but he said that it was ultimately thought not tenable.  The Appellant’s evidence did not include a solution which the Respondent could have adopted.  And the trial judge expressly found that AA was “exclusively motivated by a desire to implement the EOR policy and not by animosity against ML” (at [54]).  No reason has been shown to displace these conclusions.  Nor in my view has any reason been shown to displace the trial judge’s ultimate conclusion that the Respondent’s purpose in terminating the Appellant’s employment was implementation of the EOR policy, implicitly not as a way of doing what it otherwise wanted to do because of the marriage.  I am not persuaded that there was any deficiency in his Honour’s dealing with the evidence.

95. As his primary submission, however, the Appellant submitted that it was sufficient for discrimination that the Respondent implemented the EOR policy because of the marriage; in doing so, it was treating the Appellant less favourably than others because of the marriage.  The submissions were not specifically directed to the trial judge’s distinction between the intrinsic status of an employee and the employee’s relationship with another, but involved that the distinction was a false distinction because the marriage brought about the relationship.

96. This, I think, was the point of the Appellant’s reliance on Amnesty International v Ahmed [2009] UKEAT 0447_08_1308; (2009) IRLR 884.  An ethnic Sudanese was refused appointment to a position in the Sudan because of concern that her northern origin would place her at risk of physical harm in the civil strife in that country and might cause her to be perceived as partial.  It was held in the Employment Appeal Tribunal that it was open to find that she had been treated less favourably on racial grounds; the refusal was based on her northern Sudanese origin and it did not matter that the reason for declining to appoint a person with that origin was the concern abovementioned.  As I understand the argument, the Appellant submitted to the effect that in the present case it equally did not matter that the reason for terminating a married Appellant was implementation of the EOR policy.

97. Article 56(2) poses a question of “refusal… to continue to employ a person because of marital status”, quite apart from discrimination against the person regarding employment because of marital status.  Causation is common to both avenues to infringement; only one requires a finding in terms of discrimination.  Care must be taken in seeking guidance from legislation in different terms, as is the Race Relations Act 1976 (UK) the subject of Amnesty International v Ahmed.  But that case was concerned with the same notion of causation as that in the words “because of…marital status” (see especially at [38]).  The subject of the enquiry is the reason why the treatment occurred, and the reason may be found in the causally operative characteristic and not in the actor’s motivation.  In my view Article 56 (2) is to be understood in the same way.

98. With respect, I have some difficulty with the trial judge’s distinction between intrinsic status and relationship, when the marital status is what enlivens the EOR policy; and with his ultimate conclusion in part in terms of the Respondent’s “purpose”.  A benign purpose can accompany conduct “because of” a characteristic, and the purpose of implementing the EOR policy does not exclude refusal to continue his employment because of the Appellant’s marital status as a matter of causation.  It may be that the trial judge meant to convey definitive causation, but I am left in some doubt that he correctly disposed of that central question.

99. While I have felt it appropriate to voice this doubt, lest endorsement of the trial judge’s view go by default, the appeal on this issue nonetheless fails.  It is resolved by the proviso of a bona fide occupational requirement.

100. The Appellant submitted, in a reprise of its submission that the Respondent did not sufficiently try to relocate him to a position where the EOR policy was not infringed, that there were other alternatives to termination which the trial judge had not considered, and also that his Honour had failed to assess whether it was necessary and proportionate to terminate his employment.

101. The trial judge found that “[t]he restriction on the employment of relatives in [the EOR policy] generally is, according to the evidence a widespread practice in the UAE” (at [50]).  Its important purpose can readily be accepted, and the particular instance of co-employment of husband and wife in a reporting line is a paradigm case.  To repeat, no reason has been shown to displace that trial judge’s acceptance of AA’s evidence that there was no suitable alternative position to which the Appellant or HAH could be deployed to avoid infringing the EOR policy.  In the circumstances as they developed to the point of the Appellant’s refusal to resign, after initial agreement to do so, in my view it was well open to the Respondent to consider that there was no acceptable alternative to termination.  The Courts should be wary of imposing commercial judgment upon a party, and I respectfully agree with the trial judge’s observation that the Respondent was not obliged to keep on the payroll employees who were unsuited to the only available jobs.  I see no error in his Honour’s conclusion that dismissal was the result of a bona fide occupational requirement.

Gratuity

102. The trial judge disposed of the claim to a gratuity in the same terms as his disposal in the other appeal.  I adopt my reasons in that appeal.

Conclusion

103. As earlier indicated, I agree that the appeal should be dismissed with costs.

CHIEF JUSTICE MICHAEL HWANG:

104. I agree with the conclusions of my brother judges on the outcome of this appeal.

 

                                                                                                Issued by:

Natasha Bakirci 

Assistant Registrar

Date of Issue: 26 November 2014

At: 4pm