Robert Brown v Neon Management Services Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Choudhury |
| Judgment Date | 10 August 2018 |
| Neutral Citation | [2018] EWHC 2137 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ18X0176 |
| Date | 10 August 2018 |
[2018] EWHC 2137 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Choudhury
Case No: HQ18X0176
David Craig QC and Stephen Donnelly (instructed by Cubism Law) for the Claimants
Adam Solomon QC and John Mehrzad (instructed by Withers LLP) for the Defendants
Hearing dates: 10 – 13, 16 & 17 July 2018
Introduction
The First and Second Claimants, Mr Brown and Ms Bhoma, are former employees of the First Defendant, Neon Management Services Ltd, and the Third Claimant, Ms O'Reilly, is a current employee serving her notice. The First Defendant is the management service company of the Second Defendant, Neon Underwriting Ltd, a Lloyd's syndicate providing insurance and underwriting services in respect of financial transactions.
The Claimants complain that the Defendants breached their contracts of employment by, amongst other things, failing to pay salary increases and discretionary bonuses that had been awarded to them, making the salary increases and bonuses conditional upon acceptance of detrimental new contractual terms and the removal of profit commission (“PC”) agreed at the time of their recruitment. The Claimants contend that those breaches individually and cumulatively amounted to a repudiatory breach of contract entitling them to resign. They resigned on 16 March 2018. Those resignations were on notice. Thereafter, the Claimants, and in particular the First and Second Claimants, contend that the Defendants committed further repudiatory breaches of contract by, amongst other things, failing to pay the salary increases and bonuses, failing to pay PC and/or calculating the PC on a basis that was contrary to that which was agreed, making unjustified finding of misconduct on their part and reporting such conduct to their regulator. The First and Second Claimants accepted that alleged repudiation by resigning with immediate effect on 1 May 2018.
The Claimants seek damages. The First and Second Claimants also seek declarations that they were wrongfully dismissed, with the effect that contractual post-termination restrictions (“PTRs”) fall away in accordance with the principles established in General Bill posting Ltd v Atkinson [1909] AC 118.
The Defendants deny that there were any repudiatory breaches. They say that they were contractually entitled to make the salary increases and bonuses subject to the acceptance of more extensive PTRs, that the other contractual changes were not detrimental, that the Claimants fundamentally misunderstood how the PC is to be calculated, that the findings of misconduct and reporting of that misconduct to Lloyd's were perfectly warranted given the First and Second Claimants' various breaches of contract and company policies in sending highly sensitive confidential information to their private email addresses shortly before their collective resignations on notice. In any event, say the Defendants, even if there were breaches of contract the modern legal position is that the PTRs do not automatically fall away and continue to be enforceable.
Procedural background
On 15 May 2018, the Claimants issued their Claim and made an application for trial to be expedited. A few days later they filed and served their Particulars of Claim. By consent, on 21 May 2018, it was ordered that the trial of the issues be determined on an expedited basis with the trial to commence on 9 July 2018 or as soon thereafter as convenient. On 4 June 2018, the Defendants served their Defence and Counterclaim. The Counterclaim comprised a claim that the First and Second Claimants' repudiatory conduct had caused substantial losses to the Defendants. Those losses were said to be in the region of £1 million. On 11 June 2018, the Claimants served their Reply and Defence to Counterclaim. Following standard disclosure, witness statements were exchanged on 3 July 2018. The trial in this matter then commenced just a week later on 10 July 2018.
Witnesses
There is little in the way of disputed fact in this matter although certain matters, such as the proper interpretation of what was agreed in relation to the PC and the reasons for resigning, are hotly contested. The Claimants each gave evidence in support of their claims. Ms Bhoma was the first to give evidence. The Defendants criticise that evidence as being partisan and not a true reflection of the facts. Whilst I accept that her evidence as to the effect of her PTRs was inaccurate and that she appeared in one small respect to change her evidence in the course of cross-examination to suit the Claimant's case as to the PC, in general, I found her evidence to be credible and consistent with the contemporaneous documentation.
