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Frontline Development Partners Limited v Asif Hakim Adil [2016] DIFC CA 006

Frontline Development Partners Limited v Asif Hakim Adil [2016] DIFC CA 006

March 20, 2017

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Claim No: CA-006-2016

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 TUN ZAKI AZMI AND H.E. JUSTICE ALI AL MADHANI

BETWEEN              

FRONTLINE DEVELOPMENT PARTNERS LIMITED

                                                                   Defendant / Appellant

and

ASIF HAKIM ADIL 

Claimant / Respondent

Hearing: 18 October 2016

Counsel: Roger Kennell and Ravinder Thukral (Brown Rudnick LLP) for the Appellant

Bushra Ahmed and Natasja Pollemans (KBH Kaanuun) for the Respondent

Judgment: 20 March 2017


JUDGMENT


Summary of Judgment

This dispute arose out of an employment contract made between Asif Hakim Adil (the “Respondent”) and Frontline Development Partners Limited (the “Appellant”), pursuant to which the Respondent was employed by the Appellant as its Managing Director from 20 August 2011 until 30 June 2013. At the time of termination, there was a dispute as to the amount of the Respondent’s final settlement. This dispute was resolved by the trial judge, who awarded the Respondent significant sums as his final settlement and further ordered the Appellant to pay a daily penalty to the Respondent for late payment, pursuant to Article 18 of the DIFC Law No. 3 of 2012, as amended (the “DIFC Employment Law”).

The main issue for determination on appeal was whether the trial judge appropriately interpreted Article 18 of the DIFC Employment Law in awarding the Respondent an ongoing daily penalty for the Appellant’s failure to pay his entitlements within the specified time period.

During the course of this appeal, the Appellant accepted the trial judge’s findings of fact including that the Respondent was not terminated for cause and as to the calculation of his final employment entitlements. The only objection stemmed from the trial judge’s interpretation and implementation of Article 18 of the DIFC Employment Law, which required the Appellant to pay penalty sums far in excess of the owed employment entitlements awarded to the Respondent.

On appeal, the Appellant made a number of arguments in support of a different interpretation of Article 18. First, counsel for the Appellant sought to withdraw a previous concession made that the phrase “any other amount” as contained within Article 18(1) of the DIFC Employment Law includes within its remit any end-of-service gratuity payments and other entitlements beyond wages. As a preliminary issue, the Court of Appeal found that withdrawal of this concession was irrelevant to the outcome of the dispute.

The Appellant also argued that the entitlements awarded by the trial judge cannot be said to have been legally “owing” on the date of the Respondent’s termination as there was a genuine dispute between the parties as to the amount of the Respondent’s final settlement. The amount owing was thus only determined upon the trial judge’s decision. Furthermore, the Appellant argued that there was a legitimate excuse for not paying the Respondent within the time period specified in Article 18(1) and thus, the Appellant cannot be said to have “failed” to pay under the provision. The Appellant also encouraged the Court of Appeal to consider a number of seemingly unfair circumstances that may arise from the trial judge’s interpretation of Article 18, including circumstances where the employer has overpaid the employee in an attempt to comply with Article 18 and is then unable to recover the overpayment from the employee. Finally, the Appellant highlighted that the delay in payment in this particular case was not caused exclusively by the Appellant and instead both the Respondent and the trial judge contributed to the delay in payment.

Justice Tun Zaki Azmi (with Chief Justice Michael Hwang and H.E. Justice Ali Al Madhani) unanimously dismissed the appeal. The Court of Appeal found that the trial judge properly interpreted Article 18 of the DIFC Employment Law and that to interpret in line with the Appellant’s arguments would amount to the Court of Appeal inappropriately redrafting the provision.

The Court of Appeal found that, in comparing the drafting of Article 18 as amended with its previous version, it is clear that the purpose of the provision was to ensure that employers do not delay in paying employees their full entitlements by imposing a penalty on employers in conjunction with a benefit to employees. The Court of Appeal found no reason to presume that, pursuant to Article 18 of the DIFC Employment Law, a long delay should be treated in a different manner than a short delay. The Court of Appeal also highlighted that it is the employer that is responsible to calculate and make payments to their employees in compliance with the law.

