Severe consequences for breaching court order

People often take the view that they can be quite blasé about their contractual obligations, mainly because employers often take the view that suing them is more trouble than it is worth. However, a recent High Court judgment shows that this is a risky course of action and the consequences for serious breaches can be very severe.

OCS Group UK Limited provides services in the aviation industry. It had a contract to provide cleaning and other services to British Airways at Heathrow Airport. In February 2017 it lost the contract which was awarded to a competing firm, Omni Serv Limited. Mr Jagdeep Dadi worked for OCS providing services under the contract until 28 February 2017, when his employment was TUPE transferred to Omni Serv. On 27 February OCS issued proceedings against Mr Dadi and others, seeking declaratory relief (an order determining the rights of the parties without awarding damages or directing anything to be done), an injunction against the defendants and damages for breach of contract, breach of fiduciary duty and/or breach of confidence. It was alleged that they had transmitted confidential documents and information to their home email addresses or external storage devices and that they had made unlawful use of them and/or transmitted them to third parties.

In Mr Dadi’s case, it was claimed that, between 2014 and February 2017, he had sent confidential documents to his personal web-based email account, including information about the logistics and costs of providing aircraft cleaning and other services to British Airways.

The matter came before Mr Justice Marcus Smith on 27 February, without prior notice to Mr Dadi. He granted an interim injunction against Mr Dadi (and others), prohibiting him from disclosing confidential information belonging to OCS and requiring him to provide information about prior disclosures to third parties. He was ordered to retain hard copy and electronic documents, pending a further hearing. He was also ordered not to disclose the existence of the proceedings and the possibility of proceedings against others to anyone other than his legal advisers.

He decided not to defend the underlying proceedings and a default judgment was entered against him.

As is usual in such cases the order of Mr Justice Marcus Smith included a penal notice which warned him that disobedience of the order rendered him liable to be imprisoned or fined or to have his assets seized. He was served with the order at Heathrow by in-house counsel for OCS at 3.10 p.m. on 27 February. While doing so she drew his attention to the penal notice on the front page of the order and read it to him. She also advised him to obtain legal advice as a matter of urgency.

Do employees have to disclose their intention to compete?

In the case of MPT Group Ltd v Peel and others [2017] EWHC 1222 (Ch), the High Court was asked to decide whether employees were under a duty to disclose their intention to compete to their employer.

The facts of the case were that Mr Peel and Mr Birtwistle were employed by MPT Group Ltd (a company that produces and supplies machinery, parts and equipment to the mattress industry) in management positions.  The employees resigned from their positions on the same date, Mr Peel giving the reason for his resignation as wanting to work from home and spend more time with his family, and Mr Birtwistle advising he had been offered a position doing ‘panel wiring’.  They denied that they were leaving to form a partnership/start up their own business in competition with MPT.

Both Peel and Birtwistle were subject to extensive confidentiality clauses and restrictive covenants within their contracts of employment, to the extent that they were prohibited from soliciting or even dealing with customers with whom they had personal contact, for six months.

After the relevant period had expired however, Peel and Birtwistle incorporated MattressTek Ltd, a company that was in direct competition with MPT, and began selling complex mattress machines.  It further transpired that prior to leaving MPT, both men had copied a large amount of company data which included client and supplier databases, price and discount lists, sales quotations and orders, machinery drawings and manuals, and other documentation crucial to MPT’s business.

MPT sought an injunction against the men based on the misuse of confidential information, breach of restrictive covenants, and also upon a breach of the duty to answer questions truthfully.  In particular they sought an interim injunction prohibiting Peel, Birtwistle and MattressTek from soliciting, dealing or contracting with MPT’s customer and suppliers, and an unlimited injunction preventing them from disclosing or using MPT’s confidential information.

Exit discussions are no bar to a constructive dismissal claim

As you may be aware constructive dismissal occurs when an employee terminates their employment in response to their employee’s treatment of them. The employee has to show that they have resigned in response to fundamental breach of contract by the employer. The Employment Rights Act essentially say that if the employee terminates their contract in circumstances which they are entitled to do so without notice because of the employer’s conduct that termination constitutes a dismissal.

In the case of Gibbs v Leeds United FC the Court was required to determine liability for breach of contract, considering whether Leeds United FC was in breach of its contract with the Claimant, whether that breach was repudiatory and whether, when the Claimant resigned, he did so at least in partly as a result of that breach.

