Sunrise Brokers LLP v Rodgers

MR RICHARD SALTER QC Sitting as a Deputy Judge of the Queen’s Bench Division Approved Judgment Sunrise Brokers LLP v Michael William Rodgers Neutral Citation Number: [2014] EWHC 2633 (QB) IN THE HIGH COURT OF JUSTICE QUEEN’S BENCH DIVISION BEFORE: MR RICHARD SALTER QC Sitting as a Deputy Judge of the Queen’s Bench Division BETWEEN: Case No: HQ14A02044 Royal Courts of Justice Strand, London WC2A 2LL Tuesday 29th July 2014 Claimant Defendants SUNRISE BROKERS LLP - and - MICHAEL WILLIAM RODGERS - - - - - - - - - - - - - - - - - - - - - Mr Michael Duggan QC (instructed by Twenty Twenty Law) appeared for the Claimant Mr Nick De Marco (instructed by Mishcon de Reya) appeared for the Defendant Hearing dates: 24, 25, 28, 29 July 2014 - - - - - - - - - - - - - - - - - - - - - Approved Judgment Crown Copyright © I direct that pursuant to CPR PD39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic. - - - - - - - - - - - - - - - - - - - - - MR SALTER QC: Introduction 1. In this action the Claimant (“Sunrise”) seeks a declaration that the Defendant (“Mr Rodgers”) remains in the employment of Sunrise, and an Order restraining Mr Rodgers from working elsewhere, both during his notice period and during the subsequent period covered by the post-termination restrictive covenants in his contract of employment. This case raises for decision the interesting and difficult issue of whether, when an employee leaves his employment without giving proper notice stating that he will never return, the employer can keep the contract of employment alive, so as to be able to enforce the employee’s obligation not to work for anyone else, while simultaneously refusing to pay the employee any wages on the basis that the employee is no longer ready and willing to work for the employer. The facts 2. 3. 4. 5. There is little dispute about the primary facts of the case, most of which are apparent from the contemporary documents. Sunrise is an inter-dealer broker, dealing in equity, credit, hybrid and commodity derivatives1. Its head office is in London, but it also has offices in New York and in Asia. The majority of Sunrise’s commodities business involves metals contracts, of which most are base metal futures and options, traded on the London Metal Exchange. However, since the end of 2011, Sunrise has sought to build up a business in over-the counter contracts whose underlying commodity is a precious metal. Mr Rodgers joined Sunrise as a derivatives broker in May 2009. He had previously qualified and practised from 2005 to 2008 as a barrister in Northern Ireland, specialising in criminal cases and a small amount of chancery work. At Sunrise, Mr Rodgers began his training on equity derivative products, and thereafter specialised in European single stock derivatives. However, although he showed great promise, his broking activities in that area did not prove very profitable for Sunrise. When Sunrise decided to move into precious metals contracts in 2011, it therefore decided to transfer Mr Rodgers to help to set up its Precious Metals Desk. Mr Rodgers worked on this desk with another broker, Mr Greg Szajman, under the supervision of the Head of Commodities, Mr Gareth Harwood. Mr Rodgers began work on launching the Precious Metals Desk in October 2011, and it eventually went “live” in February 2012. In connection with his move, Mr Rodgers signed a new contract of employment dated 21 October 2011 (“the Contract”), which was subject to English law and the jurisdiction of the Courts of England and Wales. This Contract was (relevantly) terminable by Sunrise on giving 3 months’ notice, but was not terminable by Mr Rodgers until the expiration of an initial period of 3 years, and thereafter only by giving a further 12 months’ notice. Clause 2.1 of the Contract provided that: An indication of the type of contracts dealt in by Sunrise may be gathered from the list of contracts to be found in clause 17.1(f) of Mr Rodger’s Contract of Employment, which is set out in paragraph 7 below. The Employer shall continue to employ the Employee and the Employee shall serve the Employer on the terms of this agreement. Your employment will continue, subject to clause 14 until terminated by (i) the Employer giving the Employee not less than one months' prior written notice during the [first 6 months from 22nd September 2011], rising to three months thereafter, or (ii) the Employee giving the Employer not less than 12 months' prior written notice not to be given by the Employee before the end of [a period of 3 years from 22 September 2011] By virtue of clause 22, any notice under the Contract had to be given in writing. 6. Other material provisions of the Contract included the following: 3. DUTIES 3.1 The Employee shall serve the Employer or any member of the SBL Group as Derivatives Broker, or such other role as the Employer considers appropriate. 3.2 During the Appointment the Employee shall: (a) unless prevented by Incapacity, devote the whole of his time, attention and abilities to the business of the Employer; (b) comply with all reasonable and lawful directions given to him by the Employer; .. (d) report his own wrongdoing and any wrongdoing or proposed wrongdoing of any other employee or director of the Employer to the Board immediately on becoming aware of it; .. (f) comply with .. the Staff Handbook that the Employer may issue from time to time. 4. PLACE OF WORK 4.1 The normal place of work of the Employee, is the Employer's offices at 40 Whitfield Street London W1, or such other place within Greater London which the Employer may reasonably require for the proper performance and exercise of his duties. 