The Rules of the Game Damian Brown QC Ed Kemp

The Rules of the Game Damian Brown QC Ed Kemp

This talk will cover Part 1: Contractual Interpretation To what extent can the Court re-write the contract? Does business common sense have any role? When will the Court interpret against the party responsible? Part 2: Statutory Interpretation The basics Backlash against importation of English law concepts

Common law orthodoxy ICS: Lord Hoffman s re-statement principles 1. Meaning of document to reasonable man 2. Matrix of fact 3. Negotiations inadmissible unless mistake 4. Meaning what parties would reasonably have understood 5. Linguistic mistakes not easily accepted BUT: Part 5 DIFC Contract Law contains key differences

Subjective intention Intention is the starting point (Art. 49(1) and 50(1)) Meaning of contract to reasonable person is default position (Art.49(2)) Regard to all the circumstances (Art.51) Includes preliminary negotiations and subsequent conduct Greater scope for ex post facto interpretations? Taaleem CFI014/2010 first case to consider subjective intention but issue was subsequent terms absent written executed agreement Rohan CFI 025/2012 - interpreted words on face of clause. No reference to subjective intention.

Business common sense Wickman v. Shuler [1974], HL: where outcome of constructive leads to unreasonable result relevant to determining parties objective intention Rainy Sky v. Kookmin Bank [2012], SC: if two possible constructions, court entitled to prefer construction consistent with business common sense BMA v. African Minerals [2013], CA: parties cannot use Rainy to make the contract say what they wished it had

Importing business common sense Art. 51 does not expressly provide Could include as non-exhaustive and purpose is relevant Court should be slow to use business common sense to rewrite contract where words clear Chadwick L.J. (as was) in City Alliance, court can only introduce words where:- words actually used produce result so commercially nonsensical that parties could not have intended parties did intend some other commercial purpose which can be identified with confidence

Interpretation against the party responsible Art. 54 Unclear how this will operate in practice Could use to circumvent enquiry under Arts.49-50 where terms unclear Cf: English common law where doctrine no longer relevant because primacy of business common sense

Implication at common law Lord Hoffman, Belize PC: suggested only one question of interpretation Singapore CA in Foo Jong Peng: business efficacy and officious bystander tests are integral Bingham M.R, Phillips Electronique: implication of terms so intrusive that the law imposes strict constraints on the exercise of this extraordinary power BUT: no strict test of necessity for implication in DIFC contracts (Art.57)

Implied duty of good faith Art.57(c) expressly provides Bingham LJ in Interfoto, HC: playing fair, coming clean or putting one s cards face upwards on the table No requirement of finding of dishonesty for breach Legatt J in Yam Seng: improper, commercially unacceptable or unconscionable Suggested implication of shared values and norms of behaviour (i.e. ethical standards) into commercial contracts novel approach in English law

Implied term of mutual trust and confidence Recognition of trust and confidence in DIFC employment contract (see: Julius Baer CFI 014/2009 per DCJ Hwang (as was) [9]) No damages for manner of dismissal (see: Herz [81]) Possibility of damages for anterior breach? Possibility of wrongful constructive dismissal? Will recognition of trust and confidence term end? (cf: Commonwealth v. Barker [2014] HCA 32 no longer recognised in Australia) But not just yet? (see: BGC Brokers L.P. v. Abourahim CFI 027/2013 per Field J [28])

Part 2: Statutory Interpretation The literal rule: ordinary and natural meaning The golden rule: modification if absurdity The mischief rule (e.g. Heydon s Case [1584] HC)

The backlash against English law imports Starting point: Article 8 of DIFC Law No.3 of 2004 8 Application (2) The relevant jurisdiction is to be the one first ascertained under the following paragraphs:- (e) the laws of England and Wales.

In the beginning Dutch Equity CFI/2006 (HHJ Hwang) (as was) 2004 and 2006 Companies Law of the DIFC did not provide an exhaustive code of company law Appropriate to rely on Article 8(2)(e) Transplant of English Company law on shareholder meetings Ithmar Capital CFI/2007 (Justice Colman) appropriate to add flesh to the concise bones of these legislative provisions by looking to the manner in which the Common Law courts in England and elsewhere have given effect to similar principles

Article 8(2)(e): not a panacea Forsyth CFI 5/2007 (HHJ Hwang (as was) [41-45] No pronouncement from DIFCA as to what types of debt are preferential in insolvency context Not appropriate to apply UAE law or English law on preferential debts influence of public policy Legislature has said DIFC will have its own regime on preferential debts Transplant cannot supplant legislative intent even if regulations not yet enacted

The Forsyth trap: DIFC employment law No freestanding right to compensation for unfair dismissal. See: Hana Al Herz v. DIFCA CA004/2013 per CJ Hwang [67-68] No concept of penalty clause imported into DIFC law. See: Roberto s Club LLP v. Rella CFI019/2013 per DCJ Chadwick [105]

Transplant of test of reasonableness of employers? Article 59A of DIFC Employment Law 2012:- An employer or an employee may terminate an employee s employment for cause in circumstances where the conduct of one party warrants termination and where a reasonable employer or employee would have terminated the employment (emphasis added).

Transplant of test of reasonableness of employers? British Homes Stores v. Burchell [1980] ICR 303 Burchell transplanted. ABC v. XYZ LLP, SCT Burchell backlash. Raul Silva v. United Investment Bank Ltd CA 4/2014 per Justice Roger Giles [24] McDuff v. KBH Kaanuun Ltd CA3/2014 per Justice Roger Giles [77]

Greyness? How is reasonableness measured? Where the Claimant s conduct justified summary dismissal for gross misconduct or for cause was to be determined objectively (Silva at [77]) The hypothetical employer is not allowed a range of reasonable responses; it must be found that it would have terminated the employee (McDuff at [24]) Different test to whether dismissal for gross misconduct at English common law Still residual role for reasonableness at second stage? Expect further cases on precise application of Art. 59A

Conclusions Rules of the game continue to evolve Scope for DIFC brand of interpretation of contracts quite different to common law Court more likely to imply terms in DIFC Best to draft terms using language that is crystal clear More cases likely on trust and confidence More cases likely on practical application of Art. 59A Backlash against English law transplants set to continue as DIFC becomes more established

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