The Dubai International Financial Centre

Claim No: CFI-010-2012

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

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

IN THE COURT

BEFORE H.E. JUSTICE ALI AL MADHANI

BETWEEN

MR RAUL SILVA

Claimant

and

UNITED INVESTMENT BANK LIMITED

Defendant

Hearing: 25 February 2013

Counsel: Tom Montagu-Smith instructed by Hogan Lovells (Middle East) LLP for the Claimant

Stuart Ritchie QC and Simon Roderick instructed by Allen & Overy for the Defendant

Judgment: 6 November 2013

JUDGMENT OF H.E. JUSTICE ALI AL MADHANI

JUDGMENT

UPONhearing the Claimant and the Defendant

AND UPONreading the submissions and evidence filed and recorded on the Court

IT IS HEREBY ORDERED THAT:

With regards to the Claimant's claim:

3. The Claimant shall pay the costs of the claim incurred by the Defendant, to be assessed by the Registrar

With regards to the Defendant's counterclaim:

REASONING

The Parties

2. The Defendant is United Investment Bank Limited ("UIB"), a company incorporated and registered in the DIFC

The Claimant's Claim

4. The Claimant and Mr Philippe Tourillon were appointed as the Directors of UIB while Mr Chihab Tamdi was appointed as a Director and Chairman of UIB. United Financial Partners Limited ("UFP") is the 100% shareholder of UIB, and is incorporated in Hong Kong and mainly owned by Mr Tamdi. Both Mr Yves Bayle and Mr Philippe Tourillon held minority shareholdings in UFP.

5. Around August 2011, Mr Bayle who was the CEO of FAST, a sister Company of UIB, became the CEO of UFP and the group of these companies. He had no official position on the Board of Management of UIB. It is the Claimant's understanding that Mr Tamdi and his family were very wealthy, and that they entrusted Mr Bayle with their investments. Mr Tamdi and Mr Tourillon would generally approve all of Mr Bayle's recommendations.

6. At a Board Meeting on 21 February 2011, it was resolved that the CFO, Mr Craig Roberts, would become an authorised signatory of UIB. It was also resolved that Mr Silva and Mr Roberts could approve payments from UIB's bank account with their joint signatures, with no limit as to the amount of payments they could approve.

7. The Claimant contends that he proceeded with the establishment of UIB and its business in March 2011 and presented a Strategic Business Plan to Mr Tamdi, Mr Tourillon and Mr Bayle. In the report, amongst other matters, he proposed the employees he wanted to recruit and their corresponding monthly salaries. Included, amongst others were:

8. The Claimant also argues that he proposed opportunities for UIB to invest in and proposed ways in which he could continue to carry out his role and fulfil his duties as CEO for UIB until January 2012.

9. On 25 January 2012, the Claimant was called into a meeting with Mr Tamdi, Mr Bayle, Mr Tourillon and another person who was introduced as a lawyer instructed by UIB. The Claimant was told that he would be dismissed with immediate effect. Mr Tamdi stated to him that the justifications for terminating his employment were for the reasons set out in a letter that UIB had sent to him later that day confirming his termination ("the Termination Letter").

10. The letter stated that he had been terminated for the following reasons:

11. The Claimant insists that UIB had invented justifications to terminate him and that every single reason provided by the Defendant in the termination letter dated 25 January 2012 was false. The Claimant believed that Mr Bayle, Mr Tamdi and Mr Tourillon had fired him because he had refused to allow UIB to start processing transactions as an intermediary on a non-discretionary basis as it would have resulted in UIB breaching its license with the DFSA, and due to his persistence in ensuring that the breaches of the DFSA regulations caused by UIB's investment in the Investment Opportunity Fund Limited ("IOPL") were resolved.

12. The Claimant's assertion is that although the Defendant submitted various reasons for the termination, only one reason would justify summary termination, which is the allegation concerning the authorisation of payments for Mr Silva's trip to Brazil in December 2011. The Claimant described these payments as personal expenses which had been claimed and justified by the Claimant as business expenses. It is a claim for fraud inadequately substantiated by the Defendant.

13. The Claimant's position is that the Defendant must prove the grounds they relied on for the termination. The Claimant denies the reasons for termination provided by the Defendant, and if the Defendant fails to prove these grounds, the Claimant's claim should succeed. The Defendant is also required to establish the Claimant's dishonesty at a very high standard of proof.