4.2 The Employer may from time to time require the Employee to work from other overseas offices of the Employer or the SBL Group, including, but not limited to New York or Hong Kong. During such periods of secondment the Employee will continue as an Employee of the Employer unless otherwise agreed by the parties. 4.3 The Employee agrees to travel on any business of the Employer (both within the United Kingdom and abroad) as may be necessary for the proper performance of his duties under the Appointment 5. HOURS OF WORK 5.1 The normal working hours of the Employee shall be 7.30am to 6pm on Mondays to Fridays and such hours as are necessary for the proper performance of his duties. The Employee acknowledges that he shall not receive further remuneration in respect of such additional hours. 6. SALARY 6.1 The Employee shall be paid an initial salary of £60,000 Per annum. The salary paid to the Employee shall accrue from day to day and be payable monthly in arrears on or about the 1st of each month directly into his bank or building society. 6.2 The salary paid to the Employee shall be reviewed by the Board annually, the first such review to take place on the first anniversary of [22 September 2011]. The Employer is under no obligation to award an increase following a salary review. There will be no review of the salary after notice has been given by either party to terminate the Appointment BONUS 6.3 The Employer may in its absolute discretion pay you a bonus of such amount, at such intervals, and subject to such conditions as the Employer may in its absolute discretion determine from time to time. Any bonus payment to you shall be purely discretionary and shall not form part of your contractual remuneration under this agreement. If the Employer makes a bonus payment to you it shall not be obliged to make subsequent bonus payments. 9. HOLIDAYS 9.1 The Employee shall be entitled to 25 days' holiday in each holiday year together with the usual public holidays in England and Wales .. 9.2 .. The Employee shall not without the consent of Board carry forward any accrued and unused holiday entitlement to a subsequent holiday year, nor receive any payment in lieu in respect of such entitlement. I0. INCAPACITY 10.1 The. Employer does not operate a policy for sick pay. Amy payments made to the Employee, save for any statutory sick pay to which the Employee maybe entitled, are entirely at the discretion of the Employer. .. 11. OUTSIDE INTERESTS 11.1 Subject to clause 11.2, during the Appointment the Employee shall not except as a representative of the Employer or with the prior written approval of the Board, whether paid or unpaid, be directly or indirectly engaged, concerned or have any financial interest in any capacity in any other business, trade, profession or occupation (or the setting up of any business, trade profession or occupation). 11.2 Notwithstanding clause 11.1, the Employee may hold an investment by way of shares or other securities of not more than 1% of the total issued share capital of a company (being a company which is listed or dealt in on a recognised stock exchange) where such company does not carry on a business similar to or competitive with any business for the time being carried on by the Employer. .. 12. CONFIDENTIAL INFORMATION 12.1 Without prejudice to his common law duties, the Employee shall not (except in the proper course of his duties, as authorised or required by law or as authorised by the Board, either during the Appointment or at any time after termination of the Appointment (howsoever arising): (a) use any Confidential Information; or (b) make or use any [copies or records of any Confidential Information]; or (c) disclose any Confidential Information to any person, company or other organisation whatsoever. 12.2 The Employee shall be responsible for protecting the confidentiality of the Confidential Information and shall: (a) use his best endeavours to prevent the use or communication of any Confidential Information (except in the proper course of his duties, as required by law or as authorised by the Employer); and (b) inform the Employer immediately upon becoming aware, or suspecting, that any such person, company or organisation knows or has used any Confidential Information .. 12.3 All Confidential Information and Copies shall be the property of the Employer and shall be handed over to the Board by the Employee on the termination of the Appointment, or at the request of the Employer, at any time during the Appointment .. 14. TERMINATION 14.1 Subject to clause 14.2, it is agreed by the Employer and the Employee that the Employer may terminate the Appointment at any time [after 22 September 2014] by giving 3 months' notice in writing, and the Employee giving 12 months in writing. Notwithstanding clause 21, the Employer may, in its sole and absolute discretion, terminate the Appointment at any time and with immediate effect by paying a sum in lieu of notice (payment in lieu) equal to Salary (as at the date of termination) which the Employee would have been entitled to receive under this agreement between the date of termination and the earliest date the Appointment could otherwise lawfully have been terminated, less applicable income tax and National Insurance contributions. .. 