While the Appellant argued that the Court of Appeal should give Article 18 a “strained construction” due to the many circumstances in which the provision may become unfair, the Court of Appeal found no reason to apply a strained construction and instead found that the meaning of Article 18 was grammatically clear from a plain reading.

The Court of Appeal consider four principles of statutory interpretation including the literal interpretation, purposive interpretation, the mischief rule and the golden rule and arrived at the same result under each principle; the trial judge’s interpretation of Article 18 was correct. The Court of Appeal stated that the function of the court is to determine the intention of the legislature and to give effect to the true purpose of the provision; judges should not overrule the words of a statute. The Appellant’s arguments encouraged the Court of Appeal to redraft the provision to account for certain seemingly harsh circumstances, however the Court of Appeal determined that it cannot appropriately apply such discretion. Instead, if the implementation of Article 18 becomes punitive or harsh for employers, it is for the legislators to amend the law, not for the court to redraft through judicial decision. Thus, the Court of Appeal dismissed the Appellant’s appeal in full.

 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 October 2016

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. The Appellant shall pay the Respondent’s costs on the standard basis, to be assessed if not agreed.

Issued by:

Maha Al Mehairi

Judicial Officer

Date of Issue: 20 March 2017

At: 2pm

 

JUSTICE TUN ZAKI AZMI:

1.This appeal deals with the interpretation of Article 18 of the DIFC Employment Law No. 3 of 2012. That article reads as follows:

“18. Payment where the employment is terminated

(1) An employer shall pay all wages and any other amount owing to an employee within fourteen (14) days after the employer or employee terminates the employment.

(2)  If an employer fails to pay the wages or other amount owing to an employee in accordance with Article 18(1), the employer shall pay the employee a penalty equivalent to the last daily wage for each day the employer is in arrears.”

2. Prior to the current law there was a repealed law, the DIFC Employment Law No. 4 of 2005 which was worded as follows:

“If employment is terminated, an employer shall pay all wages owing to an employee within seven (7) days after the employer or employee terminates the employment.”

3. The learned judge of the first instance has already gone into the facts of the case in very great detail and made his findings of the facts. At appeal, the finding of these facts are not disputed by either party in spite of the acrimony at trial. At trial there were so many issues which were disputed. There were also allegations and counter allegations which again for the purpose of this appeal are not all relevant. So here it is not necessary for me to regurgitate them.I will just recite the facts, as found by the learned judge and which in my opinion are relevant to this appeal. In any case even the Appellant’s argument of the law was based on the facts as found by the learned judge.

4. Their real contention is the interpretation of Article 18 referred earlier.

Facts

5. The Respondent Mr Adil was employed by the Appellant as its Managing Director under a contract dated 20 August 2011. Based on the finding by the learned trial judge and which is also common ground at the appellate stage, the termination of employment was not for cause but pursuant to a contractual right to terminate without notice on payment in lieu of the notice entitlement.

6. The relevant clause of the agreement is worded:

“24. TERMINATON

Save for in circumstances where dismissal without notice is justified, your employment may be terminated at any time by you giving the Company 3 months written notice or by the Company giving you 6 months written notice or by paying you in an amount equal to your base salary in lieu of notice for that period.”

7. There was a disagreement as to the amount payable by the Appellant to the Respondent as a result of this termination but the judge found as a fact that the Respondent was not paid the monies due to him under Article 18. I quote from the judgement:

“5. For the reasons which follow, in my opinion –

(a)  the employment was terminated on 30 June 2013;

(b) the termination was not for cause, but pursuant to a contractual right to terminate without notice on payment in lieu of the notice entitlement;

(c)  Mr Adil is entitled to a total recovery of USD 359,411.12 in AED equivalent and a penalty amount calculated at USD 1,643.84 from and including 15 July 2013.

(d) the breaches of contract and of fiduciary duty are not made out;
and

(e) Frontline is not entitled to the other relief claimed in the counterclaim.”

8. For the purpose of this appeal the Appellant accepts the amount of wages due to the Respondent as found by the judge. The Appellant confined his arguments to that part of the order awarding the Respondent the penalty. The calculation of the penalty was based on the judge’s interpretation of the earlier mentioned Article 18. The Appellant contended that the interpretation by the judge was erroneous.Counsel for the Appellant centred his discussion particularly around this issue. He had other arguments which were not pursued with much vigour.

