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Claim No. CFI 006/2008

THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE

BEFORE JUSTICE DAVID WILLIAMS

BETWEEN

HOWARD NORMAN LEEDHAM

Applicant

-v-

OXFORD INVESTMENT MANAGERS LIMITED

(an exempted company of the Cayman Islands, Certificate

of Incorporation MC - 170960 - 17 July 2006)

Defendant

Hearing: 21 March 2010

Counsel: Mr Howard Leedham (in person)

No appearance by the Defendant

Judgment: 21 June 2010

JUDGMENT

Background

2. In September 2006, he was made an offer of employment by Mr Neil B. Stafford. Amongst other commercial and investment activities, Mr Stafford was and is the Chairman and controlling shareholder in Oxford Investment Managers Ltd, a company incorporated in the Cayman Islands on 17 July 2006 ("the Cayman Company").

3. It was the intention of Mr Stafford and the Caymans Company to establish a wholly owned Dubai International Financial Centre ("DIFC") subsidiary of the Cayman Company and to apply for the necessary Dubai Financial Services Authority ("DFSA") Category Three License. Mr Stafford told the Claimant that, if appointed, he was to be responsible for the preparation, filing, and management of the application.

4. The Claimant accepted the offer of employment on 29 October 2006. His employment commenced in early January 2007. His employment ended in November 2007 in circumstances described in detail below.

5. The Claimant brought these proceedings to recover what he claims is owed to him as unpaid salary. In his Claim Form he said "the company owes me £270,849.33 in unpaid 2007 salary and three months notice salary totalling £124,999.99 (less AED 50,000) equalling £395,557.04". While filing a Defence which disputed the claim and asserted a variety of defences there was no appearance on behalf of the Defendant at the hearing notwithstanding that due notice of hearing had been given.

Procedural History

11. The Claimant, therefore, applied for Judgment by Default but on 23 September 2009 advised the Court that, although the "Defense" lodged on 16 August 2009 was not served in accordance with the Rules of Court, its existence could be interpreted as "the Defendant's ineptly served desire to defend the claim". He acknowledged that in such circumstances any Default Judgment might be overturned. He, therefore, elected not to proceed with the application for a Default Judgment.

12. It will be necessary to consider the unsigned typed three page Defence in detail below. For present purposes it is sufficient to record its conclusion which stated:

"5. Conclusion

In conclusion, Oxford DIFC, the purported Defendant, maintains that:

(a) the Claimant was never an employee of Oxford DIFC, had no contractual relationship with the company and that Oxford DIFC does not owe him any money;

(b) the Claimant was at all times employed by Vientia;

(c) the Claimant had agreed to take only 50% of his salary until the Fund closed. The Fund has still not closed; and

(d) any claim that the Claimant may have could only be against Vientia or Oxford Cayman, that each of these entities lies outside the jurisdiction of the DIFC Courts and any such claim should be brought either in the Jersey courts or the Cayman Island courts."

13. By email on 8 October 2009 Mr Stafford was notified that a Case Management Conference would be held on 15 December 2009. There was dialogue with Mr Stafford about the suitability, from his standpoint, of that date for the Conference. He eventually agreed by email of 13 October 2009 to the conference date of 16 December 2009 which the Court had by then specified as the conference date. However, as noted by the presiding Justice, "On 16 December 2009 Mr Stafford was sent the Case Management Directions of Colman J of December 2009, the Defendant having failed to appear due to the ill health of its representative, Neil Stafford".

Issues for Determination

14. The Case Management Directions ordered that the following issues be determined at trial:

Issue (a): Name and True Identity of Defendant

"Case CFI 006/2008

21 March 2010

APPLICATION TO AMEND

1. As Claimant, I hereby apply for the permission of the Court to amend my Claim Form and all subsequent documents pursuant to DIFC Rules 18.2 and 18.12 by deleting the words (DIFC Registered No.0393) and adding the words "Limited" (an Exempted Company) incorporated in the Cayman Islands (17 July 2006) Certificate of Incorporation dated 17 July 2006, Certificate Number MC-170960).

2. I submit that there is no need to serve the Defendant again since the Defendant has filed a Defence (Trial Bundle document 13) acknowledging that Oxford Investment Managers Limited (Cayman Islands) has been served at its Registered Office in the Cayman Islands and the Defence itself shows that the Defendant clearly understands the nature of the case being made against it.

