TARIG H.A.G. RAHAMTALLA v EXPRESSO TELECOM GROUP [2020] DIFC CFI 069 — Employment termination for cause and secret profits (08 August 2021)

This judgment addresses the high threshold for "termination for cause" under the DIFC Employment Law 2019, specifically examining whether an executive’s retention of secret commissions constitutes a breach of fiduciary duty sufficient to justify summary dismissal.

What was the total monetary value of the claim brought by Tarig H.A.G. Rahamtalla against Expresso Telecom Group in CFI 069/2020?

The dispute arose from the termination of Tarig H.A.G. Rahamtalla (TR), a former executive at Expresso Telecom Group (ETG), who sought various end-of-service entitlements and statutory penalties. The total amount claimed by the Claimant reached US$785,015.80. The core of the dispute involved the Claimant’s remuneration structure, which had evolved significantly over his tenure.

Pursuant to the Agreement, the Claimant’s [i.e., TR’s] monthly remuneration consisted of i) Basic salary of US$9,000.00; ii) Living Allowance of US$1,500.00; iii) Transportation and Fuel allowance US$ 1,500.00; and iv) Housing Allowance of US$ 3,000.00.

The Claimant’s compensation was subsequently adjusted through several addenda. As the relationship between the parties deteriorated, ETG suspended and eventually terminated the Claimant, citing breaches of travel policy and neglect of responsibilities. The Claimant challenged the validity of this termination, leading to the present litigation regarding his outstanding entitlements. Full details of the claim and the court's findings can be reviewed at the DIFC Courts website.

Which judge presided over the proceedings in Tarig H.A.G. Rahamtalla v Expresso Telecom Group Ltd in the DIFC Court of First Instance?

The matter was heard before Justice Sir Peter Gross in the DIFC Court of First Instance. The hearing took place on 16 May 2021, with the final judgment issued on 8 August 2021.

How did Sandra Eze and Raza Mithani frame the arguments regarding the validity of the termination for cause in CFI 069/2020?

Sandra Eze, representing the Claimant, argued that the termination was procedurally and substantively flawed, asserting that the Claimant was entitled to his full end-of-service gratuity and statutory penalties for late payment. Conversely, Raza Mithani, counsel for the Defendant, contended that the Claimant had breached his fiduciary duties by retaining secret profits through a company he controlled, Kool Communications FZE. ETG argued that these secret commissions, totaling approximately US$71,000, provided a lawful basis for summary dismissal under the DIFC Employment Law 2019.

What was the specific doctrinal issue the court had to resolve regarding the application of Article 63 of the DIFC Employment Law 2019?

The court was tasked with determining whether the Claimant’s conduct—specifically the retention of secret profits—met the threshold for "termination for cause" under Article 63(1) and (3) of the DIFC Employment Law 2019. The legal question centered on whether the breach of fiduciary duty was sufficiently grave to justify the summary termination of the employment contract, thereby extinguishing the employer's obligation to pay certain end-of-service benefits, and whether the employer’s counterclaim for those secret profits could be set off against the Claimant’s statutory penalty claims.

How did Justice Sir Peter Gross apply the test for termination for cause in the context of the Claimant's secret profits?

Justice Sir Peter Gross applied the established two-stage test for termination for cause, referencing the principles set out in McDuff v KBH Kaanuun Ltd and Elseco Limited v Lys. The court found that the Claimant’s actions in diverting funds through his own company constituted a clear breach of his fiduciary obligations.

It follows that, on the ground of breach of fiduciary duty, ETG makes good its case that it was entitled to dismiss TR for cause.

The court reasoned that the retention of secret commissions is a fundamental breach of the duty of loyalty owed by an employee to their employer. Justice Gross emphasized that such conduct is inherently incompatible with the continuation of the employment relationship, thereby satisfying the requirements for termination for cause under the DIFC Employment Law.

Which specific statutes and precedents were applied by the court to determine the liability of Expresso Telecom Group?

The court primarily applied Article 63(1) and (3) of the DIFC Employment Law 2019 to evaluate the validity of the termination. Regarding the fiduciary duty breach, the court relied on the principles articulated in the English case Boardman v Phipps [1967] 2 AC 46, which establishes the strict liability of fiduciaries who profit from their position without disclosure.

How did the court utilize the precedents of McDuff v KBH Kaanuun Ltd and Elseco Limited v Lys in this judgment?

The court utilized McDuff v KBH Kaanuun Ltd [2014] DIFC CA 003 and Elseco Limited v Lys [2016] DIFC CA 011 to frame the two-stage test for termination for cause. These cases provided the necessary framework for Justice Gross to assess whether the employer had a valid reason for termination and whether the procedure followed was fair. By applying these precedents, the court confirmed that while the Claimant’s breach of fiduciary duty was severe enough to warrant termination, the employer remained obligated to pay certain undisputed entitlements, subject to the set-off of the secret profits.

What was the final disposition and the specific monetary relief ordered by the court in CFI 069/2020?

The court ruled in favor of the Claimant in part. While it upheld the Defendant’s right to terminate for cause, it ordered ETG to pay the Claimant the sum of US$404,897.67 within 28 days. Additionally, the court declared the Claimant entitled to a daily payment of US$1,052.30 for the period between 18 May 2021 and the date of the judgment, to be paid within the same 28-day window.

What are the wider implications of this ruling for DIFC employers regarding the payment of statutory penalties?

This case serves as a reminder that even when an employer has a valid ground for termination for cause, they are not automatically absolved of all financial obligations. The court rejected the notion that a counterclaim for breach of fiduciary duty could unilaterally stop the "penalty clock" for late payment of end-of-service gratuities.

In my view, this is hopeless. TR is either entitled to a sum claimed by way of penalty under Art. 19(2) or he is not.

Practitioners should note that employers must settle undisputed end-of-service payments promptly to avoid the accumulation of statutory penalties, regardless of pending counterclaims. The ruling reinforces that the DIFC Courts will strictly enforce the statutory requirements for timely payments, even in the presence of serious misconduct by the employee.

Where can I read the full judgment in Tarig H.A.G. Rahamtalla v Expresso Telecom Group Ltd [2020] DIFC CFI 069?

The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/tarig-hg-rahamtalla-v-expresso-telecom-group-ltd-2020-difc-cfi-069 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-069-2020_20210808.txt.

Cases referred to in this judgment:

Legislation referenced:

• DIFC Law No. 2 of 2019, the DIFC Employment Law 2019, Art. 63 (1) and (3)