Claim No: CFI-027-2013
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 FIRST INSTANCE
BEFORE JUSTICE SIR RICHARD FIELD
BGC BROKERS L.P.
Hearing: 3 & 4 May 2015
Counsel: Edward Kemp (instructed by Clyde & Co LLP) for the Claimant
The Defendant as a litigant in person
Judgment: 31 May 2015
JUDGMENT OF JUSTICE SIR RICHARD FIELD
Summary of Judgment
The Claimant, a foreign recognised company in the DIFC, authorised and regulated by DFSA, brought a claim against the Defendant, a former employee for the recovery of a loan advanced under a loan agreement which formed part of the employment contract between them. On 20 April 2012, the Claimant loaned the Defendant GBP 200,000 which was to be repayable from his net partnership distributions on his partnership units from BGC Holdings LP. Clause 3 of the Loan Agreement provided that the loan would be repayable on a pro-rated basis if inter alia, “the Lender lawfully dismissed the maker”.
Clause 10. 1 of the Defendant’s employment contract’s terms and conditions provided that the Employer could dismiss him “summarily (i.e. without notice) in circumstances where (his) conduct warrants termination and a reasonable employer would have terminated (his) employment and/or where it is entitled to do so at common law.” This reflected Article 59A of DIFC Law no. 4 of 2005, as amended (“the DIFC Employment Law”).
Justice Sir Richard Field found on the evidence that the Defendant had in fact blackmailed or attempted to blackmail the Claimant (by implicitly threatening to make his allegations of underhand dealings public and/or to report his allegations to the DFSA, unless he was paid not to do so). This conduct amounted to a fundamental breach of the Employment Contract so as to justify dismissal at common law, in that it was totally inconsistent with the Defendant’s duty to act honestly and ethically and as his duty to maintain the mutual trust and confidence that was at the heart of the employment contract. Moreover, the Defendant’s dismissal was lawful within the terms of Article 59A of the DIFC Employment Law, reference being made to Justice Roger Giles’ judgment in the case of McDuff v. KBH Kanuun Limited CA 003/2014 where it was held that in evaluating whether a dismissal satisfied the requirements of DIFC law, it must be found that the hypothetical reasonable employer would have terminated the employee. Justice Sir Richard Field took the view that a reasonable employer would not have taken a lesser course short of summary termination in the circumstances of this case.
It followed that the Claimant was entitled under Clause 3 of the Loan Agreement to be paid the balance outstanding on the loan, at the termination date calculated in accordance with that clause. Directions were given that within 14 days of the date on which this judgment is issued, the Claimant should serve written submissions in support of its claimed entitlement to recover the balance due under the Loan Agreement in US dollars and showing how the interest claimed had been calculated. Thereafter, the Defendant should serve his reply submissions (if any) within 14 days, with the Claimant having a final right of reply within 7 days thereafter.
This summary is not part of the Judgment and should not be cited as such
UPON hearing Counsel for the Claimant and the Defendant as a litigant in person
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
Amna Al Owais
Date of Issue: 31 May 2015
1. This is a claim for the recovery of a loan advanced under a loan agreement that formed part of the contract of employment between the Defendant (“Mr Abourahim”) and the Claimant (“BGC”).
2. BGC is a foreign recognised company in the Dubai International Financial Centre (“DIFC”). It carries on business, inter alia, as an inter-dealer brokerage, facilitating trades between institutional banks and other counterparties and is authorised and regulated by the Dubai Financial Services Authority (“the DFSA”).
3. Mr Abourahim started working for BGC on 26 March 2012 as the manager of BGC’s GCG and G10 desk in the DIFC office (“the Desk”). The terms of his employment were contained in three agreements all dated 24 November 2011: (1) a brokers contract (“the Employment Contract”); (2) a letter agreement relating to partnership units; and (3) a loan agreement and promissory note (“the Loan Agreement”).
4. On 20 April 2012, BGC loaned Mr Abourahim GBP 200,000 which sum was to be repayable from his net partnership distributions on his partnership units from BGC Holdings LP.
5. Clauses 3 and 4 of the Loan Agreement provided (in relevant part):
“3. “Notwithstanding any other provisions of this Agreement, the Loan will be repayable on the Maker [viz Mr Abourahim] on a pro-rated basis on the occurrence of any of the following events:
(a) If the Lender [viz BGC] lawfully dismissed the Maker;
(b) For the purposes of sub-clause 3 (a) only, the Loan will be written off by the Lender at a rate of 1/5 (one fifth) for each complete twelve (12) month period of the Initial Period during which the Maker remained employed by the Lender.
