Bank of Credit and Commerce International SA ((in Liquidation)) v Ali (No. 1)
| Jurisdiction | England & Wales |
| Judgment Date | 19 April 2000 |
| Date | 19 April 2000 |
| Court | Court of Appeal (Civil Division) |
Employment - Contract of employment - Implied term - Employees entering into agreement settling all claims arising from employment - Employer subsequently reputed to have acted dishonestly - Employees claiming damages for breach of implied term of trust and confidence and misrepresentation - Whether claims barred by agreement
The defendants were two employees made compulsorily redundant by the plaintiff bank. On 4 July 1990 the employees, in consideration of a payment by the bank, signed an agreement by which they accepted the terms set out “in full and final settlement of all claims … of whatsoever nature that exist or may exist” against the bank save for their rights under the bank pension scheme. The bank went into insolvent liquidation in 1991 and wide publicity was given to the illegal and dishonest conduct of its business. In the course of the liquidation, the liquidators sought to recover loans made to the employees, who counterclaimed for damages for breach of their employment contracts as a result of which they were placed at a disadvantage on the labour market. The bank contended that the agreements signed by the employees were binding compromise agreements and precluded their claims against the bank. The action proceeded on the basis that there was a subsisting breach by the bank of the implied term of trust and confidence in the contracts of employment when the agreements were signed and that the employees were unaware of the breach. The judge held that the agreement signed by the employees was binding on the employees and precluded their counterclaim for breach of contract against the bank.
On appeal by the employees:—
Held, allowing the appeal, (1) (per Chadwick and Buxton L.JJ.) that, as a matter of construction, the agreement released the bank from all unidentified claims arising out of the employment relationship, including the potential claim for stigma damages, regardless of the employee's ignorance of such a claim; and (per Sir Richard Scott V.-C.) that the intention of the parties, objectively ascertained, was not that the agreement should bar a contractual claim based on the bank's corrupt and dishonest conduct of its business of which the employee, the releasor, as the bank must have known, had no knowledge (post, pp. 1420C–1421B, 1422A–B, 1437G–1438B, 1439B–D).
(2) But that (per Sir Richard Scott V.-C. and Chadwick L.J.), where it would be unconscionable for the releasee to rely on the words of general release, equity could intervene, and, on the assumed facts, it would be unconscionable to allow the bank to take advantage of the employee's ignorance, of which it must have been aware, by relying on the agreement as a defence to the stigma claim; and (per Buxton L.J.) that equity would not permit general words in a release to debar the party using them from asserting claims that arose from circumstances of which he had no knowledge and matters that he did not contemplate, and, accordingly, on the assumption that at the date of the release the employee was unaware of the conduct of the bank on which a claim for stigma damages might be based, the release could not be applied to that claim (post, pp. 1421F–G, 1422A–B, 1438E–FSC, 1441A–B).
The following cases are referred to in the judgment:
Bates (Thomas) and Son Ltd. v. Wyndham's (Lingerie) Ltd. [
Bell v. Lever Brothers Ltd. [
Cholmondeley v. Clinton (
Ecclesiastical Commissioners for England v. North Eastern Railway Co. (
Farewell v. Coker (unreported): see 2 Mer. 353
Good, Ex parte; In re Armitage (
Investors Compensation Scheme Ltd. v. West Bromwich Building Society [
Joint Stock Trust and Finance Corporation, In re (
London and South Western Railway Co. (Directors of the) v. Blackmore (
Lindo v. Lindo (
Lyall v. Edwards (
Mahmud v. Bank of Credit and Commerce International S.A. [
Payler v. Homersham (
Perkins, In re; Poyser v. Beyfus [
Prenn v. Simmonds [
Roberts (A.) & Co. Ltd. v. Leicestershire County Council [
Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd. (Note) [
Turner v. Turner (
Willmott v. Barber (
The following additional cases were cited in argument:
Aldrich v. Norwich Union Life Insurance Co. Ltd.,
Colchester Borough Council v. Smith [
Chapman v. Chapman [
Kitchen Design and Advice Ltd. v. Lea Valley Water Co. [
Lee v. Lancashire and Yorkshire Railway Co. (
Richmond v. Savill [
Scally v. Southern Health and Social Services Board [
Spring v. Guardian Assurance Plc. [
Sybron Corporation v. Rochem Ltd. [
Turner v. Green [
University of Nottingham v. Eyett [
The following additional cases were referred to in the skeleton arguments:
Addis v. Gramophone Co. Ltd. [
Brikom Investments v. Carr [
Foakes v. Beer (
French v. Barclays Bank Plc. [
Hill v. General Accident Fire & Life Assurance Corporation Plc. [
Horcal Ltd. v. Gatland [
Huddersfield Banking Co. Ltd. v. Henry Lister & Son Ltd. [
Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd. [
Johnson v. Unisys Ltd. [
Speed v. Thomas Swift and Co. Ltd. [
White v. Reflecting Roadstuds Ltd. [
Withers v. General Theatre Corporation Ltd. [
Appeal from Lightman J.
On 30 June 1998 Lightman J., giving directions for the trial of issues to be determined in the managed litigation between the plaintiff, the Bank of Credit and Commerce International S.A. (“B.C.C.I.”), through its liquidators, and the defendants, Munawar Ali and other former employees, ordered, inter alia, (1) the selection of test cases for the determination of issues raised by a number of employees in relation to the enforceability of Acas COT-3 agreements entered into with B.C.C.I. and (2) that the test cases were to be tried between B.C.C.I. and, inter alia, Khawaja Mohammad Naeem and Abdul Naim Mohammad as representative employees dismissed by B.C.C.I. On 18 December 1998 Lightman J. ruled [
By notice of appeal dated 26 January 1999 and pursuant to the leave of the Court of Appeal the employees appealed against the decision on the grounds that (1) as the Acas COT-3 agreement was a release and not a compromise it could not be construed as applying to claims for breach of contract and/or misrepresentation which were not within the contemplation of the parties to the agreement; and (2) if the agreement was a compromise, the implied term of trust and confidence required the bank to disclose to the employees, prior to their signing the agreement, the misconduct which constituted a breach of the implied term of trust and confidence, and their failure to do so rendered the Acas COT-3 agreement void.
The facts are stated in the judgment of Chadwick L.J.
Robin Allen Q.C. and Isaac Jacob for the employees.
Christopher Jeans Q.C. and Daniel Stilitz for the liquidators.
19 April. The following judgments were handed down.
Sir Richard Scott V.-C. 1. Two claimants gave notice of appeal against the order of Lightman J. of 30 December 1998. They were Mr. Khawaja Mohammad Naeem and Mr. Abdul Naim Mohammad. We were told that since then Mr. Mohammad has agreed terms of settlement with B.C.C.I. Mr. Naeem is now, therefore, the sole appellant. But the issues raised on this appeal do not depend to any significant extent, if at all, on facts peculiar to Mr. Naeem's case. They are issues which affect the cases of every B.C.C.I. ex-employee who, like Mr. Naeem and Mr. Mohammad, signed an Acas COT-3 form and thereby purported to accept the terms that B.C.C.I. were offering:
“in full and final settlement of all or any claims whether under statute, common law or in equity of whatsoever nature that exist or may exist and, in particular, all or any claims rights or applications of whatsoever nature that the [ex-employee] has or may have or has made or could make in or to the industrial tribunal, except the [ex-employee's] rights under [B.C.C.I.'s] pension scheme.”
2. The...
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