Howard Leedham

Claimant"

18. The Court noted that the relevant DIFC Rules followed very closely the English CPR Rules in relation to the grant of permission to amend the name of a party. The leading English case is Cobbold v Greenwich LBC [9 August 1999] unreported Court of Appeal, which contains a dictum of Lord Justice Peter Gibson. This dictum has been relied upon in many later cases, as is noted in Civil Procedure Volume 1 of the White Book 2007, page 420. Lord Justice Gibson said the overriding objective of the CPR is that the Court should deal with cases justly. That includes, so far as practicable, ensuring each case is dealt with not only expeditiously but also fairly. Amendments of the name of parties in general ought to be allowed so that the real dispute between the parties can be adjudicated upon.

19. In this case the failure to specify the correct name of the defendant company was understandable in view of the way in which Mr Stafford and other individuals employed within the Stafford group of companies used letterhead containing only the words "Oxford Investment Managers" and also because of the frequent use by Mr Stafford of different companies within his Oxford Investment Managers group for different purposes. The Court held that the inadequacy of detail in the name of the Defendant was a genuine mistake and ought to be remedied to avoid injustice.

20. The Court considered that it was appropriate for the application to be granted without the need to serve the application itself on the Defendant and it so ruled. The Defendant had filed its Defence which specifically addressed the issue of the proper Defendant. It advanced separate defences depending on whether the claim was construed as one against the DIFC Company which had been formed in mid-2007 but then de-registered or the Cayman Company. Mr Stafford is the controlling shareholder of the Cayman Company. It was, therefore, only fair and just to allow the amendment rather than adjourn the proceedings and require service of the application to amend the name. The Defendant had every opportunity to attend the hearing and the Claimant should not suffer further delay by the Court insisting on service. Even if the Defendant had been present it could not have successfully resisted the application.

Issue (b): Jurisdiction

21. The Defendant challenged jurisdiction in that section of the Defence headed Identity of Defendant which stated:

24. In my judgment there is no doubt that this Court has jurisdiction under Article 5A (b) since, as discussed in more detail below, the employment contract had its genesis within the DIFC was signed within the DIFC, and performed within the DIFC and, to be more specific, largely in the offices of the Cayman company or its DIFC subsidiary which were leased within the DIFC. The salary payments made by Mr Stafford on behalf of the Cayman Company were sent to a bank within the DIFC. It matters not that one of the parties to the employment contract was a foreign corporation based elsewhere than in the Dubai International Financial Centre.

Issue (c): Did the Claimant have a contract of employment with the Defendant Cayman Islands Company?

Issue (d): Is the Claimant bound by any agreement for the reduction of his salary as alleged in the Defense and, if so, what were the terms of that agreement?

Oral evidence of Mr Burkett (DIFC) and Ms Klitcher (DFSA)

31. She also confirmed that the DFSA had been promised many times by the Applicant, Oxford Investment Managers proof of the lodging in a local bank of the required minimum capital requirement. However, it was never supplied and in the end the DFSA, in August 2007, refused to grant any further extension of time to satisfy this requirement.

The Witness Statements

33. Here were invoices left unpaid by Mr Stafford including payment for the office rent and payment for the stationery that were usually paid on a monthly basis. In September 2007 or thereabouts Mr Leedham informed her that their salaries, which were supposed to be paid by Mr Stafford, had failed to arrive. Mr Leedham then paid her salary from his pocket. She said that on reflection this was not right. So she sent email to Mr Stafford emphasising the suffering he was inflicting on her and her family, being just a very ordinary individual in this part of the world and pleaded him to pay what he actually owed.

34. She said she also accentuated in her message to Mr Stafford that she accepted the job with OIM with full confidence that she would be leaving her company for a better company where she could benefit more but all her hopes had disappeared because of what Mr Stafford did to her and to Mr Leedham.

35. She stated that Mr Stafford did not reply to her first email, so she sent a follow up message which he answered. He promised to pay what he owed. As far as she knew she was the only one paid while Mr Leedham did not receive his salaries from Mr Stafford.

36. She said that from June 2007 till November, she and Mr Leedham had remained dedicated to their jobs despite the situation being abandoned totally by Mr Stafford. She concluded by saying she was lucky as Mr Leedham had been there to support her. He was a man with a very kind heart as, despite the fact there was no money from the fund where the salaries were to be taken due to Mr Stafford's unfavourable act. Mr Leedham had provided her salary without hesitation from his pocket

37. As a result and in her own honest opinion, Mr Leedham deserved to be paid for all the services he had done for Oxford Investment Managers.

38. There was also a statement from Ms Nada Al-Assaad Kivela who was an employee of OIM in the position of Office Manager from February to May 2007. In that capacity, her activities included liaising with parties in the DIFC and DFSA concerning OIM's registration as a new company, fulfilling administrative tasks, and coordinating various business correspondence with employees and external prospective customers and partners. Her immediate supervisor was OIM Executive Director, the Claimant, Mr Howard Leedham.

