Lack of law hampers court from settling Forsyth case

Dubai: The lack of provision under the DIFC Insolvency Law No. 7 and Regulations on how to handle what constitutes preferential treatment of employees as creditors has prevented the court from arriving at a decision on the ongoing preferential debt settlements case of the now defunct Forsyth Partners.

The ongoing court hearing was adjourned for the second time on Sunday with the judge asking the legal counsel of Grant Thorton UK, the liquidator, to seek interpretations from an independent local lawyer of the two Dubai federal laws that might be applicable to former employees. At issue is the payment of all outstanding dues to ex-Forsyth staff.

For the record, $1.7 million of the funds currently held by Grant Thorton could be made available to pay the ex-staff. Forsyth Partners Global Distributors (FPGD) staff are owed $1.45 million collectively and Forsyth Partners Middle East (FPME) staff $210,000. The only staff creditor of Forsyth Partners Group Holdings (FPGH) is Paul Forsyth, the Group CEO of Forsyth Partners who has claimed $1 million.

The legal counsel has been given three weeks to seek the opinion on the two laws, which are: DIFC Employment Law 4 of 2005 - Article 52 allows employees classed as redundant to seek employment elsewhere, demonstrating that "redundancy" is rec-ognised in Dubai Federal Law and The UAE Regulation of Labour Relations regulation number 8 of 1980, article 4 which states that in bankruptcy, the first priority is to staff.

"I'm afraid it's a waiting game until we hear the results from the appropriateness of the two Dubai Federal laws," said one ex-staff creditor on condition of anonymity. "One thing is for sure though and that is, Grant Thorton is keen to pay ex-staff something as soon as possible."

UK-based asset management company Forsyth Partners lost its licence to do business at DIFC on August 27 for failing to meet adequate capital requirements, according to the regulator Dubai Financial Services Authority's official website statement. It's the first company to go into liquidation at Dubai international Financial Centre. Grant Thorton, appointed as the liquidator of all three entities - FPGH, FPGD and FPME - had applied for court direction so that it could make a payment to the former employees, whom they wish to consider preferential creditors.

Mounting costs

Grant Thorton's administrator and joint liquidator David Dunckley emphasised in court on Sunday that with time ticking by and that means mounting costs which eats into the pot available, ex-staff make enquiries on an individual basis.

Some ex-staff creditors have voiced concerns about Grant Thorton consulting with Paul Forsyth to determine the claims of the rest of the staff, considering what he appeared to have claimed personally.

Where there is a gap in DIFC law, the DIFC court can look to both England and Wales and Dubai Federal laws for direction. The judge, Michael Hwang, during the court hearing on Sunday, opined that he was against migrating the English law to the case in hand.

"Establishment of a preferential debt regime is very much fashioned by social and financial conditions in England and Wales," Hwang said. "Social conditions that influence the labour market here is different ..."

Under English law, there is governmental Redundancy Payments Office (RPO), which settles preferential claims such as outstanding holiday pay, pay in lieu of notice and redundancy. The idea is that hardship is not suffered and liquidator, who makes a final settlement to the redundant staff, reimburses the RPO. RPO is essentially a government fund. Nothing like the RPO exists in Dubai.

DIFC has indicated that when its law is drafted and enacted it will allow preferential creditors.