4. Maker will pay interest on all sums due under this note at 3% per annum or such greater rate as applicable tax law would impute to this loan and note if that rate is not charged hereon.”
6. Clause 10.1 of the Employment Contract’s Terms and Conditions provided:
“Notwithstanding anything to the contrary in your employment contract and these terms and conditions, the Employer may dismiss you summarily (i.e. without notice) in circumstances where your conduct warrants termination and a reasonable employer would have terminated your employment and/or where it is entitled to do so at common law, including, but not limited to, substantial breach of any terms of the employment contract and these terms and conditions or the Employer’s policies and procedures, wilful refusal or neglect to carry out instructions or duties, dishonesty or other instances of serious misconduct or serious incompetence. You are advised to refer to the Employee Handbook for a non-exhaustive list of the examples which are normally regarded as gross-misconduct.”
7. The italicised words in Clause 10.1 above reflect the terms of Article 59A of DIFC Law No.4 of 2005, as amended (“the DIFC Employment Law”) which provides:
“An employer or an employee may terminate an employee’s employment for cause in circumstances where the conduct of one party warrants termination and where a reasonable employer or employee would have terminated the employment.”
8. From about the end of January or beginning of February 2013, Mr Abourahim began to complain to Mr Larry Fernando, the Managing Director of the DIFC Mint Partners trading division of BGC, and later to Mr Carsten Girst, the Senior Executive Officer (SEO) of the Dubai office, that two employees working under him on the Desk, Mr Ilyas Asad and Mr Kashif Butt had received much more generous sign-on terms than he had, whereas he was more experienced than they and was their manager on the Desk. Mr Abourahim also made veiled suggestions that Mr Asad and Mr Butt were somehow being improperly provided with business by a cousin who worked for a competitor in London. Mr Girst told Mr Abourahim in February 2013 that if he had any specific allegations he should inform him (Mr Girst) or Mr Richard Barnett, a Senior Managing Director based in London to whom Mr Abourahim reported, or Mr Fernando.
9. Mr Abourahim’s discontent was aggravated when BGC told him in March 2013 that he had been overpaid GBP 51,000 by way of bonus as part of his February 2013 remuneration and that this sum would be deducted when the next bonus payment was made. So far as he was concerned, the GBP 51,000 was due to him as legitimate expenses which stood to be paid before the Desk’s bonus pool was distributed amongst those in the pool.
10. In March 2013, Mr Abourahim told Mr Girst that he no longer wished to work with Mr Asad and Mr Butt and thereafter he ceased to do so.
11. In mid-June 2013, Mr Abourahim complained in an email to, inter alios, Mr Barnett and Mr Fernando, that he was not getting enough support in establishing Euro Medium Term Swaps. He said that he was starting to lose hope as to what he could do to make things better.
12. In July 2013, BGC informed Mr Abourahim that GBP51,000 would be deducted from his August remuneration and in the meantime no bonus would be paid to him in respect of the second quarter. This angered Mr Abourahim who was expecting a bonus of GBP110,000 and had understood that his expenses claim had been accepted. In August 2013, Mr Abourahim was away from work without permission and was asked for an explanation. On 28 August 2013 Mr Barnett asked him to attend a meeting with him in two days’ time in London at which someone from HR would be present, and Mr Abourahim agreed to do so. However, on 30 August 2013 he arrived between 10 -15 minutes late for the meeting and to his intense annoyance, the meeting was cancelled.
13. Mr Abourahim eventually met Mr Barnett on 3 September 2013 in London. In the course of this meeting Mr Abourahim alleged that Mr Asad and Mr Butt were dealing improperly in conjunction with Mr Simon Mirza who was employed by a competitor and was Mr Asad’s cousin and Mr Butt’s brother-in-law. Mr Abourahim also said that he thought that since he had been making these allegations BGC had been trying to squeeze him out from his employment. Mr Barnett said he would speak to senior people in the London office and that Mr Abourahim’s allegations would be looked into.