39. During his tenure, Mr Neil Stafford was frequently consulted as the ultimate decision maker and approver, and was involved day to day operations, including financial transactions such as salary payment.

40. Ms Kivela said payment of her salary was consistently late (with one exception), and was only paid out "after my escalation to Mr Leedham and his follow up". She left OIM because of various instabilities in the company, including the unreliable salary payments

41. The other witness statement was from Mr Robert C. Bush Jr. Prior to meeting Mr Stafford in January 2007 he said he had developed a trusting business relationship with the Claimant who had licensed the very first Hedge Fund in the DIFC prior to joining OIM as their Executive Director.

42. The Claimant had introduced him to Mr Neil Stafford and the Claimant's association with Mr Stafford gave credence to Mr Stafford's claims of significant wealth and sizeable business deals. Given his network of contacts in Dubai Mr Bush was asked by Mr Stafford if he would provide introductory services to OIM. Mr Bush was available for such work and negotiated a contract which included a percentage of funds raised into OIM's proposed fund and an unconditional retainer of US$10,000 per month for three months, totalling US$30,000.00.

43. His evidence was that the agreement was discussed at length with Mr Stafford and signed by him on 6 February 2007. Mr Bush then proceeded to introduce Mr Stafford to several institutional investors, one of note being Dubai Islamic Bank (DIB) at CEO level. During the meetings with DIB Mr Bush was fairly taken aback by some of Mr Stafford's claims of assets under management, namely US$300m, which he now knew not to be true.

44. During the second meeting at the DIB Mr Stafford claimed direct links with the leadership of Libya but he was embarrassed by DIB's CEO who knew the leadership personally and upon his questioning of Mr Stafford the latter became embarrassed and evasive.

45. A further meeting was scheduled with DIB, but DIB subsequently cancelled without provision of any reason to OIM. Sometime later this was revealed to be because of their doubts over Mr Stafford's credibility and his outlandish claims.

46. As to his remuneration Mr Bush said that upon the first retainer payment being due Mr Stafford became difficult to contact. Mr Stafford then informed Mr Bush that he would only pay the retainer at the end of the three-month period and not in accordance with his signed agreement. Upon the completion of the three months, and several more prestigious introductions for OIM Mr Bush requested his full retainer payment. Mr Stafford became extremely evasive but said on several occasions that he would pay. In the event he never did Mr Bush found out two months later that he had left Dubai with no fixed date for return. He was subsequently informed that OIM had been evicted from the DIFC for non-payment of rent. In conclusion Mr Bush said that:

47. The Court finds that all of the evidence adduced by the Claimant, both oral and written, strongly supports the contention of the Claimant that he was employed by Oxford Investment Managers in the DIFC in Dubai from 2 January 2007 until 15 November 2007.¹ The real question is by which corporate entity. I refer to a "corporate entity" because there was no suggestion that Mr Stafford himself was the Claimant's employer. The Defence did not suggest any such thing. It asserted that the corporate entity which employed the Claimant was a company called Venetia. I shall consider this allegation when outlining the evidence of the Claimant.

Evidence of Claimant

49. A formal letter offering the Claimant a position was handed to the Claimant at the offices of Norton Rose, Solicitors, at their offices in the DIFC on 29 October 2006. Norton Rose was the law firm which customarily represented Mr Stafford and the Cayman company. The Claimant, Mr Stafford, and a lawyer from Norton Rose, Mr Graham Muir, were present.

50. The letter was in the following terms:

The Claimant emphasised the Cayman Island address at the foot of the letter.

52. The Court finds this evidence is truthful and accurate. By the time the employment commenced this charade had ended. As noted below, the Defence acknowledged that in 2007 the Claimant had been seconded to the Cayman company.

53. The Claimant orally accepted the offer at the meeting and shortly thereafter resigned from his then current position and was "basically unemployed for the two months while I waited for my non-compete to expire". His contract required him to commence work no later than 1 February 2007.

54. The Claimant's oral evidence was that in discussions with Mr Stafford in November/December 2006 when he was not working, Mr Stafford advised him that Claimant would have the title Executive Director in the DIFC. Thus the title he had from the beginning of his employment on 2 January 2007 until his resignation.

55. There was produced to the Court by Claimant a letter dated 2 January 2007 addressed to the Emirates Bank. He said that he had needed such a letter to provide to his bank, Emirates Bank, to prove to the Bank that he was back in employment. The Claimant had drafted it and requested Mr Stafford to sign it. Mr Stafford made some additions and alterations to it including the description of the DIFC company and then signed it.