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 terns 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 the 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. 16. OBLIGATIONS UPON TERMINATION 16.1 On Termination of the Appointment (howsoever arising); the Employee shall: (a) immediately deliver to the Employer all documents, books, materials, records, correspondence, papers and information (on whatever media and wherever located) relating to the business or affairs of the Employer or its business contacts, any keys and any other property of the Employer, which is in his possession or under his control; (b) irretrievably delete any information relating to the business of the employer stored on any magnetic or optical disk or memory and all matter derived from such sources which is in his possession or under his control outside the premises of the Employer; and (c) provide a signed statement that he has complied fully with his obligations under this clause 16.1. 16.2 On Termination of the Appointment howsoever arising the Employee shall not be entitled to any compensation for the loss of any rights or benefits under share option, bonus, long- term incentive plan or other profit sharing scheme operated by the Employer in which he may participate. 7. The Contract also contained, in clause 17, a comprehensive set of restrictive covenants which were expressed to take effect upon termination of Mr Rodgers’ employment. These clauses provided as follows: 17.1 In order to protect the confidential information, trade secrets and business connections of the Employer and the members of the SBL Group to which he has access as a result of the Appointment, the Employee covenants with the Employer and the members of the SBL Group that he shall not (a) for 6 months after Termination solicit or endeavour to entice away from the Employer or any member of the SBL Group the business or custom of a Restricted Customer 2 with a view to providing goods or services to that Restricted Customer in competition with any Restricted Business3; or (b) for 12 months after Termination in the course of any business concern which is in competition with any Restricted Business offer to employ or engage or otherwise endeavour to entice away from the Employer or any member of the SBL Group any Restricted Person4; or (c) for 6 months after Termination; be involved in any Capacity with any business concern which is (or intends to be) in competition with any Restricted Business; or (d) for 6 months after Termination be involved with the provision of goods or services to (or otherwise have any business dealings with) any Restricted Customer in the course of any business concern which is in competition with any Restricted Business; or (e) at any time after Termination, represent himself as connected with the Employer in any Capacity. (f) For 12 months after Termination, you shall not, directly or indirectly undertake, be employed, engaged or interested in any capacity in the Broking of Commodity and or Exotic Derivatives including but not limited to Barriers, Calls vs Call, Puts vs Put, Quantos, Cliquets, Daily Cliquets (Crash protection options), Worst of options, Best of options, Basket 3 Defined as “any firm, company or person who, during the 12 months prior to Termination was a customer or client or in the habit of dealing with the Employer or with a member of the SBL Group with whom the Employee had contact or about whom he became aware or informed in the course of his employment. Where the Employee is on Garden Leave it will be in the 12 months prior to the commencement of any Garden Leave rather than prior to Termination”. Defined as “the business of brokerage of securities, options, listed or OTC derivatives products and those parts of the business of the Employer or such members of the SBL Group with which the Employee was involved to a material extent in the 12 months prior to Termination, save where the Employee is on Garden Leave when it will be in the 12 months prior to the commencement of any Garden leave”. Defined as “anyone employed or engaged by the Employer or by a member of the SBL Group at the level of broker or above and/or who could materially damage the interests of the Employer or any member of the SBL Group if they were involved in any Capacity in any business concern which competes with any Restricted Business with whom the Employee dealt with [sic] in the 12 months prior to Termination in the course of his employment. Where the Employee is on Garden leave it will be in the 12 months prior to the commencement of any Garden Leave rather than prior to Termination”. Options, Realized Correlation or Covariance swaps, operating for profit or otherwise, wheresoever situated 17.2 None of the restrictions in clause 17.1 shall prevent the Employee from: (a) holding an investment by way of shares or other securities of not more than 1 % of the total issued share capital of any company, which is listed or dealt in on a recognised stock exchange; or (b) being engaged or concerned in any business concern insofar as the Employee's duties or work shall relate solely to geographical areas where, the business concern is not in competition with any Restricted Business; or (c) being engaged or concerned in any business concern, provided that the Employee's duties or work shall relate solely to services or activities of a kind with which the Employee was not concerned to a material extent in the 12 months prior to Termination. 