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 SCT JUDGE SHAMLAN AL SAWALEHI
Between
CAMELLIA
Claimant
and
CALLISTER
Defendants
JUDGMENT OF SCT JUDGE SHAMLAN AL SAWALEHI
UPON hearing the Claimant and the Defendants
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS ORDERED THAT:
The Claimant's claim be dismissed.
THE REASONS
Parties
1. The Claimant is a compliance, governance and risk consultancy firm established in the
DIFC.
2. The First
Defendant, Callister was employed by the Claimant as a consultant, and later established her own consultancy firm by the name of Callister.
Background and Preceding History
3. The Claimant requested that the First Defendant pay compensation for breach of the post-employment obligations stipulated in her Employment Contract. The First Defendant contested the Claimant's request, which consequently led the Claimant to file this application before the Court, seeking compensation for all revenues the First Defendant had earned from the provision of compliance services either directly or through her consultancy company, Callister, during the six month period from 4 December 2011 to 3 May 2012. The Claimant estimated the damages caused to be in the sum of AED 100000.
4. No settlement was reached by the parties at the end of the consultation and, consequently, the case was sent for adjudication. On 4 July 2012 I heard both parties' submissions
Particulars and Defence
5. On 16 May and 18 June 2012, the Claimant submitted written Particulars of Claim and Further Particulars of Claim with supporting documents and evidence consisting of:
(a) A mutual agreement dated 4 December 2011 with regard to the termination of the First Defendant's Employment Contract;
(b) The First Defendant's Employment Contract;
(c) Exchanges of emails between the parties and companies named XXXX and XXXX;
(d) Calculations of monthly revenue from 1 April 2011 to 29 February 2012 in relation to the companies XXXX and XXX.
6. On 22 May and 3 July 2012, the First Defendant submitted a written Defence and Skeleton Arguments with supporting documents consisting of:
a) Notice of Termination dated 27 July 2011;
b) Documents that related to the First Defendant's previous job with the Claimant.
7. In its Particulars of Claim, the Claimant argued that the Terms and Conditions of Employment (the "Employment Contract") that governed the First Defendant's employment at Camellia included express restraining covenants that provided that the employee would not carry on any competing services with regards to Camellia for a period of six months after the termination of the Employment Contract. (Clause 23 - Restraining Covenants). The Claimant further argued that shortly following the mutual termination of the First Defendant's contract on 4 December 2011, the latter had been in contact with at least two existing clients of Camellia Limited, companies named Camellia and Callister, and had entered into contracts to provide competing consultancy services to those clients, through a consultancy company - "Callister" - that she had established in the Sharjah Airport International Free Zone. The Claimant had advised the First Defendant by email on 12 March 2012 that the terms of the mutual termination did not impact on her post employment obligations as per her Employment Contract; that those post-employment obligations had commenced on 4 December 2011; and that as a result of her actions, Camellia had suffered loss and damage. In sum, the Claimant alleged that the First Defendant had willfully ignored the post-employment obligations as stipulated in her signed Employment Contract and that her actions had caused damage to Camellia Limited's business.
8. In her defence, the First Defendant denied in full the claim that she had willfully ignored her post-employment obligations and that her actions had caused damage to the Claimant's business. The First Defendant argued that the Claimant had no legitimate case, since all matters relating to her Employment Contract had been settled in consultation with the DIFC Small Claims Courts on 4 December 2012 following her claim against the Claimant in Application. The First Defendant further denied that the Claimant could rely on or seek to enforce the non-competition clause 23 in her Employment Contract, because it failed to adequately define the scope of the geographical location and the type of business restrictions to which it related and, as a consequence, was unenforceable. Moreover, the First Defendant argued that she had not provided any consultancy services to any of the Claimant's existing clients from 27 July 2011 (the date of her termination notice). However, as of 1 March 2012 the First Defendant had started to provide consultancy services, for a period of just over seven months.
Finding
9. I have reviewed Clause 23 (b) in Section B of the Employment Contract at issue, which reads as follows:
"You are bound by the terms of a restraining covenant as follows … For a period of 6 months following termination of your employment you shall not carry on or assist in the carrying on of or be directly or indirectly engaged, concerned or interested in any capacity whether as principal servant, employee, agent, consultant, director or partner, business which is wholly or partly in competition or seeking to compete with any business carried on by the firm".
10. In this connection, I have referred to leading English case-law on the subject. In CEF Holdings Limited and City Electrical Factors Limited v. Brian Mundey and Others [2012] EWHC 1524 (QB), Mr Justice Silber summarised the settled legal principles applicable to determining the issue of the reasonableness of a restrictive covenant as comprising, inter alia, the following:
i) "A restrictive covenant is void as an unlawful restraint of trade unless the employer can show that it goes no further than is reasonably necessary to protect his legitimate business interests": Herbert Morris v Saxelby [1916] 1 AC 688;
(ii) There must be some subject matter which an employer can legitimately protect by a legitimate covenant. Indeed Lord Wilberforce said in Stenhouse v Phillips [1974] AC 391 at 400 E "the employer's claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation". This was followed by Sir Christopher Slade in Office Angels Limited v Rainer-Thomas [1991] IRLR 214;
(iii) "The court cannot say that a covenant in one form affords no more than adequate protection to a covenantee's relevant legitimate interest if the evidence shows that a covenant in another form, much less far reaching and less potentially prejudicial to the covenant would have afforded adequate protection" (per Sir Christopher Slade in Office Angels [49].)"
11. In the present case, I am in agreement with the First Defendant that Clause 23 (b) in Section B of the Employment Contract is an invalid term as it neither explicitly defines the geographical scope of the provision nor the exact area that the former employee shall be restricted from acting in; neither does it identify clearly and narrowly the type or scope of work that is subject to such restriction. Therefore, I am of the view that this clause is unenforceable; that it is untenable for the Claimant to seek to rely on this term and that it cannot be upheld.
12. Furthermore, I have found that the evidence submitted by the Claimant is neither sufficient nor reasonable to establish that the First Defendant did wholly or partly compete or seek to compete with any business carried on by the Claimant.
13. Therefore, I dismiss the Claimant's compensation claim for the reasons cited above.
Issued by:Mark BeerRegistrarDate of Issue: September 2012
