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You are here: BAILII >> Databases >> The Dubai International Financial Centre >> Najah v Namine [2024] DIFC SCT 038 (27 March 2024) URL: http://www.bailii.org/ae/cases/DIFC/2024/DSCT_038.html Cite as: [2024] DIFC SCT 38, [2024] DIFC SCT 038 |
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Najah v Namine [2024] DIFC SCT 038
March 27, 2024 SCT - JUDGMENTS AND ORDERS
Claim No. SCT 038/2024
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum,
Ruler of DubaiIN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS
BEFORE H.E. JUSTICE MAHA AL MHEIRIBETWEEN
NAJAH
Claimant
and
NAMINE
Defendant
Hearing : 7 March 2024 Judgment : 27 March 2024 JUDGMENT OF H.E. JUSTICE MAHA AL MHEIRI
UPON this Claim being filed on 24 January 2024
AND UPON a hearing having been listed before H.E. Justice Maha Al Mheiri on 7 March 2024, with the Claimant’s representative and the Defendant in attendance
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1. The Defendant shall pay the Claimant the sum of AED 312,186.
2. The Defendant shall pay the Claimant the Court fee in the sum of USD 1,700.13.
Issued by:
Hayley Norton
SCT Judge and Assistant Registrar
Date of issue: 27 March 2024
At: 9amTHE REASONS
The Parties
1. The Claimant is Najah (the “Claimant”), a company registered in the DIFC , Dubai, UAE.
2. The Defendant is Namine (the “Defendant”), an employee of the Claimant.
Background and the Preceding History
3. The Claimant and Defendant entered into an Employment Contract on 7 October 2019 (the “Employment Contract”). The Claimant began working as a Compliance Officer for the Defendant with a monthly salary of AED 31,000 per month. The Defendant resigned from the Claimant on 28 April 2023, serving 3 months’ notice with her last working day on 27 July 2023.
4. Following the Defendant’s resignation from the Claimant, the Defendant joined Nisa, which is a competitor of the Claimant and is incorporated within the DIFC (the “Competitor”).
5. Pursuant to the Defendant’s Employment Contract, the Defendant agreed to post-termination contractual provisions which restrict the Defendant to procure or solicit the Claimant’s clients and to transfer their business from the Claimant’s company to the Defendant’s new employer.
6. The Claimant submits that the Defendant has breached her contractual obligations insofar as working directly with two of their clients being Naima (“ Naima”) and Nadine (“ Nadine”) (collectively the “Clients”) for and on behalf of the Competitor. This action has resulted in the loss of those Clients and material financial loss to the Claimant.
7. On 24 January 2024, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) claiming compensation in the amount of AED 312,186 with regards to the unlawful solicitation of the following:
(a) AED 91,686 for Naima; and
(b) AED 220,500 for Nadine.
8. On 30 January 2024, the Defendant filed a Defence intending to defend all of the claim.
9. The parties met for a Consultation with SCT Judge Hayley Norton on 13 February 2024 but were unable to reach a settlement. In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a Hearing held on 7 March 2024.
The Claim
10. The Claimant’s case is that following the Defendant’s resignation and the joining of the Defendant to the Competitor, the Claimant argues that they lost their Clients due to the Defendant’s actions.
11. Pursuant to Clause 20 of the Employment Contract, the post termination restrictions are set out as follows:
“20. POST TERMINATION RESTRICTIONS
20.1 After the termination of this Contract, the Employee shall not during the six (6) months after the expiration or termination of the Employment for any reason, without the Company's prior written consent either directly or indirectly do or engage in any of the following:
20.1.1 interfere with, disrupt or attempt to disrupt, or procure or solicit anybody else to interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any of its customers which the Emplovee carried out work for or had a business relationship with at any time during the final twelve (12) months of employment (Non Solicitation Clause);
20.1.2….
20.1.3…
20.1.4 take any action which is prejudicial to the name and/or trading 20.1.4 position of the Company, which could cause damage or loss to the Company and/or any employee of the Company”
(the “Post Termination Restrictions”)
12. The Claimant argues that the Post Termination Restrictions are entirely reasonable and should be followed by the Defendant. As part of the termination and the handover procedure, the Defendant was under an obligation to withdraw from being the authorised individual on the Dubai Financial Services Authority (DFSA) register for any of the Claimant’s clients. The Defendant had repeatedly provided the Claimant with assurances that she had completed all of her handover obligations upon termination.
13. The Defendant’s resignation was followed by notice of termination from both Clients, Naima being on 12 July 2023 and Nadine was on 31 July 2023. The Claimant argues that a recent search of the DFSA register, on 16 January 2024, demonstrates that the Defendant remains the authorised person for the Clients.
14. The effective date of the Defendant becoming the compliance officer for Naima is November 2022 and for Nadine is July 2020. Given that there is no withdrawal date from the DFSA system, the Claimant submits that it is evident that the Defendant had not at any point removed herself from being the authorised individual but merely solicited these Clients upon her transition to her new employer after her last day of employment on 27 July 2023.
15. The total sum claimed by the Claimant as set out in the Claim Form is AED 312,186, being the amounts that would have been paid by the Clients in the 6 months duration where the Non-Solicitation Clause applied and was expressly breached by the Defendant. The losses are calculated using the annual fees paid by both Clients.
