Mark Chassy v Left Shift it Ltd

Hearing dates: 21–25 & 28 October 2024

Bruce Carr KC (Sitting as a Deputy High Court Judge):

Introduction

On 15 October 2021, the Claimant, Mr Mark Chassy, issued a Claim Form and Particulars of Claim in which he sought damages for breach of contract based on a failure by the First Defendant to pay various sums which he claimed were due under the terms of a contract of employment originally entered into between himself and NMQA Limited (“ NMQA”) on 17 May 2012. The claims against the First Defendant were based on the contract having been transferred to the First Defendant on 1 January 2014 and by operation of law pursuant to the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“ TUPE”). The claims were however, not limited to ones arising out of his own contract alone but also covered the contracts of four other individuals whose employment had also been transferred to the First Defendant pursuant to TUPE or who had otherwise come to be employed by the First Defendant. The relevant individuals were as follows:

a. David Aistrup, whose employment also transferred on I January 2014 under TUPE;

b. Alex Cardoso, who was employed by the First Defendant under the terms of a contract of employment dated 10 July 2015;

c. Paulo Macinanti, who was employed by the First Defendant from 8 January 2014;

d. Eduardo Sousa, who was employed by the First Defendant under the terms of a contract of employment dated 14 July 2015.

The Claimant and the four individuals named above (collectively referred to as “ the Former Employees”) had terminated their employment with the First Defendant by resignation on 26 April 2019. Those terminations were considered by an Employment Tribunal which, by a judgment dated 25 June 2020, concluded that the Former Employees had all been constructively (and unfairly) dismissed from their employment with the First Defendant as of 26 April 2019 and awarded compensation in accordance with the statutory scheme contained in the Employment Rights Act 1996 (“ ERA”). In her Judgment, Employment Judge Brown acknowledged that those statutory proceedings did not relate to or include any claims for breach of contract or unpaid wages.

Mr Aistrup is sadly now deceased. However, on 29 October 2020, the executor of his estate assigned to the Claimant all claims relating to his former employment with the First Defendant. Similar assignments were made personally by Mr Cardoso (on 11 November 2020), Mr Macinanti (on 3 November 2020) and Mr Sousa (8 November 2020). As a result, the Claimant claims to be the legal assignee of the rights of the relevant individuals (“ the Assignors”) based on similar breaches of contract to those which he pursues in his own name.

The Claimant also pursues claims against the Second and Third Defendants in respect of the losses that are alleged to flow from the breaches by the First Defendant of his own contracts of employment as well as those of the Assignors. Those claims are pursued on the basis that the Second and Third Defendants were directors of the First Defendant at all times material to such claims and that in that capacity, they are jointly and severally liable for all of the losses said to flow from the First Defendant's breaches of the contracts of employment of the Former Employees, they being said to have induced or procured such breaches.

The claims brought by the Former Employees can broadly be broken down as follows:

a. Non-payment of salary over varying periods of months;

b. Non-payment of pension contributions (with the exception of Mr Aistrup, for reasons which will be explained below);

c. Non-payment of expenses incurred in the course of employment (in relation to the Claimant alone);

d. Non-payment of holiday entitlement.

The total damages claimed by the Claimant in relation to the claims of the Former Employees was set out in the Particulars of Claim at £311,601.91. The Claimant also claimed statutory interest pursuant to section 35A Senior Courts Act 1981.

In a Defence dated 17 February 2023 and filed on behalf of all three Defendants, issue was taken with the legal status of the assignments made to the Claimant by the Assignors. It was admitted that the Second Defendant was a registered director of the First Claimant from 8 January 2014 to 9 November 2016 and from 14 April 2021 onwards – but not otherwise, either on a registered or de facto basis. As to the Third Defendant, it was admitted that he was a registered director between 22 January 2014 and 26 April 2021 – but again, not otherwise, either on a registered or de facto basis.

As to the substance of the claims brought against it, the position of the Defendants in summary and as set out in their Defence was as follows:

a. In relation to unpaid wages, whilst non-payment was admitted to a limited extent by the First Defendant, the Former Employees had consented to variations in the terms of their contracts of employment or had otherwise acquiesced in or waived any breaches of contract. It was also asserted that the Former Employees were estopped from pursuing such claims, given that they were aware of financial difficulties which the First Defendant had faced but nevertheless continued to work in the knowledge that it was not possible for the First Defendant to pay their wages;

b. The claim in respect of non-payment of pension contributions was admitted by the First Defendant subject only to a defence of set-off based on allegations relating to the Claimant's conduct at the point at which he resigned from his employment with the First Defendant. The Defendants' case collectively is that they had intended to enrol the Former Employees into a company pension scheme once the First Defendant was on a firmer financial footing;

c. The claims in respect of payment for unused holiday entitlement, and again subject to the defence of set-off, were admitted to a limited extent by the First Defendant based on its assertion that the contractual entitlement to carry over and be paid for unused holiday was limited to 5 days, with a further 5 days if permission was given and that payment on lieu on termination of employment was in any event at the discretion of the directors of the First Defendant;

d. The Second and Third Defendants admitted that, whilst they were statutory directors of the First Defendant, they owed the duties set out in sections 172 and 174 Companies Act 2006. They denied however, that they had acted in breach of such duties, asserting that they had at all times acted in good faith in their attempts to carry on the business of the First Claimant during periods of financial difficulty.

As set out above, a claim of set off was also advanced in the Defence by all three Defendants based on the assertion that the Claimant had acted in breach of his contract of employment – in particular his express obligations with regard to confidentiality and the implied term of trust and confidence – by embarking “on a course of deliberate deletion, removal and misuse of confidential data belonging to” the First Defendant. The allegation was that the Claimant had deliberately removed important confidential information of the First Defendant which had been contained in a software messaging application known as “Slack” to which the Claimant had had access during the course of his employment up to the point at which he had resigned from the First Defendant in April 2019.

The position of the Third Defendant

The Third Defendant did not prepare any witness evidence for the purpose of the trial and did not otherwise engage with the litigation after the Defence was filed on his behalf. The apparent reason for that emerged shortly before the trial was due to commence, when it was discovered that he may be an undischarged bankrupt. This issue came to the attention of the Claimant on 8 October 2024 when it was disclosed in the course of a without prejudice letter sent to him on behalf of the First and Second Defendants.

The Claimant's solicitors then attempted to do what they could to check the position and discovered an entry on the Bankruptcy Register which bore a similar name to that of the Third Defendant. The questions which then arose for consideration before me were first, whether the evidence demonstrated that the Third Defendant was indeed subject to a bankruptcy order and secondly, if so, how should the court proceed. Ms Grossman on behalf of the Claimant, sought to persuade me that the trial should continue to judgment as regards the claim against the Third Defendant in order to “prevent injustice and delay” and that there would be a significant impact on the Claimant (and the Assignors) should matters not proceed against him. Whilst section 285(2) Insolvency Act 1986, on proof of bankruptcy, gives the power to either stay proceedings or allow them to continue on such terms as the court thinks fit, this should not prevent the court proceeding to judgment as it would only be at the stage of enforcement that there would be a potential impact on the estate of the bankrupt individual. The trial should therefore continue with any required safeguards in relation to the bankruptcy being addressed only if and when enforcement became an issue.

On the evidence provided to me, I was satisfied that the Third Defendant was indeed...