Sunrise Brokers LLP v Michael William Rodgers
| Jurisdiction | England & Wales |
| Judge | Lord Justice Underhill,Lady Justice Gloster,Lord Justice Longmore |
| Judgment Date | 23 October 2014 |
| Neutral Citation | [2014] EWCA Civ 1373 |
| Docket Number | Case No: A2/2014/2753 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 October 2014 |
[2014] EWCA Civ 1373
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM High Court, Queens Bench Division
Mr R Salter QC, sitting as a Deputy High Court Judge
Insert Lower Court NC Number Here
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Longmore
Lady Justice Gloster
and
Lord Justice Underhill
Case No: A2/2014/2753
Mr David Craig (instructed by Mishcon de Reya) for the Appellant
Mr Michael Duggan QC (instructed by Twenty Twenty Law) for the Respondents
Hearing date: 2nd October 2014
INTRODUCTION
This is an appeal against a decision of Mr Richard Salter QC sitting as a Deputy Judge of the Queen's Bench Division, dated 29 July 2014, in which he upheld claims by the Respondents for a declaration and injunctive relief arising out of a contract of employment between them and the Appellant.
THE FACTS IN OUTLINE
The Respondents are inter-dealer brokers. The Appellant joined them as a derivatives broker in May 2009. He signed a new contract of employment in 2011. The initial term of the contract was three years from September 22 2011, terminable by him thereafter by twelve months' written notice given on or after that date. The contract contained a garden leave provision and provision for various post termination restraints: I give more details below. His salary was £60,000 p.a. The contract also records that the Respondents may pay bonuses on a "purely discretionary" basis: no doubt, though we were given no details, bonus payments were expected to, and did, contribute substantially to his overall remuneration.
On 5 March this year, while still employed by the Respondents, the Appellant signed an employment agreement with one of their principal competitors, EOX Holdings Ltd., under which he would commence employment with a subsidiary of EOX in New York on 1 January 2015. He did not tell the Respondents straightaway but on 27 March he went to the office of one of the directors, Mr Finegold, and told him that he "was leaving Sunrise and wanted to leave now". He was told to go back to work until the director with primary responsibility for his area of work, Mr Gibbs, was available. However, he did not do so; he left the office and has not returned to work since.
On 9 April the Appellant had a meeting with the Respondents' general counsel, Mr Chiappe. He was told that he should come back to work with a view to agreeing a sensible termination plan if that was still what he wanted. He declined to do so. On 16 April he sent an e-mail to Mr Chiappe as follows:
"Thanks for your time last week. Pursuant to our conversations, I wanted to note a few things which I hope will go some way towards easing/alleviating any fears Sunrise may have about me posing an immediate threat to them.
As discussed last Wednesday, I am currently in NYC [New York] beginning the process of relocating here permanently. This is going to take some time and realistically there is no way I am going to be in a position to begin working in the near future. Therefore I can safely assure Sunrise (and can confirm so more formally in writing if needed) that I will not start work anywhere else before September 2014 and I will agree to remain on garden leave until then.
…"
In the light of the Appellant's continuing absence from work the Respondents decided not to make the monthly payment of salary and bonus that would otherwise have been due on 1 May.
On 25 April the Respondents' solicitors, Twenty Twenty Law, wrote to the Appellant. They reminded him that under his contract of employment he had no right to terminate before September next year. The letter continued:
"For the avoidance of doubt our client does not accept your purported resignation. You have not given notice to terminate in accordance with your contract and hence you remain employed, not in a period of notice, and fully bound by the terms of your employment contract. As you are not in a period of notice, your request to be placed on garden leave is misconceived."
They required the Appellant to return to work by 30 April and, additionally, reserved the right "to pursue a claim against you personally for the substantial quantifiable losses it [i.e. the Respondents] has incurred and continues to suffer as a result of your breach". He was asked to confirm whether he had been offered any other employment: the Respondents had at that stage not been told about his agreement with EOX.