14. The Claimant asserts that under his contract, he would normally be entitled to several payments such as one year's full salary as he believes that he was terminated without cause. As a result of this, Mr Silva claims the following remedies:

The Defendant's position

15. The Defendant, UIB, argues that it was entitled to terminate the Claimant's employment for the reasons stated in the termination letter dated 25 January 2012, set out below:

16. The Defendant further argues that they are entitled to rely on reasons and facts that were discovered after the dismissal with reference to the principle inBoston Deep Sea Fishing & Ice Company v Ansell(1888)39 CH D.339. The Defendant claims that they discovered further evidence of dishonesty or destructive conduct undermining the mutual trust on the Claimant's part after investigating the Royal Football Fund ("the RFF"). In addition to the reasons set out in the Termination Letter, the Defendant claims that they found that Mr Silva had misrepresented to them information about an investor, Mr Ashok Hiranandani, and his intention to invest $5 million in the RFF which should then have entered into a nominee agreement with UFB on his behalf. The Claimant also failed to disclose to the Defendant that he is the beneficial owner of 90% of the RFF.

17. The Defendant argues that in so doing the Claimant acted dishonestly in breach of his contractual duties and the implied terms of mutual trust and confidence as a Director of the Defendant which required him to act in good faith with a view to the best interests of the Company. He breached the duty of loyalty as he placed himself in a position where his own interest conflicted with those of the Defendant and he had put himself in a position where he would use the Defendant's opportunity for his own benefit, without disclosure or approval from the Defendant in advance.

18. The Defendant considers that what the Claimant has done, from the misconduct noted in the Termination Letter and discovered at a later stage following an investigation, is in breach of Article 59 (a)of the DIFC Employment Law No 3 of 2012 which provides that:

19. According to the Defendant, the Claimant was in further breach of an implied term of trust and confidence in his relationship with his employer, the principle of which was recognised in CFI-14-2009Kteily Ghassan Elias v Julius Baer Middle East Limited "as an overarching obligation implied by law as an incident of the contract of employment".

20. The Defendant also drew the Court's attention to the issue of what level of misconduct by an employee justified instant termination under English law, citing the case ofNeary & Neary v Dean of Westminister[1999] IRIR 228,as where the conduct"so undermines the trust and confidence which is inherent in the particular contract of employment that the master should be no longer be required to retain the servant in his employment".

21. Finally, the Defendant asserts that the Claimant was in breach of Articles 53 and 54 of the DIFC Company Law, Article 159 of the DIFC Law of Obligations and Article 57 of the DIFC Employment Law.

Hearing and Submissions

22. On 25 February 2013 I heard both parties' opening submissions and evidence. At the end of the trial, the Court allowed for written submissions. Each party submitted two sets of closing submissions that will be considered and discussed further in the below reasoning.

Reasoning

24. Although the DIFC Employment Law makes no provision for damages against unfair dismissal, the Claimant's entitlement to compensation is based on the terms of the Employment Contract, particularly Clause 12, which provides as follows:

25. The Claimant's case is that the ground for seeking such contractual remedies is that he did not commit any misconduct or gross misconduct that would justify the termination and that none of the reasons provided by the Defendant in the termination letter dated 25 January 2013 or after that qualify as a cause for summary termination.

26. On the other hand, the Defendant's case is that the Claimant has breached the Employment Contract by committing gross misconduct which would justify summary termination, giving the Claimant no right to pursue such a case.

27. In order to resolve the dispute between the Claimant and the Defendant, namely whether the termination was based on justifiable grounds or effected with cause, the Court shall take into consideration the reasons provided by the Defendant in the termination letter dated 25 January 2012 and will then question whether or not they are capable of justifying summary dismissal in light of the test of fairness and reasonableness as follows below.

Expenses related to the UIB event in Brazil (the Copacabana Event)

30. In his defence and evidence, the Claimant's position as regards the Copacabana Event is that the Event was a joint corporate event with Edgware Equity Partners (EEP) in Brazil as he had wanted to establish and develop a client base in that country, and he had felt that a New Year's Eve party at the Copacabana Palace would be prestigious enough to serve that purpose.

31. The Claimant denies the Defendant's description of the event as a personal event during a family holiday and insists that it was a corporate event as he had informed the Board of Directors both in the discussion list for the Board meeting and during the Board meeting itself on 22 November 2012.

32. The Claimant also argues that the payment of the expenses related to the event booking had been approved by the company CFO Mr Robert in November 2012, who then approved the payment of the New Year's Eve party costs in December 2012 after instructions from the Claimant to his Assistant, Ms Pikaleva, to invite the guests.

33. The Claimant further argues that most of the company staff knew about the event to be held in Brazil, including the CFO Mr Robert, and the attempt by the Board members to deny that it had been discussed with them or that they had ever heard of EEP speaks only reflected their memory or their unreliability in light of the Board time table and minutes of September and November 2012 in the documents [3/242, 3/244, 4/77and 4/197].