The Claimant (here photographed when at Tottenham) had worked as an assistant manager at Leeds United Football Club. When the head coach was dismissed it was expected that, as is usually the case, the Claimant would also be dismissed despite working under the terms of a fixed term contract which was due to expire in June 2016.

Following the departure of the head coach the claimant did enter into discussions concerning the early termination of his employment however the Chairman made clear that he wanted him to remain at the club. The Claimant returned to work as requested although discussions continued with the club in an attempt to negotiate the early termination of his contract. During this period the Claimant was not assigned work which fell within his contract to do, although he turned up ready and willing to do it. He complained and said that he had been left with nothing to do and expressed that he was unhappy about this situation. However subsequently on the 23 June he received an email from the club secretary, Graham Bean, which read as follows:

Can a demotion amount to a breach of contract/constructive dismissal claim?

In the case of Gibbs v Leeds United Football Club Ltd [2016] EWHC 960 (QB) (28 April 2016) the matter in question concerned a contract of employment between the Claimant (Mr Gibbs) and the Respondent (Leeds United FC).

 

The question was whether the Claimant had been constructively dismissed due to a repudiatory breach of his contract of employment by Leeds United, or whether he chose to leave the club without there being any breach of contract.  There was a also a further question in respect of whether the Claimant acted unreasonably in failing to mitigate his losses by rejecting the offer of the role of Head Coach after he had resigned.

By way of background information, the claimant’s contract of employment stated that he must “diligently exercise such powers and perform such duties as may from time to time be assigned to him by the Chief Executive and the Board at which are commonly undertaken and exercised by the managers of Professional football club companies of the Company’s status in relation to the playing, coaching and scouting aspects of the Company’s undertaking (included but not limited to player conditioning and the development of tactical instructions and playing standards generally) and in the discharge of the same he shall:…comply with all reasonable and lawful instructions and requests given:…(B) to the Assistant Manager by the Chairman; (C) to the Assistant Manager by the Company; (D) to the Assistant Manager by the Chief of the Executive…and perform such hours of work as may from time to time reasonably be required of him…”

 

The Claimant was engaged on a fixed term three year contract, however after around eight months of employment the Respondent Company was purchased by a Mr Cellino.  The Respondent thereafter wanted to recruit their own management team, and agreed with the Claimant’s manager to end the manager’s contract early – the Claimant therefore expected that the same thing would happen to him.

 

A new manager was subsequently recruited by the Respondent along with a new assistant manager, however the Claimant was not offered a termination package.  The Claimant did express during a meeting with the owner of the Company that if work was not available for him, he would be happy for his contract to be terminated if a termination package could be agreed.

 

An agreement was not met however and the Claimant subsequently reported to work under the new manager.  Unfortunately they did not get on and the Claimant received an email stating that his role had been changed and he was now required to train the Respondent’s youth players instead of the first team.  The Claimant felt that this instruction constituted a demotion and subsequently resigned.

 

Four months later, strangely, the Claimant was offered the role of manager following the dismissal of his predecessor.  He refused this offer, stating that the treatment he had received by the Respondent had undermined his relationship with his fellow employees.  The Claimant brought a breach of contract constructive dismissal claim against the Respondent.

 

The High Court held

Incorporation of company handbooks into employment contracts

The employment contract sets out an employee’s rights, responsibilities and duties within the employment relationship. However, as an employer, you also need a set of policies complying with the ACAS code on grievance and disciplinary procedures, paid holiday and maternity and paternity leave. The general position and assumption of most employers are that policies are non contractual and therefore an employee will be prohibited from bringing a breach of contract claim in the event that their employers fail to adhere to any of their policies.

However, the above is not conclusive and the Court will often consider a number of factors in considering whether policies contained in company handbooks will be viewed as contractual. Policies that infer statutory rights such as sickness and holiday rights will be deemed contractual on the basis that the employer is obliged to provide full particulars of their employment under the Employment Rights Act 1996. However with non-statutory rights the Court will try to ascertain what the intentions of the parties were when entering into the agreement

Whether a policy is contractual became a point of contention in Sparks v Departments for Transport [2015] EWHC 181 (QB)  which concerned the contractual validity of a decision by several government agencies to tighten up their sickness absence rules by reducing the amount of time before sickness procedures were triggered.