Solicitors instructed by the Appellant, Mishcon de Reya, replied on his behalf on 29 April. They contended that he had resigned with immediate effect on 27 March and said that he would not be returning to work. They said that he had accepted an offer of employment from EOX in New York, though no further details were given.
I need not trace the details of the inter-solicitor correspondence that followed. Mishcons' primary position remained that the Appellant had resigned on 27 March and that his employment had terminated on that date, but they also asserted by way of alternative that he was entitled to terminate his contract by reason of the non-payment of his salary and bonus for April. Twenty Twenty's position remained that the contract of employment had not been terminated. They said, however, that the Respondents would not insist on the Appellant remaining in employment until September 2015 and were prepared to treat his e-mail of 16 April as notice effective to terminate the contract after six months, i.e. on 16 October this year. They required him to return to work until that date and made it clear that the Respondents would not put him on garden leave.
The Appellant contended at the trial that the Respondents did not really want him to return to work and that their insistence that he do so was entirely tactical. The Judge found that the Respondents had indeed initially wanted him back, because he was a valued employee and they hoped that they could get him to change his mind about leaving. However, he also found that that changed when they were told that he was going to EOX, and that thereafter they would have wished to keep him as far away as possible from their clients and their information.
THE RELEVANT CONTRACTUAL TERMS
Clause 11 of the contract of employment prohibited the Appellant during the currency of his employment from being engaged in any other business without the Respondents' written consent.
Clause 15 of the contract reads as follows:
"15. GARDEN LEAVE
15.1 Following service of notice to terminate the Appointment by either party, or if the Employee purports to terminate the Appointment in breach of contract, and, if the Employer so decides, at any time during the Appointment the Employer may by written notice require the Employee not to perform any services (or to perform only specified services) for the Employer until a specified date or the termination of the Appointment. Any period of Garden Leave shall not normally exceed 6 months.
15.2 During any period of Garden Leave the Employer shall be under no obligation to provide any work to, or vest any powers in, the Employee who shall have no right to perform any services for the Employer.
15.3 During any period of Garden Leave the Employee shall:
(a) continue to receive his salary and all contractual benefits in the usual way and subject to the terms of any benefit arrangement;
(b) remain an employee of the Employer and be bound by the terms of this agreement;
(c) not, without the prior written consent of the Board, attend his place of work or any other premises of the Employer;
(d) not, without prior written consent of the Board, contact or deal with (or attempt to contact or deal with) any member, officer, employee, consultant, client, customer, supplier, agent, distributor, shareholder, adviser or other business contact of the Employer; and
(e) (except during any periods taken as holiday in the usual way) ensure that the Board knows where he will be and how he can be contacted during each working day and shall comply with any written requests to contact a specified employee of the Employer at specified intervals."
Clause 17 is headed "Post-Termination Restrictions". The restrictions are set out in clause 17.1. I need not reproduce them here, since nothing turns on their terms. They include prohibitions on solicitation of customers and staff and – at (c) – a prohibition of the Appellant being "involved in any capacity with any business concern which is (or intends to be) in competition with" any brokerage business of the kind in which the Respondents and its associated companies were involved. All the restrictions with which we are concerned are expressed to run "for 6 months after Termination".
Clause 17.4 reads as follows:
"The periods for which the restrictions in clause 17.1 apply shall be reduced by any period that the Employee spends on Garden Leave immediately prior to Termination."
This was referred to before us as "the set-off provision". It was no doubt drafted to take account of Neill LJ's observation in Credit Suisse Asset Management Ltd. v Armstrong [1996] ICR 882 that in assessing the reasonableness of a post-termination restriction it may be material that the employee could (and in practice probably would) have spent a long period of notice on garden leave: see at p. 894 B-D.
THE PROCEEDINGS
On 19 May the Respondents issued a claim form seeking a declaration that the Appellant remained an employee and would do so until 16 October, together with injunctions enforcing his obligations as to solicitation and working for...
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