14. By an email dated 9 September 2013, Mr Barnett informed Mr Abourahim that his bonus would be signed off but would be reduced by the sum of GBP51,000 which would be re-distributed amongst those in the bonus pool. This letter made Mr Abourahim angry. He subsequently met Mr Girst in the corridor and they went together to Mr Girst’s office where they had an unscheduled meeting. Mr Girst’s sworn evidence of what happened at this impromptu meeting (see paragraphs 10–17 of his witness statement) is as follows:
“10. During the afternoon of 9 September 2013, Mr Abourahim met him in his office. This was not a pre-arranged meeting; he just dropped in on a casual basis. He asked Mr Abourahim how he could help him and Mr Abourahim told him that around GBP50,000 worth of his bonus award was in dispute and that he wanted to get paid “or else”. Mr Abourahim went on to make allegations of “underhand dealings” against Mr Asad and Mr Butt, as well as an individual employed by a competitor of BGC, whom he did not name or refer to with any particularity. He did not believe that Mr Abourahim referred to being “squeezed out” but he (Mr Girst) made it clear to Mr Abourahim that if he did not feel he could be specific about his allegations with anyone internally at BGC, then he should consider reporting the matter to the DFSA. Mr Abourahim made negative vague references to being in possession of employment documentation of his colleagues and taped conversations between him, his colleagues on the Desk, and the individual at the competitor. Mr Abourahim had initially said that he did not want to blackmail anyone and only wanted to discuss how to resolve his issues. Mr Girst asked Mr Abourahim how he saw the situation developing and what his best-case scenario was. Mr Abourahim indicated clearly to Mr Girst that he wanted to be released from his fixed-term employment contract with BGC and went on to say that any such arrangement should include payment of the bonus that he considered was due to him and his entitlement to the value of his partnership holding. Finally, he stated that he would require a “payment for his silence”. It was very clear to Mr Girst that Mr Abourahim was attempting to blackmail BGC. He understood Mr Abourahim was seeking a payment from BGC in return for his (misguided) silence arising from his belief that an inappropriate arrangement had been put in place between his colleagues on the Desk and a broker at a competitor. Mr Girst was furious at Mr Abourahim’s attempt to blackmail BGC in this manner. He was particularly disappointed in Mr Abourahim’s behaviour as he had tried to forge a positive relationship with him, and had always offered to help him in any role as SEO given that he was sometimes unhappy about working on the Desk or with his colleagues’ remuneration. At this point, he told Mr Abourahim that he was surely better than that (attempting to blackmail BGC) and ended the meeting by asking Mr Abourahim to leave his office immediately. He did not tell Mr Abourahim that he would “see what I can do.”
15. Mr Girst’s evidence was very much in line with his emailed account of what happened, sent at 16:49 the same day to Suran Samaringhe, BGC’s Employment Counsel:
As per our phone call just now I wanted to alert you to a conversation that I had with Mourad Abourahim in my office earlier today.
He came to see me and I asked him whether he and Richard had their meeting and everything was sorted. He told me they had and his bonus will get paid this week minus gbp50K that is still in dispute.
I commented that this is good news but he was clearly not happy. He told me this is his money and he wants to get paid or else …
He continued to make all sorts of allegations about underhand deals with an employee from another company and told me that he had copies of contracts and loan agreements of his old team members in Mint and also taped conversations between himself, his old team members and the person in question, which you are telling me Richard is dealing with already.
He was rambling on about not wanting to blackmail anyone and just wanting to have an in-house discussion on how to resolve things.
I asked him how he sees the situation developing – what his best case scenario would be?
He told me it would involve him getting paid all his bonus (including the 50k), all his stock and a “payment for his silence” ..
… at which point I told him that he surely is better than that and kicked him out of my office immediately.
16. Mr Abourahim’s evidence as to what happened at the meeting is very different from that of Mr Girst. The relevant parts of his witness statement read as follows:
“On the 9th of September 2013 I received an email from Richard Barnett saying that I will get paid my bonus but without the 51K pounds that I according to him took without permission. We agreed on this 6 months before, if I took this money without permission why did it take 6 month to solve it?
They were trying to break me and knew exactly how I would react to this.
I was very angry and really was thinking about leaving but I couldn’t resign as I had to pay back the loan and it wouldn’t be fair as it wasn’t my choice they were just forcing me to.
I was invited to a “friendly” discussion with Carsten Girst to discuss it, he strangely already knew about it when I only had received the mail from Richard Barnett a few hours before.
I told him that it was obvious that the company wanted me out, he didn’t denie (sic) and asked me what did I want from them to leave and sign a document to never speak about what was going on at BGC. I said I wanted my bonus in full, my shares and a compensation for them breaking the contract earlier as I still had 3.5 years running.