17.3 The restriction imposed on the Employee by this clause 17 apply to him acting: (a) directly or indirectly; and (b) on his own behalf or on behalf of, or in conjunction with, any firm, company or person. 17.4 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. 17.5 If the Employee receives an offer to be involved in a business concern in any Capacity during the Appointment or prior to the expiry of the last of the covenants in this clause 17, the Employee shall give the person making the offer a copy of this clause 17 and shall tell the Employer the identity of that person as soon as possible after receiving the offer. 17.6 Each of the restrictions in this clause 17 is intended to be separate and severable. If any of the restrictions shall be held to be void but would be valid if part of their wording were deleted, such restriction shall apply with such deletions as may be necessary to make it valid or effective. 17.7 The Employee will, at the request and expense of the Employer, enter into a separate agreement with any member of the SBL Group Company in which he agrees to be bound by restrictions corresponding to those restrictions in this clause 17 (or such of those restrictions as may be appropriate) in relation to that member of the SBL Group. 8. Section 6 of Sunrise’s Employee Handbook (the terms of which were incorporated into the Contract by clause 3.2(f)) contained the following relevant provisions: 6. LEAVING SUNRISE BROKERS Notice Periods (c) If you decide to leave the Company, you must give written notice. The length of notice to be given either by you or the Company is set out in your contract of employment. .. Garden leave (c) During any period of notice the Company reserves the right to exclude you from work and place you on garden leave. During the period of garden leave the Company will continue to pay you but is not obliged to provide you with work; you will however still be bound by the terms of you employment and you should be available to come to work if requested to do so. You will be required to take an accrued holiday as part of any period of garden leave. You may not under any circumstances participate in other work, either paid or unpaid, without our express permission. 9. 10. Mr Rodgers continued to work on Sunrise’s Precious Metals Desk until March 2014. However, particularly towards the end of that period, he became increasingly disenchanted with his life at Sunrise. Among the reasons for his dissatisfaction were the departure of Mr Harwood from Sunrise in October 2013, the appointment in Mr Harwood’s place of Mr Garson (a successful base metals broker) as Head of both the Base Metals Desk and the Precious Metals Desk, the attempted recruitment of a further precious metals broker without any prior consultation with Mr Rodgers, Mr Rodgers’ desire to work in New York, and Mr Roger’s general impression that he was doing more than his fair share of the work on the Precious Metals Desk without getting what he saw as his fair share of the bonus pool and other rewards. According to Mr Rodgers, a client of Sunrise invited him to accompany him to the 2014 Super Bowl game (which took place on 2 February 2014 between the Denver Broncos and the Seattle Seahawks at the MetLife Stadium in Rutherford, New Jersey), to meet a “friend who owns a brokerage”. Since it was a big part of Mr Rodgers’ job to build relationships with clients and potential clients, and that was the ostensible purpose of the visit, Sunrise agreed that he should go, and paid for his fare and accommodation. According to Mr Rodgers, during that visit the client introduced Mr Rodgers to the CEO of OTC Holdings LLC (“OTC Holdings”), Mr 11. 12. 13. 14. 15. Joe Kelly. On his return, he was then contacted “out of the blue” by Mr Gene Rubio, a recruitment consultant working in this area. On 5 February 2014, Mr Rodgers sent an email to Mr Rubio from his private email address. That email was headed “Precious Metal Options Client Matrix”, and contained a list of the Sunrise clients with whom Mr Rodgers was accustomed to deal. It is not disputed that the information in this email was confidential to Sunrise, and that Mr Rodgers was in breach of duty in disclosing it to Mr Rubio. On 9 February 2014 Mr Rodgers sent to Mr Kelly by email (again from Mr Rodgers’ private email address) a copy of the Contract. Thereafter, Mr Rodgers had a number of meetings with Mr Kelly, which eventually resulted in him signing on about 5 March 2014 an Employment Agreement with EOX Holdings LLC (“EOX”), a subsidiary of Mr Kelly’s company, OTC Holdings. This Employment Agreement was expressed to begin on 1 January 2015, and to continue for an initial term of 5 years. Under its terms, EOX agreed to pay Mr Rodgers a signing on bonus of USD 50,000 (repayable in full if he left before completing the initial 5-year term), “Base Compensation” of USD 12,500 per month, and an “Incentive