Bgc Capital Markets (Switzerland) LLC v Peter Kevin Rees (1st Defendant) Tullett Prebon Plc (2nd Defendant) Tullett Prebon Group Ltd (3rd Defendant) Tullett Prebon (Uk) Ltd (4th Defendant)
| Jurisdiction | England & Wales |
| Judge | Sir Raymond Jack |
| Judgment Date | 27 July 2011 |
| Neutral Citation | [2011] EWHC 2009 (QB) |
| Date | 27 July 2011 |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ09X02534 |
[2011] EWHC 2009 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Raymond Jack
Sitting as a Judge of the High Court
Case No: HQ09X02534
Mr Jonathan Cohen (instructed by McDermott Will & Emery UK LLP) for the Claimant
Mr Mohinderpal Sethi (instructed by Edwards Angell Palmer & Dodge UK LLP) for the First Defendant
Mr Simon Devonshire QC (Instructed by Rosenblatt) for the Second, Third and Fourth Defendants
Hearing dates: 14–17, 20–24, 27, 30 June 2011
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
| Index | |
| Introduction | paragraph 1 |
| A. The case against Mr Rees | 17 |
| Termination by Mr Rees | 17 |
| Damages against Mr Rees | 82 |
| The loss of profit claims | 84 |
| The claim in respect of the loan | 98 |
| Post termination restrictions or restrictive covenants | 99 |
| Confidential information | 109 |
| B. The case against Tullett | 111 |
| Inducing Mr Rees to terminate his contract | 111 |
| Inducing breach of post termination restrictions and misuse of confidential information | 151 |
| The outcome | 153 |
Introduction
BGC and Tullett, as I will call them, are both substantial groups of companies carrying on businesses of inter-dealer broking. That involves the employment in London and in other financial centres of large numbers of brokers who act as intermediaries between traders, most often employed by banks, in what can broadly be described as financial products, including cash, foreign exchange, derivatives, commodities and equities. There is a rivalry between the two groups.
On 5 June 2007 the first defendant in this action, Mr Peter Rees, commenced work for the claimant, BGC Capital Markets (Switzerland) LLC, as head of the company's Swiss francs forward desk under a contract dated 6 March 2007. He was to work at the company's office in Nyon, which lies between Geneva and Lausanne. The contract was for an initial period of 4 years with an additional notice period of 3 months, and the earliest Mr Rees might have left under that provision was 4 September 2011. On 6 April 2009 Mr Rees gave notice to BGC that he was treating the contract as ended by reason of BGC's reduction of his salary. That had been done by BGC under a term of the contract permitting a reduction if the desk's earnings failed to meet a defined level. On 25 April 2009 Mr Rees entered a contract of employment with the third defendant, Tullett Prebon Group Limited, and he commenced work as a broker on Tullett's forward cable desk on 18 May 2009.
In this action BGC Switzerland claims damages by way of loss of profits from Mr Rees for breach of his contract by terminating it on 6 April 2009, and damages for breach of the post termination restrictions on his employment contained in the contract. There is also a claim for misuse of confidential information. The company further claims from Mr Rees the sum of £144,525, the net amount of a 'forgivable loan' paid to Mr Rees under his contract. Mr Rees counterclaims against BGC Switzerland damages for constructive dismissal. BGC Switzerland claims damages against Tullett for inducing Mr Rees' breaches by offering him a job.
The previous paragraph sets out the bare bones of the litigation. An essential part of the story is the attempt by BGC between January and March 2009 to recruit a large number of the brokers employed in Tullett's London office. This was successful as to ten brokers including four from the forward cable desk. Mr Rees was employed by Tullett as a replacement on that desk. On 25 March 2009 Tullett commenced proceedings against BGC, Mr Verrier, Mr Lynn and Mr Hall. The last three were respectively executive managing director of BGC, president of BGC, and head of Tullett's forward cable desk. The ten brokers who had gone to BGC from Tullett were also joined as defendants soon after. The most important claims were for injunctions and for damages for conspiracy. In a judgment delivered on 18 March 2010 I upheld those claims. I found that BGC, Mr Verrier and Mr Lynn had conspired to use unlawful means to gain the employees in question: [2010] EWHC 484 (QB). My judgment was upheld by the Court of Appeal: [2011] EWCA Civ 131. On 17 March 2011 I began the hearing of Tullett's claims for damages. On 11 April, when the evidence was close to completion, the parties stated that they had reached a settlement. An agreement was entered into. Its terms are confidential to the parties. I will call this action 'the conspiracy action'. In 2009 BGC recruited to its New York office, or Tullett would say 'poached', approximately 80 brokers from Tullett's New York office. That is the subject of on-going arbitration proceedings in the United States.