9. At the beginning of this hearing of this appeal there was an issue of whether the Appellant should be allowed withdraw a concessionthat was made by counsel at trial. It was conceded by the counsel on behalf of the Defendant at trial (now Appellant) that the “any other amount” in Article 18(1) includes “gratuity” and other sums payable to employee upon his termination. He contends that the sums under “any other amount” do not include gratuity or monies other than wages due the employee which are awarded after judgement because on the date of termination these monies are not due yet to the employee. Consequentially, the penalty is not imposable on these amounts. Only the wages attract the penalty.

10. For myself this appeal can be decided without going into that concession or its withdrawal. In other words even if the Appellant is allowed to withdraw the concession and put in his new arguments, my conclusion is not affected by them.

11. The clause “wages and any other amount owing” inthe Article is to be read in one breath, so to speak. In my opinion they cannot be broken into two parts. Gratuity and monies due to the employee on termination of his employment must necessarily become due and owing on the same date as his wages. Those amounts must paid together and not separately. The penalty commences upon the lapse of 14 days should the sums or any part of it remains unpaid. The words “any other amount” were absent in the earlier repealed provision. By the addition of those word into the current impugned Article 18 it can only be concluded that “any other amount” is to be treated like the wages. On the facts of this case, I do not agree that wages can be due on one date and the other amounts due on another date. The learned judge has concluded that all the sums were due to the employee on the date of termination of his employment i.e. 30 June 2013. This is a finding of fact which I am not prepared to disturb. In any case there was no argument why it should be disturbed. Like any other finding of facts, although the findings are made later, factually they are deemed to have occurred at the date of their occurrence i.e. 30 June 2013.

12. In my opinion this appeal can be resolved just by the interpretation of Article 18.

13. In summary, in addition to the Appellant’s arguments cited earlier, the Appellant argued as follows:

(a) The Appellant was not legally owing the Respondent the amount awarded by the judge on the date of his termination. There was a dispute as to the amount owing because there were also sums due from the Respondent to the Appellant under other contracts which were entered into between the Respondent and companies related to the Appellant by a common shareholder. These contracts were also between the Respondent and some other companies owned by the same person who owns the Appellant and who also was the main witness for the Appellant at trial. In the Appellant’s contention, the parties could not have known what was owing and until this amount has been determined, no amount could be said to be “owing” by the Appellant to the Respondent. According to him, where there was a disagreement on whether it was due to the Respondent and what was the amount due, since the matter has been brought to court, the amount is only determinable after the court has fixed it.

(b) The Appellant can be said to have “failed” to pay the amount due to the Respondent only if he does not have any excuse for not paying. In this case, as there was a dispute between the parties as to the amount due to the respondent, there was an excuse not to pay.

(c) If the payment of what is due to the employee is made immediately upon termination and subsequently decided by the court to be an overpayment, the employer may not be able to recover from the employee such overpayment. There are other possible situations that could be unfair to the employer, and the question is whether Article 18 should be read in the way the Respondent would like it to be read.

(d) On the facts of this case, the delay was not caused by the Appellant alone, but was also contributed by the Respondent as well as the Judge himself.

Interpretation

14. The responsibility of the draftsman is to draft the laws according to the intention of the legislators. The courts interpret the legislation according to the principles of interpretation which are quite well established. The intention of the legislators is to be understood from the way in which the legislation is worded.

15. Reading the provision on its own without referring to any other aids, is the provision to punish the employer or to compensate the employee? It seems to have both effects. Unlike a criminal sanction, where the employee does not benefit from the sanction, while the employer is punished and intended to be deterred, the way this Article is worded, it punishes the employer and, at the same time, the employee enjoys compensation.

16. When comparing the two enactments, the current and the repealed, it can be seen that the intended purpose of both enactments is to ensure that the employer does not delay paying the employee his full entitled wages on time.

17. The differences between the two are, however, obvious. While the earlier repealed provision merely required wages to be paid within the period specified, the current law goes on to provide a penalty if payment is not made within a specified (albeit longer) period. It also includes a requirement to make other payments due to the employee apart from wages.

18. What becomes an issue is when there is a long delay of non-payment by the employer. Perhaps if the delay is just one week or two or even a month it may not be an issue, whoever may have caused the delay, but when it drags on for a year or beyond as in this case, the liability on the employer becomes heavier and would (as in this case) render the provision as being unfair and disproportionate. But then if the penalty for a day is in order and acceptable, why should a longer delay have any other effect?