56. At the end of January 2007, the Claimant asked Mr Stafford how he would be paying his salary. He replied "by cheque". The Claimant asked Mr Stafford how long it would be before the first salary cheque was paid. Mr Stafford then asked the Claimant if he would accept 50% of his salary "until the fund closed which was expected to be in a couple of months". The Claimant construed this as being February or March 2007. The Claimant reluctantly agreed to the proposal.

57. However, when the first cheque arrived it was for £20,000 which was much less than the 50% promised.

58. Toward the end of February a short lease in the DIFC was taken up. The Claimant said he negotiated the lease on behalf of the Cayman company. (The DIFC subsidiary was not incorporated until 14 May 2007).

59. There was produced to the Court a true copy of a Board resolution of the Cayman company passed on 11 March 2007. This was in the following terms:

60. In his evidence the Claimant said that the securing of the lease were authorised by the Cayman company and secured on its behalf as required by the resolution. The Claimant pointed to these facts as showing that he must have been employed by the Defendant company since the DIFC subsidiary had not been formed at this point. The Court notes in passing that this evidence is strongly supported by the statement in the Defence, referred to in paragraph 22 above, that "the Claimant was for a time effectively seconded to the company (Oxford Cayman) whilst the fund was being promoted".

61. The Court accepts the Claimant's evidence that as from the outset of his employment, especially since the DIFC company was not in existence in January 2007, that he was acting as an employee of the Cayman company at the direction of its controller Mr Stafford. The date of incorporation of the Cayman entity was 2006 and the certificates for the DIFC entity were not issued until May 2007.

62. The Court referred the Claimant to the Defence which asserted that the Claimant had always been an employee of Vientia. The Claimant said that the Defence was the first time it had been suggested that he was all along an employee of Vientia. He confirmed his earlier explanation (see paragraph 50 above). He stated that he had never conducted any business for Vienta and was never asked to. When asked to look at the statement in the Defence that:

63. The Claimant said he had never had anything to do with Vientia Capital Partners and it was never suggested by Mr Stafford or anyone else until the Defence was filed that he had been employed by Vientia. The Claimant produced evidence that that company had been struck off the Jersey Companies Register on 1 October 2008.

64. As to the Defence contention, noted in paragraph 12(c) above, that "the Claimant had agreed to take only 50% of his salary until the Fund closed and the Fund still has not closed, it is necessary to examine the events in mid-2007. The Claimant wished to purchase an apartment in Dubai. He needed his unpaid back pay to help finance the purchase. He explained the situation to Mr Stafford and said he needed his back pay in order to put enough funds down to reduce the size of the mortgage on the property. He emphasised to Mr Stafford that he would only buy the apartment if he was going to see good my back pay in the immediate future. Mr Stafford said, "I don't see a problem".

65. The Claimant then provided a letter to the National Bank of Dubai which was to be the mortgage company. The letter confirmed the amount of his salary because the size of the salary as stated on his salary letter did not match the inflow or the deposits from Oxford Investment Managers. Four documents were signed by Mr Stafford for provision to the Banks. One of them, a letter Mr Stafford signed on 11 June to the Bank of Dubai referred to the unpaid salary. It stated:

66. The Claimant said that the £130,000 referred to in the letter represented the unpaid amount of the agreed salary. The Court finds the reference in the letter to the then unpaid salary of £130,000 amounts to an unequivocal statement by the Defendant that the Claimant had not foregone any salary but had agreed earlier only to defer payment. The letter states unequivocally that the unpaid salary "will be payable no sooner than 30 June 2007 and no later than 31 December 2007 as per his request". This is wholly inconsistent with any claim that the salary had been foregone permanently.

67. The failure of Mr Stafford or the Defendant to pay the back pay owing became a serious problem for the Claimant. He was later told by Mr Stafford that the back pay would come out of the Minimum Capital Deposit which would have to be paid on behalf of the DIFC subsidiary in order for it to achieve registration with the DIFSA. As to that, the evidence of the Claimant was as follows:

69. As to the registration of the DIFC subsidiary, progress had been made in May but its bank account had not been seeded. The amount needed on 17 July 2007 was in the vicinity of US$975,000. Mr Stafford emailed saying the money was on the way. The Claimant negotiated extensions of time with the DFSA but in the end the funds did not materialise. The Claimant advised that it would be damaging to Mr Stafford's reputation and any future dealings in the DIFC if the application was refused and he recommended it be withdrawn. Mr Stafford agreed and it was withdrawn.