The present action was commenced by BGC Switzerland against Mr Rees on 15 June 2009. On 19 June Mr Rees offered undertakings not to trade forward Swiss or forward Euro, and BGC's application for interim relief by way of injunction was otherwise rejected. Following pre-action disclosure by Tullett, on 26 August 2009 BGC applied to join Tullett as a defendant on the basis that Tullett had induced breaches by Mr Rees of the post termination restrictions contained in his contract with BGC. An order was made by consent on 10 September 2009. But the claim that Tullett had induced Mr Rees to terminate his contract of employment with BGC was not added until January 2011.
The sole claimant is BGC's Swiss arm, BGC Capital Markets (Switzerland) LLC. I can in the main simply refer to BGC. But it is necessary to distinguish between the claimant and BGC London companies in relation to the right of the claimant to recover loss of profit suffered in London on the basis that had Mr Rees not terminated his contract, he would have been seconded to work for BGC in London. I will there refer to 'BGC Switzerland' and 'BGC London'. There are three Tullett defendants: Tullett Prebon PLC, Tullett Prebon Group Limited and Tullett Prebon (UK) Limited. The particulars of claim do not distinguish between them, and no point arises as to the differences. I can simply refer to 'Tullett'.
BGC has been represented by Mr Jonathan Cohen instructed by McDermott Will & Emery UK LLP. Mr Rees has been represented by Mr Mohinderpal Sethi instructed by Edwards Angell Palmer & Dodge UK LLP. Tullett has been represented by Mr Simon Devonshire Q.C. instructed by Rosenblatt. McDermott Will & Emery acted for BGC in the conspiracy action, and Rosenblatt acted for Tullett. Edwards Angell Palmer & Dodge were instructed by Tullett in the conspiracy action to guard the interests of three forward cable brokers, referred to as 'the Tullett Three', in respect of whom it was alleged by BGC that Tullett had induced them not to perform the forward contracts that they had entered with BGC. The Tullett Three were not parties in the conspiracy action but were important witnesses. I held that Tullett had induced them not to perform their contracts with BGC but that they were entitled to refuse to do so by reason of BGC's unlawful behaviour. Mr Cohen had represented BGC in the conspiracy action led by Mr Andrew Hochhauser Q.C. In the conspiracy action BGC were responsible for the costs of all the defendants. Tullett paid the costs of Edwards Angell in representing the Tullett Three.
In the present action Tullett have undertaken to pay the costs of Mr Rees which are incurred in his defence of the proceedings and in the advancement of his counterclaim. But Tullett have not undertaken to pay any costs which may be awarded against Mr Rees. Nor have they given any indemnity against any other sums which Mr Rees may be ordered to pay arising from the claims against him. Tullett's undertaking in respect of Mr Rees' costs was given orally to Edwards Angell, and passed by Edwards Angell to Mr Rees. Nothing has been put in writing. That was also the position in respect of the Tullett Three. The undertaking was given immediately following McDermott Will & Emery's involvement of Rosenblatt in the service of proceedings on Mr Rees. It is clear that Tullett then determined that Mr Rees should be represented at Tullett's expense. Tullett's reasoning is unknown. Mr Rees would have been unable to pay for his own representation. This situation is very different to the indemnities offered by BGC to its recruits from Tullett, with which I was concerned in the conspiracy action. Those indemnities were included in the packages by which they were recruited. While Mr Rees' financial position has hopefully improved since 2009 – when it was dire, it appears unlikely that he will be able to meet any substantial judgment against him.
The contract between BGC and Mr Rees is governed by Swiss law. I heard evidence as to that from Mr Edgar Philippin who was instructed on behalf of BGC, and Mr Daniel Hochstrasser who was instructed on behalf of Mr Rees. It is agreed that BGC's claims against Tullett for inducing breach of contract are governed by English law.
Mr Rees' Contract with BGC
Mr Rees' contract was for an initial period of 4 years which might be followed by a three month notice period. He was to be employed as an associate director on the Swiss forwards desk or such other capacity as the company might reasonably require. It is agreed that he was in fact employed as head of the desk, and that he had no responsibilities beyond that.
Paragraph 2(c) provided:
"2(c) You will be employed to work for the Company (or on secondment with an Associated Company) in the offices based in Switzerland...
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