Horkulak v Cantor Fitzgerald International

Thursday, 20 November 2003

On 13 August this year Newman J handed down a judgment in the Queen's Bench Division giving judgment to the claimant on his claim for damages for wrongful constructive dismissal. The defendant sought permission to appeal on both liability and quantum. On 6 October Mance LJ granted the defendant permission to appeal on the issues of quantum but refused it in respect of liability. The defendant now renews his application for permission to appeal in respect of liability in advance of the appeal hearing because if he is granted permission it will materially affect the time estimate for the appeal.

The claimant joined the defendant under a contract of employment, dated 17 January 1997, as a Director responsible for Deutschmark rate swaps. He was, of course, very well paid. He was twice promoted. He became employed as a Senior Managing Director under a new contract, dated 17 August 1999. This was a fixed term contract due to expire in September 2002.

Mr Amaitis was the Senior Managing Director in London and later the Chief Executive Officer and President of the Group. He was the claimant's Line Manager. From about July 1997 they spent a considerable amount of time together. The judge delivered the following assessment of Mr Amaitis' managerial style in paragraph 39 of his judgment:

"In my judgment Mr Amaitis is a dictatorial manager and executive. I have concluded that he sees it as his role to be so. As he was minded to accept in evidence, he has brought to the executive and managerial level the habits of the trading floor. He issues staccato instructions, raises his voice, shouts, expects instant responses and is quick to criticise where he perceives failings or faults. He regularly employs strong, foul language and swear words and expressions containing expletives."

The judge having gone through the history from that early stage commented in paragraph 43:

"The claimant, had he thought about it, could have been in no doubt about what might be in store for him if Mr Amaitis had reason to question his performance."

From late 1999, after the second contract of employment, Mr Amaitis did begin to find fault. The judge made findings about a series of matters during the first half of the year 2000. There was an incident in February showing contempt for the claimant's presentation. On 28 April Mr Amaitis rang the claimant at home, went berserk and threatened to break the claimant in two and sack him. This was not a real threat of physical violence, but nevertheless it was an expression of extreme anger. The judge commented in paragraph 56:

"It was not a criminal threat to harm the claimant but a clear expression of the level of anger and intolerance he harboured for the claimant, which was wholly incompatible with the continuance of a relationship based on mutual trust and confidence."

The last straw came on 28 June when there was a telephone call in relation to a schedule of proposed bonuses put forward by the claimant for other members of staff. The judge concluded as to this:

"I am satisfied that the minor nature of the criticism relating to the absence of brackets and the strength of the language in which it was expressed convinced the claimant he could not continue to work with Mr Amaitis. The episode was to put him in fear of meeting Mr Amaitis and being able to continue with his employment. He left Cantor not as an act of insubordination in the face of the exercise of reasonable authority by his employer, but because his role and status as a senior manager and employee had been severely undermined."

The next day the claimant visited his doctor and a solicitor. He suffered an acute stress reaction and was unable to return to work. His solicitors intimated a claim for constructive dismissal.

The judge's findings on fact are not now disputed. His conclusions on liability can be summarised in paragraphs 70, 76 and 79 of his judgment. In paragraph 70, he says:

"Even when full allowance is made for Cantor's right, acting through Mr Amaitis, to set and maintain a very strict, demanding regime of performance for its employees, I am unable to conclude that such criticisms as it had in connection with the claimant's conduct were properly raised and handled. Threats of dismissal should not be used to intimidate. Nor should they be used in intemperate language. The level of the rebuke must be proportionate to the alleged failing on the part of the employee."

In paragraph 76:

"In my judgment the contract broke down and the position of the claimant became intolerable because Mr Amaitis took every opportunity to vent his disapproval of the claimant, to the claimant and sometimes to him in the presence of others. He demonstrated by his outbursts that he had lost faith in him and gave him no chance to re-establish the trust and confidence which would recreate the 'faith."

Finally in paragraph 79:

"I have reached the firm conclusion that Mr Amaitis' deliberate course of conduct from January 2000 to 28 June 2000 breached the implied term of trust and confidence in the claimant's contract of employment. As a senior managing director, having responsibility for managing employees, his position became intolerable. The outbursts of Mr Amaitis to the claimant were bound to become common knowledge in Cantor. Without Mr Amaitis' support, his authority to manage employees was severely undermined."

The applicant accepts that Mr Amaitis behaved unreasonably but argues that that is not the question. The question is whether his behaviour amounted to a breach of the contract of employment.

Mr Béar makes two inter-related points. The first is that there must be an interaction between the implied term of trust and confidence, and the principle of acceptance by employees of risks from the employment knowingly run (including the Wikers v Perry Chain Company principle). He draws our attention to the proposition from Lord Nicholls in Mahmud v BCCI [1998] AC 20 at 35:

"This implied obligation is no more than one particular aspect of the portmanteau, general obligation not to engage in conduct likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract implicitly envisages."

So it is argued that as the claimant knew perfectly well what sort of a man Mr Amaitis was and what he was letting himself in for when he moved into a more senior management role, he cannot complain when exactly that sort of behaviour was meted out to him as it had been to others in the past.

The related point is that the scope of the implied term of trust and confidence should not be such as to fail to recognise differences between different types of employment. It should also allow the employer the power to run his business in the way that he considers fit. Mr Béar makes some criticisms of the rather broad statements of the judge about what Mr Amaitis was and was not entitled to do, in particular in paragraph 78 of the judgment. In that paragraph the judge says that Mr Amaitis was not entitled to: "assert his authority by the use of foul and abusive language which gave no chance for the claimant to respond to any criticism; [or] to continue to insist on his levels and standards of performance where he had grounds to believe that the claimant could not attain them."

Mr Béar, in my judgment with some justice, says that employers are entitled to expect very high standards from their employees and it cannot be a breach of contract for them so to do in the circumstances of this particular high-level, high-performance-requiring employment.

While I do not accept all the statements made by the judge as to what an employer's obligations are, they are not, in my view, the basis of his decision. The basis of his decision lies in the passages that I have quoted, which indicate that Mr Amaitis' conduct towards the claimant so undermined his authority to manage the employees for whom he was responsible as to make it impossible for him to do the job. The whole principle of the law of constructive dismissal is that of course an employer is entitled, if he wishes, to dismiss somebody and seek to justify that dismissal as being both lawful and fair within the terms of the law against unfair dismissal. But what he is not entitled to do is to make it impossible for somebody to do his job, thus in effect stopping him and preventing him from doing his job, and then say that that was not a dismissal. In other words he was not entitled to sack somebody through the back door and avoid the consequences by so doing. It is no interference with an employer's business to hold that that is a breach of contract. The employer should go about his business in the way in which the contract envisages, which is that if he is dissatisfied with an employee he goes through the usual processes of seeking to terminate his employment.

For that very simple reason I, for my part, would say that an appeal in this case has no prospect of success and I would refuse permission on the additional grounds.

I agree that this application must be refused for the...