In Tullet Prebon Plc(TP) v BGC Broker LP(BP) the fast-moving and cut-throat world of the financial services industry was exposed to the light of day or, to be more precise, the sharp eyes of the Court of Appeal in February. It was held that an employer's intention, objectively assessed, is of paramount importance when considering whether an employer's actions towards an employee amount to a repudiatory breach of contract: in other words, conduct so bad that it entitles an employee to resign and claim constructive dismissal.
TP and BGC are rival companies in the business of inter-dealer broking. A number of TP brokers signed 'forward contracts' with BGC whereby they agreed to commence employment at BGC as soon as they became free from TP to do so. When TP discovered this it tried to convince the employees to stay at TP. Nine brokers claimed that TP's attempts to persuade them to breach their forward contracts constituted a repudiatory breach of the mutual term of trust and confidence enabling them to claim constructive dismissal and start work for BGC. TP initiated proceedings in the High Court to prevent them working at BGC. To spice things up BGC counter-claimed that the three employees who remained at TP had breached their forward contracts.
The Court of Appeal rejected the appeal in relation to the constructive dismissals. The central question was whether the 'contract breaker' (i.e. the employer) could be clearly shown to have had 'an intention to abandon and altogether refuse to perform the contract'?
Quoting from an earlier case:
“all the circumstances must be taken into account insofar as they have been on an objective assessment of the intention of the contract breaker. This means that motive, while irrelevant if relied upon solely to show the subjective intention of the contract breaker, may be relevant if it reflects something of which the innocent party was, or a reasonable person in his or her position would have been, aware and throws light on the way the alleged repudiatory act would be viewed as such by a reasonable person."
Whether a repudiatory breach has occurred is a question of fact for the court or tribunal, with the objectively assessed intention of the employer towards the employees of paramount importance. The judge had been entitled and correct to find that TP did not manifest an intention 'to abandon and refuse' to perform its contracts with the brokers.
A very important House of Lord's case, Malik v BCCI, which had decided that 'the motives of the employer cannot (my u/l) be determinative, or even relevant, in judging the employees' claims for breach' of the implied term of trust and confidence, was distinguished from the present, TP v BGC, case: Malik had been concerned with the 'indirect effect of corporate behaviour on employees' not as in this case 'the specific dynamics between employer and employees'
The appeal against the rejection of the counter-claim was also dismissed.