Bonus” based on 50% of the net trading commissions generated by Mr Rodgers. EOX is, like Sunrise, an interdealer broker, and is one of Sunrise’s principal competitors. It is common ground that EOX’s intention in recruiting Mr Rodgers was so that he should help to set up a Precious Metals Desk for EOX in New York, to compete for business with Sunrise’s Precious Metals Desk. Much of Mr Rodgers’ work for Sunrise had been with US-based clients. So his contacts and expertise in the world of precious metals derivative contracts, entirely built up while working for Sunrise and at Sunrise’s expense, would be of great value to EOX in launching its competing business. It is no doubt for that reason that EOX has agreed to pay for Mr Rodgers’ defence of these proceedings. In breach of clauses 3.2(d) and 17.5 of the Contract, Mr Rodgers did not tell Sunrise of any of this at the time. However, 22 days later, on Thursday 27 March 2014 Mr Rodgers took a screenshot from his Sunrise computer, showing the figures for the last quarter’s business on the Sunrise Precious Metals Desk. According to Mr Rodgers, this was done “in case I needed to evidence to EOX what my bonus entitlement (which I forfeited on my resignation) would have been for Q1 2014”. Even so, it was, on any showing, information that was confidential to Sunrise, which Mr Rodgers was not at liberty to use for his own purposes. 16. Having done that, Mr Rodgers then went to the office of Mr Finegold, one of the directors of Sunrise. Once there, Mr Rodgers told Mr Finegold that he (Mr Rodgers) “was leaving Sunrise and wanted to leave now”. Mr Finegold asked him to go back to work, and to make no decision until Mr Gibbs (who was the director with primary responsibility for Mr Rodgers’ area of the business) was back. Mr Rodgers then left Sunrise’s offices and, except for the meeting mentioned below, has not returned. That weekend, Mr Rodgers left the UK for a skiing holiday, which he had previously arranged with Sunrise should be part of his annual leave. He was due to come back into the office after that holiday on 7 April 2014, but did not turn up. However, on 9 April 2014, Mr Rodgers did come to a meeting that had been arranged at short notice with Sunrise’s General Counsel, Mr Paul Chiappe. Mr Chiappe’s contemporary notes of that meeting (the accuracy of which Mr Rodgers did not seriously challenge) summarised what was said as follows: 17. 18. 1. Told him that he was held in high regard by myself and the Board; 2. That I certainly expected a certain level of professionalism from him and that I would never have put him in the category of person who would have no regard for legal or moral obligations; 3. I told him that the purpose of the meeting was to understand his motivation and then find a way of getting him back to work with a view to agreeing a sensible termination plan if that was what he still wanted. I reminded him that his Initial Period comes to an end in September and that he is then subject to a 12 months' notice and 6 month non-compete. 4. He said that various things had happened in his life that had made him focus on his future and that there was no turning back. He said he will not come back to the office, that he does not want to work for Sunrise anymore. 5. He said he was going to New York tomorrow and was planning to permanently relocate there as soon as possible. 6. I said that I was hoping to find a solution that moved towards a win win, but that whatever the solution he would have to come back to the office, but that might include the Sunrise New York office. 7. He reiterated that he did not want to work for Sunrise in New York or London. He said he has in total probably spent a month in New York and while he likes a couple of people he simply does not want to work for Sunrise .. 19. On 16 April 2014, Mr Rodgers sent an email to Mr Chiappe, seeking to reassure Sunrise that he posed no immediate threat to Sunrise’s business, and saying that .. I can safely assure Sunrise (and can confirm so more formally in writing in needed) that I will not start work anywhere else before September 2014 and I will agree to remain on garden leave until then .. .. and furthermore, I will not be trying to persuade anyone with whom I used to work to join me in NYC Mr Rodgers failed to disclose that he had already signed the Employment Contract with EOX, either in the course of his meeting with Mr Chiappe or in this subsequent email. 20. 21. On 22 April 2014, Sunrise’s HR department contacted Mr Gibbs, querying why Mr Rodgers was taking such a long holiday. Mr Gibbs reply was terse: “He left without notice. We are currently suing him”. The HR department’s response was to amend the records to show that Mr Rodgers was on “unauthorised absence”. On 24 April 2014, as a result of a decision taken by the directors, the Financial Controller of Sunrise instructed the outsourced company used to administer Sunrise’s payroll to remove Mr Rodgers’ Basic Pay and bonus from the April payroll. That meant that Sunrise did not pay Mr Rodgers for April 2014. In other circumstances, Mr Rodgers’ salary and bonus for April would have been received into his account on or about 28th April 2014 (though the contractual date for payment would have been 1 May 2014). 