city_lunch

It is an often-heard maxim in contract law that a party cannot seek to claim the benefits of a contract which he has breached. While that is a rather simplistic statement and is, in practice, subject to numerous qualifications and exclusions, the decision of the High Court in Imam-Sadeque -v- Bluebay Asset Management (Services) Limited is an example of how the general principle can apply, even in the most complex of cases.

Heard over seven days and with the judgment of Mr Justice Popplewell running to 235 paragraphs in 61 pages, the case concerned the departure of Mr Imam-Sadeque from Bluebay. As is common with executive contracts there were “good leaver” and “bad leaver” provisions. Resignation would make Mr Imam-Sadeque a “bad leaver”. The distinction was particularly important for him since, as a good leaver, he would be able to exercise share options worth £1.7m. Terms were therefore set out in a compromise agreement.

Unknown to Bluebay, shortly after the meeting to agree severance terms, he agreed to join a new asset management company, Goldbridge Capital Partners LLP. He would be a partner, entitled to a profit share, a guaranteed bonus and a sign on payment.

Pursuant to the compromise terms he was to remain on garden leave from 22 August 2011 to 31 December 2011. During that period and in the course of what the Daily Telegraph has described as “probably the world’s most expensive lunch” Mr Imam-Sadeque sought to recruit a Bluebay employee, Damian Nixon. In doing so he had breached the terms of his contract with Bluebay and therefore disqualified himself from his bonus.

As a more general observation it is worth bearing in mind that, regardless of any express contractual terms, the implied duties of good faith and faithful service which apply to all employment relationships, survive for the entire duration of the contract and that includes notice periods and garden leave.

Incidentally, the entitlement to share options worth £1.7m arose notwithstanding that Mr Justice Popplewell found that Mr Imam-Sadeque was in “serious breach” of his terms of employment, sufficient to justify dismissal for gross misconduct and that he “wanted to leave”. He was “aggressive, threatening and intimidating” to junior employees, said he could “make or break” someone’s career and behaved “inappropriately and unprofessionally” towards a woman employee.

It seems that some of the City stereotypes are alive and well.