Liability for work related stress

The words “work related stress” strike fear into the hearts of many employers. There is a widely held perception that all an employee needs to do is raise the complaint or go off sick with a note referring to “work related” stress or anxiety for the employer to be in a whole world of trouble. It is also widely believed that GPs are far too willing to record a diagnosis of work related stress or anxiety just because it is mentioned by the patient.

However, Government guidance issued in 2013 to coincide with the launch of fit notes states that if “work related stress” or stress arising from personal problems does not amount to a “mental illness”, the GP is to regard the patient as fit for work and so no fit note is required. So getting signed off for work related stress is not, or at least should not be, as easy as is widely thought.

Similarly, bringing a claim for damages resulting from work related stress is far from straightforward, as confirmed in the recent High Court case of Easton -v- B&Q plc. In 2004 Mr Easton joined B & Q as a unit manager. In 2007 he moved to head office and in 2008 he was appointed as manager of the store in Romford. The store performed well and by 2010 Mr Easton was earning about £105,000 p.a. However, in May 2010 he was diagnosed as suffering from depression. Apart from two failed attempts at returning to work in 2010 and 2012 he did not work again for B&Q. B&Q accepted that he suffered from a psychiatric illness that was at least in substantial measure caused by occupational stress. However they denied breach of any relevant duty of care to Mr Easton and that his illness was foreseeable.

Mr Easton was a high achiever and recognised as such. He therefore expected to be promoted from his job as store manager. He felt that he was overlooked for promotion and cited this as one of the causes of his depression. This contention was supported with medical evidence. He maintained that he had been promised that he would be promoted. Witnesses for B&Q felt that he had read too much into the praise he received for his management of the Romford store. In appraisals he was identified as having “further potential” and “may make next level”. Mr Justice William Davis found that Mr Easton had convinced himself that a promotion was on the cards. However there was no “clear promise” of promotion or any similar representation. In 2010 circumstances at work including long working hours (up to 14 hours a day), problems with the introduction of a campaign targeted at trade customers and disruptive construction work at the store took a toll on Mr Easton. By May he had developed the depression which was the basis of his claim. He went off work from 2 May with a diagnosis of depression caused by work related stress.

end of the line for employment tribunal fees challenge (for now)

The challenge to employment tribunal fees brought by UNISON finally hit the buffers when Lord Justice Elias (pictured), delivering the lead judgment in the High Court, rejected the application. There were two grounds for the application. First, it was claimed to be unlawful in not complying with the EU principle of effectiveness because it was either impossible or exceptionally difficult for prospective claimants to bring a claim. Second, it was claimed that fees were indirectly discriminatory in that they placed women, ethnic minorities and the disabled at a substantial disadvantage.

In a controversial judgment Judge Patrick Elias, who has a strong background in employment law, observed that the reduction in the number of claims brought after the introduction of fees was “striking”. Before fees were introduced Employment Tribunals received an average of 48,000 claims per quarter. In the most recent recorded period (July to September 2014) that number had dropped to 13,612. Evidence from the CAB showed that fees made four out of five workers less likely to claim or deterred from claiming at all. Further, over four in ten of those with employment problems had a household income of less than £46 per week after essential bills.

The Government contended that other factors, such as the introduction of ACAS compulsory conciliation, might have contributed to the reduction. Regular readers know my views about the effectiveness of the new ACAS scheme and even the Government’s own figures concerning the operation of the scheme cannot justify any significant impact.

However, the main reason why the application failed was the lack of tangible evidence “that any individual has even asserted that he or she has been unable to bring a claim because of cost”. The most contentious part of the judgment then followed:

The question many potential claimants have to ask themselves is how to prioritise their spending: what priority should they give to paying the fees in a possible legal claim as against many competing and pressing demands on their finances? And at what point can the court say that there is in substance no choice at all? Although Ms Monaghan would not accept that this is the task facing the court, it seems to me that in essence that is precisely what the court has to do. In that context, as Moses LJ said in the first Unison challenge, it is not enough that the fees place a burden on those with limited means. The question is not whether it is difficult for someone to be able to pay – there must be many claimants in that position – it is whether it is virtually impossible or excessively difficult for them to do so. Moreover, the other factors which I have identified as potentially inhibiting a worker from pursuing a claim may reinforce the conclusion that the risks inherent in litigation are not worth taking. These factors engender a cautious approach to litigation but do not compel the inference that it would be impossible in practice for some of these claimants to litigate.