22. By this stage, Sunrise had instructed Solicitors, Twenty Twenty Law, to act on its behalf. On 25 April 2014, Twenty Twenty Law wrote to Mr Rodgers, stating: We understand that you purported to resign from your employment on 27 March 2014. As you are aware from your employment contract dated 21 October 2011 (copy enclosed), there is no provision allowing you to terminate your employment before September 2015. Your contract clearly states that you may only give written notice from 22 September 2014, the applicable notice period after that date being 12 months. 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. Your continuing failure to attend work represents a serious ongoing breach of your employment contract. Our client requires you to return to work by 30 April 2014, failing which it reserves its right to terminate your employment without notice for fundamental breach. Additionally, our client reserves its right to pursue a claim against you personally for the substantial quantifiable losses it has incurred and continues to suffer as a result of your breach. Pursuant to clause 17.5 of your employment contract, please confirm whether you have been offered any opportunity to be involved in any business concern in any capacity and if so please confirm the identity of that business concern. Please note that in the event our client discovers that a third party has induced you to breach any of your legal obligations to our client it shall not hesitate to bring an additional claim against that third party. 23. On 27 April 2014, Mishcon de Reya replied on behalf of Mr Rodgers: We confirm that our client resigned with immediate effect on 27 March 2014. He has not worked since submitting his resignation and he will not be returning to work. As our client explained in his meeting on 9 April and in his email of 16 May 2014, the reason for our client's resignation is his desire to relocate to the United States. This desire was made clear to your client several years ago … Our client has accepted an offer of employment from EOX Holdings LLC in New York as it was able to provide the role our client has been seeking .. That letter, written a month after Mr Rodgers’ purported resignation, was the first indication to Sunrise that Mr Rodgers had accepted an offer of employment from a direct competitor of Sunrise. 24. Twenty Twenty Law replied on behalf of Sunrise by letter dated 2 May 2014. Our client's position remains unchanged that your client remains in its employment and as stated in our previous correspondence, your client is required to attend work. You have asserted that your client summarily resigned on 27 March 2014. Our client has never accepted any such resignation by your client. Indeed, it is clear from the email that your client sent on 16 April 2014 that your client did not think that he had summarily ended his employment but that he was instead working out a period of notice until September 2014. We wish to make it absolutely clear that our client has not accepted any summary termination and requires your client to work until 16 October 2014. He remains in breach of contract whilst he does not render his services, as he is obliged to do so under his contract of employment dated 21 October 2011 (Contract), a copy of which was enclosed with our letter to your client dated 25 April 2014. Our client remains ready and willing to fully remunerate your client in return for him attending work. Your client is not entitled to payment under his Contract for periods in which he has failed/fails to attend work and is in breach of contract. Nevertheless, he remains employed and he is instructed to attend work as normal for which he will be paid. 25. After further exchanges of correspondence between solicitors, on 14 May 2014 Twenty Twenty Law wrote to Mishcon de Reya, offering on behalf of Sunrise to “waive its full contractual rights” and to accept a notice period for Mr Roger expiring on 16 October 2014, ie 6 months from the date of Mr Rodgers’ email dated 16 April 2014 (which was the first written notice of resignation that he had given). .. Six months’ notice is reasonable for an employee at your client’s level and our client has been generous in not holding you client to his full contractual notice period. Following the expiry of that notice on 16 October 2014, our client is entitled to the protection of the post-termination restrictions in your client’s contract, including a non-compete restriction running from 17 October 2014 for six months .. 26. By this time, it was apparent to Mr Rodgers that he had not been paid salary or bonus by Sunrise for April. Mishcon de Reya’s response dated 16 May 2014 accordingly purported to accept that non-payment as a repudiatory breach by Sunrise of the Contract. As you know, our clients' primary position is that Mr Rodgers resigned with immediate effect on 27 March 2014. Both parties have conducted themselves consistently with this fact. Mr Rodgers has not attended work since that date and your client has not made any further salary payments to him since the end of March 2014. If that position is not correct, and your client's contention that Mr Rodgers' employment is in some way continuing, then your client is in repudiatory breach of contract by failing to pay our client his salary. That breach is hereby accepted and accordingly, Mr Rodgers' employment is terminated with immediate effect as at today's date. 27. 