70. In late September 2007, at the instructions of Mr Stafford the Claimant commenced work on a DIFC reapplication. At that time the Claimant was under great financial strain. Despite significant protest, Mr Stafford basically made him remain on half-salary until the end of August 2007. At the end of August the Claimant was working on the revamp of the original application. He was still emailing Mr Stafford frequently and calling him trying to get payment of the back-pay. By now he owned the apartment because he would have lost his deposit if he had not bought it. He was now having to make good on the mortgage, after having to put twice the down-payment that he had expected to have to put down.

71. The re-application work continued but at the end of September no back salary had arrived and Mr Stafford was completely unresponsive. The Claimant continued to correspond with him and to ask him repeatedly what was happening with salaries.

73. The Court finds that there was no agreement for the reduction of his salary so as to preclude a full recovery of his agreed salary. The Court consider that the arrangement to take 50% only was an agreement to a payment of 50% only for a reasonable time, not as alleged at one point by Defendant, "until the Fund" closed. A reasonable time had long since passed by the time of the Claimant's resignation in November 2007. This defence fails accordingly.

74. For all of the foregoing reasons the Court answers Issue (c) "Yes" and Issue (d) "No".

Issue (e): Is the Defendant bound by an admission in the letter of 8 January 2009 that it was liable for unpaid salary in the amount claimed or any amount?

77. It will be noted that the offer was not expressed to be without prejudice. The signed offer letter explicitly acknowledges in paragraph 1 that Oxford Investment Managers owes the full amount of the claim.

78. The offer was not accepted by the Claimant because of the uncertainty of paragraph 1. The letter amounts to an admission of liability for the full amount claimed. However, the Court was not given details about the circumstances in which the offer was made, and in particular whether the offer was made in the course of without prejudice negotiations. The Court is inclined to the view that paragraph 1 of the letter contains an admission that the Defendant owes the Claimant £395,557.04. However, this is not a matter of moment because the Court finds, on the evidence, that the sum of £395,557.04 is due and owing and nowhere in the Defence was there a challenge to the precise quantum of the claim. The only aspect of quantum which was in dispute was the suggestion that the Claimant had agreed to defer payment of 50% of his salary. The Court has rejected this Claim.

Issue (e): What Amount is Due?

Issues (f): Interest

81. I consider that, in the circumstances of this case, the Claimant is entitled to an award of pre-judgment interest. However, the Court has a discretion as to the period for which interest should run. As to the exercise of the discretion in this case, in discussion with the Court the Claimant acknowledged that his lawyer's letter of 11 February 2008 was the first occasion on which he had notified the Defendant of the precise amount of the claim he was making. An appropriate date from which interest should run is, therefore, 25 February 2008 i.e. 14 days after the solicitor's letter of 11 February 2008.

82. The Claimant is also entitled to interest on the amount awarded under this judgment by virtue of DIFC Law No.10 of 2004, DIFC Rule 45.19 (Interest on Judgment Debts).

83. As to the rate of interest, the Court holds that the rate for both pre and post-judgment shall be as prescribed in Practice Direction No.1 of 2009 (Interest on Judgments) and Practice Direction No.1 2009 (Interest on Judgments (Clarification)). They both provide that "a Judgment of the DIFC Courts shall carry interest, from the date the Judgment is entered, at the rate of 1% over the Emirates Interbank Offer Rate ("EIBOR") or such other rate as the Judge may prescribe in the Judgment. Reference to Eibor is to the Eibor three month reference rate as at the date of Judgment".

Issue (g): Costs and disbursements

89. As to that limit the next question is what would have been the costs in this case if the Applicant had been represented by a lawyer and how should the Court establish the starting point from which the two-thirds calculation is to be made? Based on my own experience of fees of counsel in a DIFC case such as the present, I consider that the hourly rate of an experienced law firm associate with moderate Court room experience would be AED1500 per hour which approximates at current exchange rates to a US400 hourly rate. I consider that this rate should be applied to half of the 150 hours claimed since I regard 75 hours as a more realistic number of hours for this case. This results in a costs limit of US$30,000 and the Court must not award any greater sum than two thirds of this amount. Two thirds of that sum amounts to US$20,000.00 and the Court therefore awards $20,000.00 in this case. Out of pocket disbursements

90. As the Court file shows, the Claimant has had to pay filing fees and other disbursements totalling US$3,850.00. Decision

91. In summary, the Claimant is entitled to judgment for the amount of his claim plus costs and disbursements. It is, therefore, ordered that the Defendant forthwith pay the Claimant:

Justice David Williams

Date of Issue: 22 June 2010