18 Mar 2014

HADEF & PARTNERS - ABU DHABI COURT HIGHLIGHTS

Authored by: Mohammed AQ Al Salti and Tarik El-Bakri

HADEF & PARTNERS - ABU DHABI COURT HIGHLIGHTS

Hadef & Partners has an active role in the UAE Courts having a number of in-house Emirati advocates who act for clients throughout all stages of the court process. From our long established presence and in-depth experience in the region, we are regularly approached by Government entities to review and draft legislation on developing areas of the law. Throughout the year we deal with many matters that provided outcomes with important legal principles.  In this article Mohammed AQ Al Salti, Senior Legal Consultant & Tarik El-Bakri, Partner & Head of Commercial, Employment and IP practices in Abu Dhabi, discuss a number of these.
 
Abu Dhabi Court of Appeal (Case No. 1752/2011)
 
The first significant case concerned an Abu Dhabi Court of Appeal Case involving our client, a reputable Takaful insurance company, and a ready-mix concrete supplier. The position on motor vehicle insurance has always been a controversial topic with confusion as to where responsibility lies for paying amounts where there has been negligence, breaches of the law and criminal acts or felony by the insured. However, this has recently been clarified by a judgment in favor of our client, which states “An insurance company is not liable to pay under the insurance policy if it is proved that the insured failed to fulfill his obligation to maintain the vehicle in proper working order as provided for in the general condition for vehicle insurance”.
 
This therefore provides that it is a fundamental pre-condition that the insured driver is to take all reasonable precautionary measures to ensure the insured vehicle is fit for purpose. This gives an insurer flexibility to assess situations on their subjective circumstances and the ability to inspect vehicles when assessing liability.
 
Abu Dhabi Court of Cassation (Case No. 157/2012)
 
The second key case involved an employment case that was determined in the Abu Dhabi Court of Cassation. The background to this case concerned a termination where the appellant had asked for her end service gratuity based on her last salary and had asked to be compensated for unused leave based on this salary also. The final request was for compensation for moral damage in addition to compensation for unfair dismissal.  We had argued, successfully, at First Instance and Court of Appeal levels, that the appellant was only entitled to compensation for both heads (i.e., end of service gratuity and unused leave) based on her last basic salary, in addition to the statutory heads of compensation.
 
The Court of Cassation agreed with our reasoning and ruled that compensation is to be calculated on the “last basic salary received by the employee” as opposed to the “last salary received by an employee” which may include various allowances.  This represents an important clarification regarding this matter, especially in respect of calculating end of service entitlements given the conflicting opinions over the meaning of “last salary” mentioned above.  The Court also accepted our argument that the compensation for unfair dismissal is limited in scope to the formula set in Article 123 of the Labor Law, which is “not to exceed in all cases three months’ salary”, to the exclusion of any other heads of compensation that an employee may claim for unfair dismissal - and therefore rejected the employee's claim for compensation for moral injury.
 
The three significant principles that emerged from this case are:
 
a.     When calculating the end of service benefits of an employee, the meaning of the term “last wage” mentioned in Article 134 of the Labor Law means “the last basic salary”.
b.    When calculating leave entitlements, it should be based on basic salary plus housing allowance, where applicable.
c.     In the event of unfair dismissal, an employee is only entitled to compensation set out in the Labor Law, and not any other form of compensation.
 
Abu Dhabi Court of Cassation (Case No. 140/2012)
 
The final case to discuss from the Abu Dhabi Court of Cassation concerns retired military personnel and their entitlements. An employee of a local university, who had retired from the UAE military, was hired pursuant to Abu Dhabi Executive Council Resolution regarding the Hiring of Retired Military Personnel (the “Resolution”).  The employee was subsequently dismissed by the University and filed an action claiming severance pay and back dated housing allowance.  He asserted that his employment contract provided for a monthly salary of AED 25,000 without specifically mentioning that this amount is inclusive of housing allowance, and therefore he was entitled to an additional housing allowance.
 
We pointed out to the court that the employee in his employment contract was specifically hired pursuant to the Resolution which provides, inter alia, that “a military personnel who joins the civilian sector shall be paid a total lump sum salary to be calculated as a median amount of the salary to be paid for the position to which the retired candidate is nominated, to which housing allowance is  added…”.  We argued, successfully, that the phrase “shall be paid a total lump sum salary” includes the housing allowance, notwithstanding the subsequent phrase “to which housing allowance is added”.  The Court of Cassation agreed with our reasoning that the “total lump sum” is inclusive of the housing allowance, i.e. that the word “total” encompasses allowances as well, and since the employment contract followed the Resolution, the employee in question was only entitled to the agreed lump sum amount which is deemed to include the housing allowance, even though the employment contract did not specifically say so.
 
To conclude, in respect of Retired UAE military personnel hired in the civilian sector, the Resolution provides that such personnel are only entitled to a lump sum payment, including housing allowance, even if the employment contract does not explicitly say so.

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the develop jurisdiction of the UAE.