The next witness was Mr Brown. His evidence was less satisfactory. There is some substance to the Defendants' criticism that his evidence was sometimes hesitant and unfocused. Particular criticism was made of the difficulty Mr Brown had in accepting relatively innocuous propositions such as the fact that the Claimants had agreed to join Neon as a team and that he had negotiated the PC element of their remuneration on their behalf. However, rather than being indicative of a witness who was being evasive, it seems to me that Mr Brown's faltering performance in the witness box was largely down to his natural cautiousness and being overly defensive. His evidence as to key issues was largely consistent with the contemporaneous documentation. For the reasons set out below, I do not consider that he sought to change his case as to the basis on which he believed the PC would be calculated. I do not, therefore, accede to the Defendants' invitation to reject Mr Brown's evidence in this regard.
Ms O'Reilly's evidence, by contrast with that of Mr Brown, was clear, cogent and largely unperturbed by cross examination. She was incorrect in one respect in relation to her understanding of the PTRs. However, she readily accepted that she was wrong, and her evidence was otherwise consistent with the contemporaneous documentation.
Other live witnesses for the Claimants were Mr Ross Louden, Deputy Chief Underwriting Officer of Axis Capital, the second lead insurer behind Neon under a consortium agreement for 2018 between Neon, Axis and several other insurers, and Mr Andrew Thornton, an underwriter in the Claimants' team at Neon. Mr Louden's evidence included a reference to a meeting he had had with Mr Brown on 19 March 2018, shortly after Mr Brown had tendered his resignation on notice. Mr Louden admitted that he had misled Neon in subsequent communications as to that meeting and his knowledge of Mr Brown's resignation. However, despite starting his evidence “on the back foot” for that reason, I found Mr Louden's evidence to be otherwise clear, credible and consistent with the other evidence before me. Mr Thornton's evidence was largely uncontroversial and no particular criticism is made of it by the Defendants. A further written witness statement from Mr Rowley Higgs, an insurance broker, was admitted unchallenged.
The Defendants called four witnesses. These were Ms Caroline Andrew, Neon's Global Head of Human Resources, Mr Ian Harman, Neon's Head of Finance, Mr Andrew Dougall, Deputy Active Underwriter and Head of Casualty Lines, and Mr Brown's line manager, and Mr Alistair McKay, Neon's General Counsel. None of these witnesses could give direct evidence as to the recruitment of the Claimants and the terms of their remuneration as they were not involved at that time. Each of them gave evidence in a straightforward manner, making concessions where appropriate, although some aspects of their evidence were not accepted. I shall refer to some of those concessions and those aspects where relevant below.
Factual Background
The Defendants, to whom I shall also refer collectively as “Neon”, were previously known as Marketform and are part of the Great American Insurance Group, a multinational insurance group operating in a number of countries. In 2014, Neon was a loss-making syndicate with no significant presence in the M&A underwriting market. It sought to establish itself in the M&A market by recruiting a market-leading team. Neon's enquiries led it to identify the First Claimant, Mr Brown, who was then working for Pembroke Managing Agency Ltd, as a suitable candidate to lead such a team. Other key recruitment targets identified at that time were the Second and Third Claimants, Ms Bhoma and Ms O'Reilly, both of whom were then also working for Pembroke.
In about October 2014, Neon approached Mr Brown and asked him whether he would be interested in joining Neon to head up a new M&A division. Mr Brown was interested, and soon afterwards, in December 2014, he met with a number of senior executives from Neon and related companies. He entered into discussions with Mr Simon Lotter, the then Chief Underwriting Officer at Neon, and Mr Scott Gregory, the then Communications and Marketing Director at Neon.
During these early discussions, Mr Brown was told that Neon could offer a ring-fenced profit commission scheme enabling him to share in the profits of the M&A class of business. This was important to Mr Brown because Neon was, at that time, a loss-making syndicate whereas he believed the M&A class would be highly profitable. It was also very important to Mr Brown that there should be a PC scheme enabling him to share in profits rather than risk relying entirely on a discretionary bonus. It was agreed between Mr Brown, Mr Gregory and Mr Lotter that they would negotiate and agree a set of terms to form Mr Brown's contract and that these terms would be reflected in the employment contracts of any other persons...
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