34. Finally, the Claimant argues that he does not owe a fiduciary duty in everything he does, and that the expenses claim does not fall under the scope of section 53 of the Company Law which provides for the obligation of loyalty and good faith of a Director when he is"exercising his powers and discharging his duty".Furthermore, even if there was a duty to disclose, the Claimant should be excused as he acted in good faith and did not intend to take personal advantage from the event which was merely meant to promote the company in the Brazilian market and, in any event, he had disclosed the event to the CFO of the Company which, in the Claimant's point of view, should be deemed to constitute sufficient disclosure.

35. Although the Claimant has managed to prove before this Court that the so called EEP exists in UIB's records, by showing that there was a memorandum signed between UIB and EEP and that an update about EEP was also mentioned in the Board time table and minutes of September and November 2012, and although Mr Silva also managed to prove that the payment to cover the Copacabana Event had been authorised by the Company's CFO Mr Robert and invitations had been prepared to be sent to guests, the following facts are found to not be in support of the Claimant's position:

36. Accordingly, the Defendant has succeeded in establishing before this Court that the Claimant has acted in such a way that the best interests of the Company were put aside, and that the surrounding circumstances of the Copacabana Event, such as the costs involved, the Claimant and his family's interest in staying in the hotel and the coinciding of the event and the Claimant's holiday had imposed an obligation on the CEO of the UIB to act in a way so as to fulfil the duty to disclose and acquire Board approval before hosting such an event.

The issue of the Claimant's holiday

39. The Claimant's answer to this accusation is that there was no formal procedure for taking a vacation. During his time with UIB and prior to his vacation in December 2011, he had taken two previous holidays, namely during New Year's in 2010 and in August 2011 by informing the Company's Directors verbally. He insists that he had informed Mr Bayle that he was going away on vacation between 22 December 2011 and 6 January 2012, which was then confirmed in an email sent at 1.13am on 22 December 2011 [4/142] where Mr Roberts informed Mr Tamdi and Mr Tourillon that "Raul will be travelling for the next 2 weeks from today" [4/129]. They did not raise any objections regarding his holidays or the manner in which he had notified them. As such, the Claimant maintains that he was not in breach of any instruction and in any case his conduct cannot be said to have been repudiatory of the contract, and that Clause 6.8 of the Employment Contract is plainly a warranty and not condition per Chitty on Contracts (31^stEd.) 12-019; 12-062.

40. In the Employment Contract under Clause 6.8, it is provided that:

43. It is quite obvious from the Employment Contract that the Claimant had to seek approval in advance if he intended to go on leave. He failed to adduce any written evidence that he had done so. Furthermore, his statement that he informally told Mr Bayle about his plan to take leave is contradicted by both the evidence of Mr Bayle and Mr Tamdi supported by the email of 21 December 2011 and the Claimant's failure to mention his holiday plans at the Board meeting.

44. As the Court finds in favour of the Defendant's evidence in this matter, to the effect that the Claimant who was the CEO of the Company had failed to seek approval to take leave before informing his employer in the last hours of his last working day of his plan, the Court finds that Mr Silva breached Clause 6.8 of the Employment Contract.

45. The belated notification of the Directors of the Claimant's intention to go on holiday and their negative reaction at the time cannot be considered to imply their agreement, but should instead be considered as merely silence as the Court has not seen any indication of consent within the available evidence from the Defendant to the Claimant's breach.

The Issue of the Employment Contracts of Mr Hefft and Mr Skandalis

46. A further reason that was given by the Defendant to summarily dismiss the Claimant in the termination letter is that the Claimant did not comply with a Board instruction to terminate Mr Hefft's and Mr Skandalis' employment contracts and go renegotiate new contracts with a monthly salary of US$15,000 with a better termination option in favour of the company. The letter read as follows:

47. The Defendant argues that the Claimant had followed part of the instruction by fixing the monthly salary, but at the same time had provided a better termination option in favour of the two employees with the possibility of extending the termination notice up to nine months which exposed the Defendant to potential liabilities that the Board had been keen to avoid.

48. The Defendant also blamed the Claimant for not disclosing those changes to the contracts and not complying with the Company's Group CEO instruction to put both employees in a probation period for six months, as per the email of 24/3/2011, which the Claimant failed to do in both the old and new contracts, as stated in the termination letter.

49. The Claimant argues that there was no Board instruction as to the termination option as regards Messrs Hefft and Skandalis or as to the cutting costs policy, and that the

50. It is evident from the letter of 24 March 2011 sent from Mr Bayle to the Claimant that a six-month probation period in Messrs Skandalis' and Hefft's contracts was required; however, no probation period was inserted in the said contracts at the first or the second renegotiations of the contract of either of the employees.

