RMJM bosses Peter Morrison and Declan Thompson face a legal battle over £7.75 million which, it is claimed, was ‘wrongfully appropriated’ by the practice after a complex deal in Dubai
Edinburgh’s Court of Session last month ruled that a case, brought by US-headquartered engineering firm Ted Jacob in an attempt to recover the money it believes it is owed, should be allowed to proceed.
Ted Jacob claims that RMJM ‘appropriated for its own purpose’ money that was owed to the US firm for works carried out in the United Arab Emirates.
According to the legal claim, Morrison and Thompson are personally liable to repay the money since they are directors of Cyprus-incorporated companies RMJM Middle East and RMJM Overseas, and because those companies were partners in Scottish partnership RMJM.
Morrison and Thompson disputed their potential liability on two grounds. However, the Court of Session last month threw out their appeals meaning they now face a further hearing to decide whether they owe the sums.
The dispute dates back to the 2011 purchase by Ted Jacob of RMJM’s Dubai engineering business.
Because the buying party did not have the necessary licences to operate in Dubai, RMJM remained the contracting party on existing projects while Ted Jacob carried out certain works.
Ted Jacob claimed that RMJM collected ‘substantial sums’ from clients and failed to pass them on to the buying firm ‘as required’ by key agreements linked to the buyout.
It is alleged that RMJM ‘made use of the amounts collected for its own purposes, and concealed its activities from the pursuer [Ted Jacob]’.
An earlier court hearing in Scotland on the case focused on the detail of the law in force in Dubai. The judge’s opinion in that preliminary hearing was subsequently challenged on two grounds by Morrison and Thompson leading to last month’s hearing.
First the pair – as directors of the Cypriot companies that were the partners of RMJM – disagreed that they should be personally liable for the payments regardless of the merits of the overall case. They argued that under UAE law they would not be seen as directors of RMJM.
Secondly they claimed that the earlier judge had wrongly interpreted UAE law when saying it applied to RMJM.
Those appeals were quashed in April by Lord President, Lord Menzies and Lord Drummond Young sitting in the Court of Session’s Inner House First Division.
‘The commercial judge was correct to hold that the fact that the defenders were directors of Cypriot companies which were in turn the partners of a Scottish partnership, RMJM, carrying on business in Dubai made no difference to the application of the principles of UAE law which made the defenders personally liable for the wrongs of RMJM,’ said the opinion delivered by Lord Drummond Young.
On the second ground of appeal, Drummond Young dismissed the defenders’ argument that certain parts of the 1984 UAE Companies Law should not apply to RMJM because it was a foreign entity.
’The problem with that approach is that it leaves the individuals in control of foreign entities, whether as directors or partners or, as in the present case, directors or partners, outside the system of control imposed by the Companies Law,’ said the court opinion. ‘If that were so, it would be relatively easy to avoid the system of control found in the law by making use of foreign entities. It is perhaps unnecessary to describe the adverse consequences that would result from such an interpretation. We have no hesitation in rejecting it.’
A hearing will now take place in the Court of Session’s Commercial Court.
Ted Jacob, RMJM and the legal firms acting for both parties in the case have all been contacted for comment.