28. On 19 May 2014, Sunrise issued the Claim Form in the present action, together with an application for an interim injunction. That application came before Laing J on 23rd May 2014. By consent, she made an Order for a speedy trial, made various orders for delivery up and disclosure against Mr Rodgers, and enjoined Mr Rodgers until trial or further order from working for any competitor or soliciting Sunrise’s clients or employees. On 10 July 2014, Roger ter Harr QC (sitting as a Judge of the High Court) made an Order which (inter alia) defined and limited the issues to be tried before me today. At the outset of the hearing, the parties further agreed that I should first of all decide issues (1), (3) and (4) of those identified in Schedule A to the Order of 10 th July 2014 – that is, that I should decide whether Mr Rodgers remains (as Sunrise contends) still employed by Sunrise and, if so, to what relief (if any) Sunrise is in consequence entitled. The positions adopted by the parties Sunrise’s case 29. 30. 31. Sunrise’s case is that Mr Rodgers remains employed by Sunrise, and will so remain until the reduced period of notice to which Sunrise has voluntarily agreed expires on 16 October 2014. During that period, Sunrise wishes Mr Rodgers to come into work as normal in order (in Mr Gibbs’ words) to “facilitate a proper handover of clients which would involve introducing clients to colleagues over a series of meetings, lunches and drinks, spread over the notice period. This is usual practice .. when individuals leave .. The failure by the [Mr Rodgers] to do this seriously compromises [Sunrise’s] prospects of continuing to trade with the clients. In addition it has reflected poorly on the business for [Mr Rodgers] to vanish without agreement, and this is demonstrated by the many questions by clients about his whereabouts ..”. If Mr Rodgers comes into work, he will be paid in accordance with the Contract. However, if he does not come into work, Sunrise has no contractual or other obligation to pay him. On the expiration of his period of notice, Sunrise is thereafter entitled to the full benefit of the restrictive covenants in the Contract, running from 16 October 2014. No reduction in that period should be made, since Mr Rodgers has been absent from work without authorisation, not absent from work at Sunrise’s request on garden leave. Mr Rodgers’ case 32. 33. 34. Mr Roger’s case, by contrast, is that Sunrise cannot purport to employ him while refusing to pay him. Sunrise’s failure to pay his April salary and bonus therefore amounted either to an acceptance of his repudiatory breach in leaving his employment without notice in March, or as a repudiatory breach by Sunrise, which Mishcon de Reya accepted on his behalf by their letter of 16 May 2014. On either basis, his employment has now ended. Even if that be wrong, the Court should not, even by negative injunction, enforce the Contract with Sunrise. That is particularly so, since Sunrise will not pay him if he does not work for them, as the effect will be that he must either “work or starve”. The suggestion that – give all that has happened and all the accusations made against him in these proceedings by Sunrise – Sunrise genuinely wants him to come in to conduct a client handover is unrealistic. In any event, Mr Szajman is already very familiar (and has dealt) will all of the relevant clients, so a series of staged handover meetings would be unnecessary and pointless. As for his restrictive covenants, the terms of the Contract demonstrate that the maximum protection that Sunrise requires is a period of 6 months from the last client contact. Since Mr Rodgers’ last client contact was on 27 March 2014, the restrictive covenants should not be enforced against him beyond 26 September 2014. Matters that are not in dispute 35. Mr De Marco, who appears for Mr Rodgers, has realistically and sensibly made a number of concessions, which have significantly reduced the area of dispute. He accepts: 35.1. 35.2. First, that Mr Rodgers was not entitled to terminate the Contract without notice on 27 March 2014. The Contract provided that he was not entitled to give notice before 22 September 2014, and was thereafter required to give one year’s notice; Secondly, that a contract of employment, like any other contract, does not terminate automatically upon renunciation, but only on the acceptance by the innocent party of the defaulting party’s repudiatory breach. That principle operates whether the breaching party is the employer or (as here) the employee. 35.3. Thirdly, that under the terms of the Contract, Mr Rodgers had no right to insist on being put on gardening leave during his notice period. That is an option given to the employer (Sunrise), not to the employee (Mr Rodgers). 