I told him also no I will not sign a document to silence me on illegal activities and if the authorities came to ask me what happened I will tell the truth. I made it very clear to him during our meeting that my allegations had nothing to do with the payment of my bonus or the negotiation of an early leave.
He asked me if I had any proofs about my allegations like documents or recorded tapes of conversations.
I responded that I didn’t have any.
He was very concerned about proofs and didn’t believe me.
His tone and attitude were very different from the usual.
I told him that he could record this conversation to even be more sure, or a call a witness to the room but he didn’t.”
17. On 23 September 2013 Mr Abourahim attended a video link disciplinary meeting held by BGC under its Performance and Conduct Procedure. The meeting was chaired by Mr Michael Secretan who, at the time, was co-Head (together with Mr Barnett) of BGC’s Mint Division. Mr Abourahim was asked to comment on Mr Girst’s version of events as contained in his email of the 9 September 2013 to Ms Samaringhe, namely, that at his meeting with Mr Abourahim the latter had made allegations about underhand dealings and had said that he wanted to be paid all his bonus, all his stock and a “payment for his silence”. In reply, Mr Abourahim told the hearing that Mr Girst had misunderstood his request for the compensation that was due to him. What he had said to Mr Girst did not constitute blackmail. He had told Mr Girst that he wanted to leave BGC but was not prepared to leave empty handed.
18. The meeting then adjourned for about 10 minutes during which time Mr Secretan concluded that Mr Abourahim had indeed attempted to blackmail BGC and that he should be summarily dismissed. The meeting then re-convened and Mr Abourahim was summarily dismissed by Mr Secretan.
19. Mr Abourahim’s dismissal was confirmed in a letter from Mr Secretan dated 3 October 2013. The letter further stated that in the event that Mr Abourahim disputed the decision to dismiss him he “should promptly appeal to Nathalie Trovato (BGC’s Human Resources Manager) in writing within 5 days of receipt of this letter.” Mr Abourahim testified that he did not receive this letter until 21 October 2013 because it had been sent to the wrong address. He testified that notwithstanding the words, “ appeal …. within 5 days of receipt of this letter,” he did not explore the possibility of an appeal because he thought the deadline for launching an appeal had expired on 8 October 2013.
20. Following the meeting between Mr Barnett and Mr Abourahim, BGC’s legal and HR departments began an investigation into Mr Abourahim’s allegations of improper dealings between Mr Asad and Mr Butt on the one hand, and Mr Simon Mirza who was employed by Tullett Prebon in London, on the other.
21. By an email to Mr Abourahim dated 13 September 2013, Mr Barnett stated that Mr Abourahim had told Mr Girst that he had taped evidence to support his allegations of untoward dealings and asked Mr Abourahim to provide all the evidence he had of such dealings. Mr Abourahim replied that Mr Girst must have misunderstood. He had no taped evidence; the only thing he had was common sense.
22. In paragraph 3 of its Reply (which was endorsed with a signed statement of belief in its truth) BGC pleads that the conclusion of its internal investigation into Mr Abourahim’s allegations was that there was insufficient evidence to substantiate them.
THE ISSUES IN THE CASE
23. There are three issues: (1) Did Mr Abourahim attempt to blackmail BGC at the meeting with Mr Girst on 9 September 2013, as asserted by Mr Girst and denied by Mr Abourahim? (2) If the answer to (1) is “yes”, was Mr Abourahim’s summary dismissal lawful under the Employment Contract and Article 59A of the DIFC Employment Law? (3) If the answer to (2) is “yes”, what sum is recoverable by BGC pursuant to the Loan Agreement?
24. The answer to (1) depends on the Court’s finding as to whose evidence to accept, Mr Girst’s or Mr Abourahim’s? As to this, I have come to the firm conclusion that I should not accept Mr Abourahim’s evidence but should accept Mr Girst’s evidence which is supported by the email he sent at 16:49 to Suran Samaringhe, BGC’s Employment Counsel, not very long after the meeting with Mr Abourahim. Mr Abourahim alleged that Mr Girst dishonestly concocted the account in his email on the instructions of the two top executives in BGC, Mr Shaun Lynn and Mr Mark Webster, who had decided in May 2013 that Mr Abourahim should be “squeezed out of the company”. In my view this allegation is fanciful. It is based on nothing more than conjecture and was not put to Mr Girst by Mr Abourahim in cross-examination.
