Shetty v Al Rushaid Petroleum Investment Company & Ors

A contractual release may extinguish all claims connected with employment where its language covers all monies due, even if particular claims are not expressly identified. Under Saudi law, a director or mudir of a limited liability company must not take secret commissions which cause the company loss. An agent entrusted with purchasing property must act reasonably in the principal’s interests and is liable for loss caused by departing from that duty. A secret commission causes recoverable loss where it inflates the price paid by the company. Actual and direct loss may be established by reasonable inference; recovery cannot depend on speculative or uncertain loss.

The claimant brought employment-related claims against companies in the Al Rushaid Group, including claims for remuneration and compensation following termination. He also alleged false imprisonment, but abandoned that claim after cross-examination. The defendants counterclaimed against the claimant and two other individuals, alleging that they had received secret commissions through TSJ Engineering Consulting Limited from suppliers whose equipment was purchased for a joint venture company, ARPD.

The central issues were the effect of a final settlement and release, the claimant’s employment status and resignation, the status of the alleged recipients as directors, employees or agents, the duties imposed by Saudi law, whether the payments were secret commissions, and whether they caused ARPD recoverable loss.

1. Employment claims. The final settlement statement released all claims connected with the claimant’s employment by ARPIC. The alleged reservation of a bonus was not made. The release also covered claims against the associated company CB, and the claim against CB independently failed because the claimant had resigned. The employment claims were therefore dismissed.
2. Status and duties. ARPD was a limited liability company. Under Article 167 of the Saudi Companies Regulation, the validity of a mudir appointment depended on an agreement between the shareholders appointing the person and a method of appointment consistent with the articles of association. The claimant and Mr Caplis were validly appointed directors or mudirs of ARPD. Under Article 168, each owed a duty not to take secret commissions causing loss to ARPD.
3. Dr Wight’s duty. Dr Wight was not an employee or mudir, but was ARPD’s agent for procuring equipment. An agent entrusted with purchasing property must act reasonably in the principal’s interests and is liable for loss caused by failing to do so.
4. Secret commissions and loss. Payments from Shandong Kerui, NOV, Byrne, Good Vantage and Honstand were secret commissions. The NOV evidence established that the commission was added to the prices paid by ARPD. The same inference was reasonably available for the other suppliers. The resulting loss was actual and direct and was not impermissibly speculative under the Saudi doctrine of gharar. The JB Consulting and Texas International payments were not established to be secret commissions.
5. Liability and disposal. Mr Shetty and Dr Wight were each liable for US$1,859,682. Mr Caplis was liable for US$1,266,266, limited to payments received before his resignation as director where post-resignation liability was not established. The Saudi conspiracy allegations were dismissed because the late amendment would unfairly require the defendants to answer a new allegation involving criminal participation. The counterclaim and additional claim otherwise succeeded. The alternative English-law remedies were not considered.

Not stated in the judgment. This was a first-instance decision of the High Court (Chancery Division).