51. This is also evident from Mr Tamdi's evidence, who stated that"we had insisted that their contract be terminable on short notice so as to protect against the risk that they could not deliver on their business plan.."which is supported by the email dated 29 September 2013 sent from Hogan Lovells (Middle East) LLP to the Claimant regarding the termination condition in the contract of Messrs Hefft and Skandalis. The termination period in the said employees' contracts is evidently of the essence to the Defendant.

52. The Claimant, despite renegotiating the contracts of Messrs Hefft and Skandalis to include the requirement of a fixed salary as suggested by the Board, had failed to address the instructions to enhance the termination option in favour of the Defendant. The Claimant not only failed to respond to the instructions of the Board, but in fact drafted the termination clause more in favour of the employee and against his employers' interest, which is obvious through the comparison between the old termination clause in each of Messrs Hefft's and Skandalis' contracts:

53. It is clear from the above-mentioned contracts that the Claimant has acted in a way against his employer's interests by breaching clear instructions given to him to insert a probation period and to make both Messrs Hefft's and Skandalis' contracts terminable on a shorter term.

54. By such conduct, the Claimant breached his duty as a Director of the Company to act honestly, in good faith and lawfully with a view to the best interests of the Company under the DIFC Company Law No. 2009 Article 53.

Whether the above-cited reasons justify dismissal

55. Since the burden is on the employer to prove that they had reasonable grounds to dismiss the employee, the Defendant who is the employer in this case has established the reasons discussed above, amongst other reasons that were not accepted by the Court, some due to a lack of evidence, such as the insisting of Ms Pikaleva's involvement in business before her actual employment or reasons that were discovered post-termination, as the employer can only rely on reasons known to him at the time of dismissal as found inDavis and Suns Ltd v Atkins[1977] IRLR 314.

56. I accept the evidence submitted by the Defendant discussed above, including the issue of the Copacabana Event, the Claimant's Holiday and the issue of the Employment Contracts of Mr Hefft and Mr Skandalis, and find a breach of the duty of trust and care, breach of contract and breaches of the obligation owed under DIFC Company Law No.2. 2009 Articles 53 and 54 including the "duty to act honestly, lawfully and in good faith".

57. The question as to whether those breaches justify instant dismissal can be addressed by referring to the principle derived from the famous case ofBritish Home Store v

59. In response to the Claimant's argument that the Defendant must establish reasons and proof at a very high standard, I am of the view that there is only one civil standard of proof, namely that "the fact in issue more probably occurred than not"as established by theScottish Special Housing Association v Coke and Others[1979] IRLR 264 where it was decided that the employer does not have to produce evidence that establishes beyond reasonable doubt that he has a genuine belief in the employee's guilt.

60. Accordingly, the Claimant's claim for one year's salary of US$360,000 in accordance with Clause 12.3 of the Employment Contract, US$90,000 for payment in lieu of notice in accordance with Clause 12.2 of the Employment Contract and US$37,114.47 for end of service gratuity must fail.

62. The Claimant's claim for US$2,231.18 for accrued but untaken annual leave with reference to Clause 6.8 of the Employment Contract remains an unchallenged claim by the Defendant in all of their Defence and submitted evidence and, therefore, the Claimant is entitled to such benefit.

63. Being the losing party in the original claim, the Claimant is to pay the costs of the claim incurred by the Defendant to be assessed by the Registrar if not agreed.

The Counterclaim

65. The Defendant further claimed the repayment of US$6,213.91 which the Claimant personally took as business expenses in relation to the Copacabana Palace event in Brazil that appeared, after investigation and at a later stage, to be part of a personal and family vacation for the Claimant.

66. The Defendant argues that the Claimant's action which resulted in the misappropriation of company money to fund personal expenses and his failure to disclose to this Board justified the Defendant's Counterclaim to recover that money as damages for the breach of the Employment Contract.

67. The Defendant also argues that the Claimant owes a fiduciary duty and must reimburse the Defendant for the substantial unauthorised benefits that the Claimant obtained from the breaches he committed in violation of the Employment Contract and the Law with reference to Article 160 of the DIFC Law of Obligations.

68. Although the Claimant agrees that the Counterclaim and the issue of the Copacabana Brazil event expenses stand and fall together, however, he asserted that these are very serious allegations and anything less than fraud would not be sufficient to plead such a case, referring to "mere concealment of a relevant fact, without fraud, does not entitle the Employer to dismiss the Employee" Chitty on Contracts (31^stEd.) 39-181.

69. The Claimant asserted that the Defendant should have pleaded its allegations in this Counterclaim as a special category of fraud, as Rule17.43of DIFC Courts