25. Mr Girst was an impressive witness who gave his evidence clearly and convincingly. In Mr Abourahim’s case, however, there were inconsistencies in his evidence that additionally undermine his reliability as a witness. Thus, although he denied in paragraph 14 of his Defence, that he made any reference to the word blackmail at the meeting, in cross-examination he confirmed that he did say at the meeting that he didn’t want to blackmail anyone. He also said in cross-examination that he made it very clear to Mr Girst, “Don’t try to twist this into blackmail”, but there is no mention of this in his witness statement or his very fully pleaded Defence.
26. In addition, Mr Abourahim testified in cross-examination that Mr Girst asked him what he wanted and he then went on to state that Mr Girst did not say anything about signing a document with a confidentiality clause, whereas in his witness statement, Mr Abourahim says: “[he] …. asked me what did I want to leave and [to] sign a document never to speak about what was going on at BGC.”
27. Although the evidence of Mr Abourahim simply cannot stand with that of Mr Girst (which I accept), I prefer not to conclude that Mr Abourahim was knowingly lying in his evidence. Instead, I think Mr Abourahim within a fairly short time of the 9 September 2013 meeting probably convinced himself that he could not have asked for money for his silence and proceeded to plead his Defence and give his evidence in the belief that he had not done so.
28. In my judgment, when Mr Abourahim asked for money for his silence he was implicitly threatening to make his allegations of underhand dealing public and/or to report his allegations to the DFSA, unless he was paid not to do so. In short, Mr Abourahim was blackmailing or attempting to blackmail BGC. Did such conduct amount to a fundamental breach of the Employment Contract so as to justify summary dismissal at common law? In my opinion it undoubtedly did. Such conduct was totally inconsistent with Mr Abourahim’s duty to act honestly and ethically and his duty to maintain the mutual trust and confidence that was at the heart of the Employment Contract.
29. Was Mr Abourahim’s dismissal lawful within the terms of Article 59A of the DIFC Employment Law? This involves asking: did Mr Abourahim’s conduct in blackmailing or threatening to blackmail BGC warrant termination of the Employment Contract and would a reasonable employer have terminated his employment by reason of such conduct?
30. It was held by Justice Roger Giles in McDuff v KBH Kaanuun LimitedCA003/2014 when considering the materially similar Article 60(4) of the former version of the DIFC Employment Law 2005, that in evaluating whether a dismissal satisfied the requirements of DIFC law there is no investigation into the employer’s beliefs and how they were arrived at. Moreover, the hypothetical employer is not allowed a range of reasonable responses. Rather, it must be found that the hypothetical reasonable employer would have terminated the employee.
31. For the reasons I have given for concluding that Mr Abourahim’s conduct constituted a fundamental breach of the Employment Contract, I find that his conduct warranted termination of that contract for the purposes of Article 59A of the DIFC Employment Law, as amended. Further, I have no doubt that a reasonable employer in the circumstances of the employer in this case – an entity regulated by the DFSA – would have terminated Mr Abourahim’s contract given the obligation on Mr Abourahim to act honestly and with integrity at all times. In my view, a reasonable employer would not have taken a lesser course short of summary termination in the circumstances of this case.
32. It follows that BGC is entitled under clause 3 of the Loan Agreement to be paid the balance outstanding on the loan, at the Termination Date calculated in accordance with that clause. At the Termination Date of the Employment contract (23 September 2013), Mr Abourahim had completed 17 months’ service. It follows that applying the write-off in respect of one complete year of service as provided for in the Loan Agreement, the balance of the Loan Amount at the Date of Termination was GBP160,000, and pursuant to clause 4 of the Loan Agreement, BGC is entitled to interest at the rate of 3% p.a. on the sum advanced. However, in its pleadings BGC has converted that sterling sum to US$ 259,816 at an exchange rate of 1.62385 but the Court was not told at which date the conversion was made – the Termination Date, the date of the Loan Agreement or the date of the Claim Form. Nor was the Court told what law entitled BGC to sue for a sum in a currency different from the currency of account of the Loan Agreement and different from the currency of the forum. Further, no calculations showing how the interest claimed is arrived at were put into evidence.
33. I therefore direct that within 14 days of the date on which this judgment is issued, BGC should serve written submissions in support of its claimed entitlement to recover the balance due under the Loan Agreement in US dollars and showing how the interest claimed is calculated. Thereafter, Mr Abourahim should serve his reply submissions (if any) within 14 days, with BGC having a final right of reply within 7 days thereafter.
Amna Al Owais
Date of Issue: 31 May 2015
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