This judgment clarifies the enforceability of discretionary payment clauses in employment settlement agreements, confirming that employers may withhold funds when contractual performance conditions—linked to regulatory findings—are not met.
What was the nature of the dispute between Niyaniya and Nubal regarding the AED 250,039.85 claim?
The dispute centered on the interpretation of a Settlement Agreement dated 2 June 2022, which followed the termination of the Claimant’s employment as Head of Compliance. The Claimant sought to recover an "Additional Settlement Amount" and legal representation fees, alleging that the Defendant had failed to honor its payment obligations following the conclusion of a Dubai Financial Services Authority (DFSA) investigation.
On 6 October 2023, the Claimant filed a claim with the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking the payment of an additional settlement amount and counsel fees in the sum of AED 250,039.85.
The Claimant argued that the Defendant was contractually bound to pay these sums once the DFSA investigation concluded. Conversely, the Defendant contended that the payments were conditional upon the Claimant’s performance and cooperation during the investigation. The Defendant maintained that findings of professional failure, which led to a significant fine against the company, justified the withholding of the discretionary payments. Furthermore, the Claimant sought additional damages for personal grievances.
In addition to the above, the Claimant also claims the sum of AED 50,000 due to the mental trauma and stress caused by the Defendant’s actions.
Which judge presided over the Niyaniya v Nubal hearing in the DIFC Small Claims Tribunal?
The matter was heard and determined by H.E. Justice Nassir Al Nasser of the DIFC Courts’ Small Claims Tribunal (SCT). Following an unsuccessful consultation process before SCT Judge Hayley Norton on 30 October and 1 November 2023, the case was referred to Justice Al Nasser for formal determination. The final judgment was issued on 22 December 2023.
What specific legal arguments did Niyaniya and Nubal advance regarding the Settlement Agreement?
The Claimant argued that the Defendant’s refusal to pay the "Additional Settlement Amount" and the "Counsel Fee" was a breach of the Settlement Agreement. She asserted that the conditions for payment had been satisfied and that the Defendant’s reliance on the DFSA investigation findings was an insufficient justification for withholding the funds.
The Defendant, however, relied on the express language of clauses 3.2 and 3.3 of the Settlement Agreement. They argued that the payment of the Additional Settlement Amount was subject to the Claimant’s full cooperation and the absence of any "omissions, failures or breaches" of her contractual duties as Head of Compliance. The Defendant highlighted that the DFSA had indeed identified failings, which resulted in a substantial financial penalty for the firm.
The Defendant submits that clause 3.2 and 3.3 of the Settlement Agreement provides the following:
“The Employer shall pay an additional maximum amount (the “Additional Settlement Amount”) of AED 150,000 (subject to all relevant deductions) no earlier than 31 October 2022 and no later than 60 days after receipt of the final report and/or conclusions of the DFSA with regard to the enforcement procedure announced on 22 March 2022 and related enquiries (hereinafter the “DFSA Investigation”).
What was the core legal question the Court had to answer regarding the Defendant's discretion?
The Court was tasked with determining whether the Defendant possessed the contractual authority to unilaterally rescind the Additional Settlement Amount based on the outcome of the DFSA investigation. The central issue was whether the Claimant’s performance, as evaluated by the DFSA, triggered the exclusionary provisions of the Settlement Agreement, thereby rendering the Defendant’s decision to withhold payment legally compliant.
How did Justice Al Nasser apply the contractual interpretation test to the Defendant's decision to withhold payment?
Justice Al Nasser focused on the plain language of the Settlement Agreement, which explicitly linked the payment of the Additional Settlement Amount to the findings of the DFSA. The Court found that the agreement granted the Defendant the right to assess the Claimant’s performance and cooperation. Because the DFSA investigation revealed significant failings, the Defendant was within its rights to withhold the discretionary payment.
Further findings of the DFSA have been shared with the Defendant on a confidential basis. As a result of the failings, the Defendant has been fined USD 2,047,500.
The Court concluded that the Defendant’s decision was not arbitrary but was instead grounded in the specific conditions set out in the contract. By failing to meet the standards of conduct required by her role as Head of Compliance, the Claimant had effectively disqualified herself from receiving the discretionary funds.
Which specific provisions of the Settlement Agreement were central to the Court’s reasoning?
The Court relied heavily on clauses 3.2 and 3.3 of the Settlement Agreement. Clause 3.2 established the conditions for the Additional Settlement Amount, specifically noting that "omissions, failures or breaches" of the Claimant’s duties would be taken into consideration. Clause 3.3 governed the Counsel Fee, stipulating that the Claimant was entitled to recover reasonable fees only if she was not found guilty of "unprofessional behaviour" by the relevant authority.
The Claimant adds that pursuant to clause 3.3 of the Settlement Agreement, the Defendant has also agreed to pay a maximum amount of AED 200,000 to the Claimant as a legal representation fee (“Counsel Fee”) for the purpose of retaining legal counsel in the enforcement procedure opened by the DFSA.
How did the Court address the Claimant's failure to substantiate her claims for legal fees and mental trauma?
The Court dismissed the claim for legal fees on the basis that the Claimant failed to provide any evidence that such costs were actually incurred. Furthermore, the Court rejected the claim for mental trauma and stress due to a lack of evidentiary support and a failure to properly quantify the claim.
In relation to the Claimant’s claim of AED 50,000 for mental trauma and stress. Firstly, the Claimant failed to quantify this sum within the total claimed value and secondly, the Claimant failed to provide evidence to support its claim.
Thirdly, the Defendant asserts that the Claimant is not entitled to any funds for incurred fees in relation to the DFSA Enforcement action as the Claimant has not provided any evidence to substantiate this claim for legal fees.
What was the final disposition of the case and the Court's order regarding costs?
The Court dismissed the Claimant’s claim in its entirety. Consequently, the Claimant was awarded no monetary relief. Regarding costs, the Court exercised its discretion to make no order, meaning each party was responsible for its own legal expenses incurred during the SCT proceedings.
What are the wider implications of this ruling for DIFC employment practitioners?
This judgment reinforces the principle that discretionary payment clauses in settlement agreements are enforceable in the DIFC, provided they are clearly linked to objective performance criteria or regulatory outcomes. Practitioners should advise clients that where a settlement is contingent upon the results of a regulatory investigation, the employer’s right to withhold payment is robust if the investigation reveals professional misconduct. Litigants must ensure that any claim for legal fees or damages is supported by concrete evidence, as the SCT will not award sums based on unsubstantiated assertions.
Where can I read the full judgment in Niyaniya v Nubal [2023] DIFC SCT 390?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/niyaniya-v-nubal-2023-difc-sct-390
CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/small-claims-tribunal/DIFC_SCT-390-2023_20231222.txt
Cases referred to in this judgment:
(None cited in the provided text)
Legislation referenced:
- DIFC Courts Law
- Rules of the DIFC Courts (RDC)