The Defence
16. The Defendant denies all of the Claimant’s allegations and submits that the Post Termination Restrictions in her Employment Contract do not prohibit her from "working" with the Claimant’s former clients. If it did, such a clause would be an unreasonable restraint of trade.
17. The Defendant accepts that according to the Post Termination Restrictions in her Employment Contract she is prohibited from interfering with or disrupting the relationship between the Claimant and its Clients, however, she denies participating in this action.
18. The Defendant argues that the only evidence that the Claimant is relying upon in support of its allegations is the fact that the Defendant is listed on the website of the DFSA as being the authorised individual for the Clients.
19. The Defendant agues that the Claimant’s reliance on the DFSA website as evidence of the alleged wrongdoing is flawed for a number of reasons being:
(a) Clause 20.1 of the Defendant’s Employment Contract prohibits her from interfering with or disrupting the Claimant’s client’s relationships, it does not prohibit her from working with the Claimant’s former client;
(b) There is nothing in her Employment Contract which prohibits her from acting as the DFSA-registered Authorised Individual for any of the Claimant’s former clients;
(c) There is no requirement in her Employment Contract to remove herself as the DFSA-registered Authorised Individual for any of the Claimant’s former clients; nor did the Claimant instruct her to do so;
(d) The process to withdraw an authorised individual status is filed by the Authorised Firm via the DFSA e-portal and requires a declaration by a Director or Senior Manager of the Authorised Firm, this cannot be done by the Defendant; and
(e) Both Clients approached the Competitor before the Defendant’s termination date.
20. As such the Defendant denies all allegations that she in any way solicited, encouraged or persuaded the Clients to cease their engagement with the Claimant.
Discussion
21. This dispute is governed by DIFC Employment Law No. 4 of 2021 (the “DIFC Employment Law”) in conjunction with the relevant Employment Contract.
22. I have reviewed Clause 20 of the Employment Contract at issue and the Post Termination Restrictions.
23. I shall refer to the leading English case-law on the subject, namely,CEF HoldingsLimitedand City Electrical Factors Limited v. Brian Mundey and Others [2012] EWHC 1524 (QB), wherein Mr Justice Silber summarised the settled legal principles applicable to determining the issue of the reasonableness of a restrictive covenant, comprising, inter alia, the following:
“i) "A restrictive covenant is void as an unlawful restraint of trade unless the employer can show that it goes no further than is reasonably necessary to protect his legitimate business interests": Herbert Morris v Saxelby [1916] 1 AC 688;
(ii) There must be some subject matter which an employer can legitimately protect by a legitimate covenant. Indeed Lord Wilberforce said inStenhouse v Phillips [1974] AC 391 at 400 E "the employer's claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation". This was followed by Sir Christopher Slade inOffice Angels Limited v Rainer-Thomas [1991] IRLR 214;
(iii) "The court cannot say that a covenant in one form affords no more than adequate protection to a covenantee's relevant legitimate interest if the evidence shows that a covenant in another form, much less far reaching and less potentially prejudicial to the covenant would have afforded adequate protection" (per Sir Christopher Slade in Office Angels [49].)”
24. In the present case, I am persuaded by the Claimant’s argument that Clause 20 of the Employment Contract is clear in protection of the Claimant and is considered reasonable. Although the Defenant submits that Clause 20 does not prohibit her from working with former Clients of the Claimant, the Defendant did not protect herself from this action.
25. When examining the incidents of the claim and the case file, the probability that the Defendant solicited the Claimant’s Clients are very high, with both Clients approaching the Competitor and at the same time the Defendant leaving the Claimant’s company. In addition, both Clients approaching the Competitor with the appointment of the Defendant as their compliance officer. The Defendant failed to flag any of these incidents to her former employer nor her current one.
26. The Clients who the Defendant worked with were underlying Clients of the Claimant and the Claimant had invested time, money and intellectual property in winning and developing those relationships. Therefore, it was reasonable for the Claimant to protect those Clients. It is a legitimate business interest for the Claimant to seek to protect its client relationships. Given the nature of the Claimant’s business, the inclusion of non-solicitation restrictive covenants in its employment agreements is common and necessary to protect client relationships.
27. The restrictive covenant did not prohibit the Defendant from working for another competitor or obtaining another role. It only prevented the Defendant from working with the Claimant’s clients for a limited period of time, being six months from her last working day. The restrictive covenant identified clearly and narrowly the type or scope of work that is subject to such restriction.
28. Furthermore, I have found that the evidence submitted by the Claimant is sufficient and reasonable to establish that the Defendant has breached Clause 20 of her Employment Contract.
29. The Claimant provided copies of quarterly invoices paid by the Clients for their services. As the period of the restrictive covenant is for the period of 6 months, the Court shall order the Defendant to pay compensation in the amount of AED 312,186 for the reasons cited above.
Conclusion
30. In light of the aforementioned, I find that the Defendant shall pay the Claimant the sum of AED 312,186.
31. The Defendant shall pay the Claimant the amount of USD 1,700.13 being 2% of the judgment sum awarded to the Claimant.