19. According to the Appellant, the employee can cause the delay. I do not agree with this submission. The party who determines when and the amount of the wages or any other amount to be paid to the employee is the employer. He has to calculate the amount due and the date payable and then make that payment to the employee.

20. It is not for the employee to refuse the payment. He may complain it is insufficient and that what is due to him is more or that he should be paid earlier. He can contest it. It is for the court to decide. If the court rules in favour of the employer it ends there, but if it rules in favour of the employee, the employer will have to pay the penalty. This is another bone of contention that, if the employer is short one dirham, he has to pay the full penalty. If this happens, it is no more a compensation to the employee. It would seem to become punitive on the employer.

21. Here the Appellant has failed to pay the respondent completely. It is not non-payment of one dirham. He failed to pay a sum in USD amounting to the equivalent of AED 359,411.12 as mentioned earlier. The situation I described above is therefore merely hypothetical and this court does not decide on hypotheticals.

22. During the oral arguments, the Appellant’s counsel also urged us to apply the strained construction rule to the Article, but he was not able to suggest how it should be applied. He gave examples from Bennion on Statutory Interpretation (LexisNexis, 5th Ed, 2008) (“Bennion”) of instances where the law can create exceptions to the general rules of interpretation but none of his examples were similar to this case.

23. The English and Singapore cases cited by Bennion agreed with his views but even in those two cases cited the courts did not apply the strained construction rule.

24. According to Bennion 5thEdition at page 546:

“Where, on the facts of the instant case and taken by itself, an enactment has a clear grammatical meaning, it is a strained construction to give it a different meaning.”

25. On the facts of this case, there is no reason to give the Article a strained construction by giving a different meaning since the enactment is clear grammatically.

26. I do not end there. I bear in mind what the judge in Pierre-Eric Daniel Bernard Lys v Elesco Limited [2014] DIFC CFI 012 said. H.E. Justice Ali Al Madhani summarised the situations which the counsel quoted in his submission as creating absurd situations which in the context of that case can occur as follows (paragraph 159):

“(a) An employee who is owned AED 1 on termination is entitled to a daily penalty that is equivalent to wages that would have been payable had the employee’s employment not been terminated;

(b) There is a six year limitation period for bringing an employment claim in the DIFC Courts.Consequently, a penalty award could easily exceed an amount equivalent to a year’s salary;

(c) In the Claimant’s penalty would be equivalent to: EUR 143,322.70 or USD 156,542.78 (which is 15 times greater than the admitted arears), this is absurd and grossly disproportionate:

(d) An employee will, therefore, be financially rewarded forfailing to bring a claim for wages promptly since they would receive a greater penalty with every day or delay, so prejudicing the expedient administration of justice;

(e) An employee will be financially rewarded for delay in litigating their claims since they would receive a greater penalty with every day delay so prejudicing the administration of justice;

(f) An employee will be financially rewarded for failing to settle their dispute before trial because they (sic) would receive a greater penalty by running the claim for wages to trial, so defeating proportionate and cost efficient dispute resolution in the DIFC;

(g) An employer who lawfully terminates for cause is financially penalised if any monies are withheld on termination.This is unjust.”

27. On the face of the arguments earlier mentioned by H.E. Justice Al Madhani, it may not seem fair. But then is it for this court to say it is not fair, if the legislature thinks that is what the law should be?

28. I analysed the situations individually and then I had a closer reconsideration of the wording of the provision. I recognise what Lord Griffiths said in Pepper (Inspector of Taxes) v Hart [1993] AC 593:

“The days have long passed when the courts adopted a strict constructionist view of interpretation which required them to adopt the literal meaning of the language. The courts now adopt a purposive approach which seeks to give effect to the true purpose of legislation and are prepared to look at much extraneous material that bears upon the background against which the legislation was enacted.”

29. However, I ultimately still faced the problem of how to interpret it in the way the Appellant submits to be fair to an employer if any of the situations mentioned in Lys Unfortunately, I cannot replace the words impugned or read into the provision one or more words or delete from the provision a word or two. As Article 18 stands, it is grammatically correct, makes sense and clearly understandable. The only complaint if at all is that it can create situations which the employer considers to be unfair to him. But if that is what the legislator intended, by the use of those words, drafted in the manner it does, it is not for this court to give any other interpretation, no matter how sympathetic this court may be to the employer.