This part of the judgment has led to considerable debate which centres around the widely held view that judges are out of touch with the real world and do not understand the financial strictures which blight many people, particularly low paid workers. Some have even gone so far as to compare Judge Elias’ salary with many of those contemplating proceedings and questioning whether the judge was able to understand such problems in practical terms.

A particularly strident critic is employment lawyer and blogger Kerry Underwood who took the opportunity to write A Christmas Carol by the High Court in which he takes aim at what he perceives to be the obvious inequities demonstrated by the judgment.

“keep music live” – unless you’re producing War Horse

In Ashworth and Others v The Royal National Theatre the question for Mr Justice Cranston (sitting in the High Court) was whether to grant an injunction pending trial requiring the Theatre to continue employing musicians, notwithstanding that part of the music for the show has always been recorded and the Theatre wanted to move to fully recorded music with a view to saving costs.

Injunctions are an emergency remedy and, as such, they need to be applied for promptly and with good cause. While a temporary injunction can be granted on the basis that a claim is made out with a real prospect of success, even though there has not been a full trial of the issues, the court must consider the balance of convenience between the parties and the risk of irremediable prejudice to a party if it turns out that the injunction should not have been granted.

In general injunctions which require someone to do something (mandatory) rather than not do something (prohibitive) are less readily granted particularly when, as in this case, there are financial implications for the party required to act in the manner directed by the Court.

War Horse is a very well known and celebrated National Theatre production which opened in the Olivier Theatre in 2007 and transferred to the New London Theatre in the West End in 2009, where it remains. It has been a great money spinner for the National Theatre but income has dwindled in the last few years. It is an expensive play to stage with its cast of 36 plus five musicians (the Claimants) and their deputies (who cover in their absence).

The composer of the musical score described it as an orchestral epic. Nonetheless, from the outset most of the music has been recorded. The live musicians have added to the recordings, including an opening trumpet solo and briefly appearing on stage during one scene. Productions in other parts of the world have not included live musicians, instead relying wholly on recorded music. In December 2012 the musicians used for the London production were told that it would go the same way and that, as a result, they would be made redundant in March 2013. Following conciliation involving the Musicians’ Union they remained employed but their participation was significantly reduced.

On 4 March 2014 they were sent letters providing notice of termination of employment on 15 March. They were told that they were being made redundant in order to bring the London production into line with other productions. However, on 15 March they turned up for work as usual but they were turned away, hence the application for injunctive relief.

Having considered the contractual terms Mr Justice Cranston concluded that there was a serious issue concerning whether the National Theatre was entitled to terminate the contracts in the way that it did. However he was much more concerned about the question of any resulting remedy and this was also a relevant consideration when determining whether an injunction should be granted.

stay of tribunal proceedings, precedence of the High Court and beware the term "draconian"

A litigant can sometimes find it difficult to elect the forum in which to issue proceedings. Sometimes it can simply be an issue of cost. Litigating in tribunal is less expensive and the findings of fact will bind a higher court. When deciding whether a stay of tribunal proceedings should be granted where claims are issued on similar facts in more than one court, it is necessary to consider the balance between duplication of court proceedings and the prejudice which might be caused by a stay. In Chorion plc and others v Lane the High Court held that tribunal proceedings should be stayed where there was a sufficient overlap between the tribunal and court proceedings. However, it should be remembered that there is no absolute rule that provides that tribunal proceedings should automatically be stayed.
The litigant, Mr Halstead, in Paymentshield Group Holdings Ltd v Halstead had first issued proceedings in an employment tribunal for unfair dismissal and breach of the Working Time Regulations 1998 in respect of holiday pay. Some two months prior to the hearing, Mr Halstead decided to send a letter before action with attached draft particulars of claim to Paymentshield. When Paymentshield sought a stay of the tribunal proceedings, Mr Halstead at first agreed but then changed his mind, intending to fund the more costly High Court proceedings with the compensation he expected to win from his tribunal claims. He applied for reinstatement of the tribunal proceedings and two employment judges at first instance agreed with him, agreeing to lift the stay because no High Court proceedings had been issued.

BA and Unite – update

[picappgallerysingle id=”8828664″ align=”left”] The Court of Appeal will begin hearing submissions at 2.00 p.m. this afternoon in order to determine whether Unite will be granted leave to appeal against yesterday’s injunction which prevented the latest scheduled strike from going ahead. As has been widely reported, Mr Justice McCombe granted an injunction in favour of British…