30. Irrespective of whether I apply any of the principles of interpretation cited below, I arrive at the same conclusion. The principles are as follows:

(a) Literal interpretation; or

(b) Purposive [i.e. one that will “promote the general legislative purpose underlying the provisions” (per Lord Denning MR in Notham v London Borough of Barnet (1978) 1 WLR 220)]. In my opinion the general purpose is to ensure the employee gets paid what is due to him on time; or

(c) The Mischief Rule, i.e. to overcome the mischief (Heydon’s case (1584) 3 Co Rep 7a); or

(d) The Golden Rule, Grey v Pearson (1857) 6 HL Cas 61 at 106 where Parke B (later Lord Wensleydale) said in a famous dictum that the plain meaning of an enactment must be followed “unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument”. (Grey v Pearson (1857) 6 HL Cas 61 at 106, cited with approval in Bennion (5th Edition, page 514).

31. Again, according to Bennion (5th Edition, page 969), quoting Lord Millett in R (on the application of Edison First Power Ltd) v Central Valuation Officer and another [2003] All ER 209 at [116], [117] an absurd situation can arise where there it leads to the following consequences i.e. unworkable or impractical result, and inconvenience result, and anomalous or illogical result, a futile or pointless result, and artificial result or a disproportionate counter-mischief. But he also concluded that, if it appears that Parliament really intended or the literal meaning is so strong, then the court will still apply that interpretation. Lord Mersey in Thompson v Goold & Co [1910] AC 409 said “It is a strong thing to read into an Act of Parliament words which are not there and in the absence of clear necessity it is a wrong thing to do”.

32. Applying the purposive or mischief rule, I arrive at the conclusion referred above which is to prevent the possible situations of abuse by the employer by not paying his employee his entitled wages and/or on time. The same goes with the golden rule. The law is to protect the employee, and that is inescapable.

33. It is an established principle that the function of the court is to determine the intention of the legislature by interpreting it. The legislature enacts and the courts interpret it. Courts are not legislators. (See, e.g. Sussex Peerage Claim (1844) 11 Cl. & F. 85). “If the language is clear and explicit, the court must give effect to it”’ (Warburton v Loveland (1832) 2. D. & Cl. 480). The courts must bear in mind that its function is jus dicere, and not dare: the words of a statute must not be overruled by the judges, but reform of the law must be left in the hands of Parliament. See Cheney v Conn [1968] 1 W.L.R. 242 (quoted from Maxwell on the Interpretation of Statutes, 12th Edition, page 1).

34. To read the provision to overcome the situations listed in Lys case would be asking this court to redraft the statute to take care of the different situations. I cannot find a way to read the Article such that each of the situations can be overcome. The only way to read it as the Appellant wishes is by giving a full discretion to the court to apply the Article differently to different circumstances. And that is something this court cannot do. The court would then be legislating, and not merely interpreting. If His Royal Highness the Ruler considers that our interpretation is not what was intended, His Royal Highness will have to amend the law to take care of the situations cited. As was said by Lord Birkenhead LC in Sutters v Briggs [1922] 1AC 1 at pg 8,  the duty of the court is to expound the law as it stands, and to “leave the remedy (if one is to be resolved) to others”…from Maxwell on The Interpretation of Statutes.

35. I therefore dismiss with costs this appeal and reaffirm the order made by the Court of First Instance.

H.E. JUSTICE ALI AL MADHANI:

36. I agree with the judgment and have nothing further to add.

CHIEF JUSTICE MICHAEL HWANG:

37. I concur with the decision of the majority and the broad reasoning contained in their judgment. However, I am mindful that I am also sitting on a panel of this Court in the case of Elseco Limited v Pierre-Eric Daniel Bernard Lys [2016] DIFC CA 011 which involves a dispute largely based on the same statutory provisions as discussed in this case, and the counsel in that case have reserved their right to make further submissions after the release of this judgment. I will therefore reserve my right to make further observations on the meaning of the provisions in question at a later time.

Issued by:

                                                                                                Maha Al Mehairi

                                                                                                Judicial Officer

 Date of Issue: 20 March 2017

At: 2pm