35.4. Fourthly, that the particular restrictive covenants in the Contract which Sunrise has sought to enforce in this action were not, when the contract was made, void as unreasonable restraints of trade. The arguments for the parties 36. Mr Duggan QC, who appears for Sunrise, takes his stand on the recent decision of the Supreme Court in Societe Generale, London Branch v Geys5. In that case, Lord Wilson JSC (with whose reasoning Lord Hope of Craighead DPSC (and therefore the rest of the majority) agreed6), endorsed and applied the following passage from the judgment of Templeman LJ in London Transport Executive v Clarke7 .. The general rule is that a repudiated contract is not terminated unless and until the repudiation is accepted by the innocent party ... contracts of employment cannot provide a general exemption to that rule because it would be manifestly unjust to allow a wrongdoer to determine a contract by repudiatory breach if the innocent party wished to affirm the contract for good reason. Thus in Thomas Marshall v Guinle8, which contains a full discussion of principles and of the conflicting authorities, a contract of employment was repudiated by the employee. The court could not enforce specific performance of the contract for personal services, but the Vice Chancellor Sir Robert Megarry enforced against the wrongdoing employee at the behest of the innocent employer who had not accepted the repudiation a confidentiality and non-competition obligation which was only effective during the continuance of the contract. Repudiation cannot determine a contract of service or any other contract while there exists a reason and an opportunity for the innocent party to affirm the contract .. 37. Mr Duggan submits that in the present case, Sunrise plainly had good reasons for not accepting Mr Rodgers’ repudiation. First of all, they genuinely wanted him to stay, as he was good at his job and made money for them in an area that Sunrise was seeking to develop. Second – and only if the first was not possible - Sunrise wanted Mr Rodgers to give proper notice, so as to allow time for a proper “termination plan”, leading to a phased handover of clients to his successor. Thirdly, they did not want Mr Rodgers to go to work for a competitor. 6 8 [2013] 1 AC 523. See at [15] and [19]. [1981] ICR 355 a 366-367. [1978] IRLR 174. 38. Mr De Marco’s response on behalf of Mr Rodgers has a number of stages. 38.1. He first submits that it is necessary to view Sunrise’s conduct against the background of the statutory prohibition on the enforcement of a contract of employment9. Sunrise had access to both internal and external legal advice. It would therefore at all relevant times have been clear to Sunrise that there was no prospect of Mr Rodgers returning to work voluntarily, or being compelled by the Court to return to work. Nor could Sunrise truly have wanted him to do so, once it was clear that his loyalties lay elsewhere. Given the complaints made against Mr Rodgers in the litigation, it is plain that the relationship of trust and confidence between Sunrise and Mr Rodgers has irretrievably broken down. 38.2. Against that background, it is clear (Mr De Marco submits) that Sunrise can have had no genuine reason for wishing to keep the Contract alive after 27 March 2014, other than to prolong the period during which Mr Rodgers was contractually forbidden from working for a competitor. 38.3. Accordingly, Mr De Marco submits that this is one of those exceptional cases where (in the words of Lord Reid in White and Carter (Councils) Ltd v McGregor10) “it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages”, and so has no right to treat the contract as continuing to subsist11. 38.4. Alternatively, Mr De Marco submits that Sunrise’s decision to refuse to continue paying Mr Rodgers should be construed either – against that background – as an acceptance of Mr Rodgers’ repudiation, or (in the further alternative) as a repudiation by Sunrise of the Contract. After all, it is trite law that an unaccepted repudiation keeps the contract alive for both sides, so that the innocent party remains as much obliged to perform its contractual obligations as the contract breaker12. In the present case, therefore, if 10 12 “No court shall, whether by way of (a) an order for specific performance or specific implement of a contract of employment, or (b) an injunction or interdict restraining a breach or threatened breach of such a contract, compel an employee to do any work or attend at any place for the doing of any work”: Trade Union and Labour Relations (Consolidation) Act 1992 s 236 (derived from the Trade Union and Labour Relations Act 1974, s 16). [1962] AC 413 at 431. See also Isabella Shipowner SA v Shagang Shipping Co Ltd (The Aquafaith) [2012] EWHC 1077 (Comm), [2012] 2 All ER (Comm) 461 at [44], per Cooke J: “The effect of the authorities is that an innocent party will have no legitimate interest in maintaining the contract if damages are an adequate remedy and his insistence on maintaining the contract can be described as 'wholly unreasonable", 'extremely unreasonable" or, perhaps" in my words, 'perverse'”. Cf the requirement that “the innocent party wishe[s] to affirm the contract for good reason” (emphasis added) in the passage from London Transport Executive v Clarke cited in paragraph 36 above. “If the innocent party elects to treat the contract as continuing, then it remains in existence for the benefit of the wrongdoer as well as of himself. The wrongdoer is entitled to complete the contract and to take advantage of any supervening circumstance which would excuse him from or diminish his liability”: Chitty on Contracts (31st ed) para 24-011. Sunrise wished to hold Mr Rodgers to the Contract, it had to continue to perform its side of the contract by paying him. 39. Mr Duggan’s riposte to these submissions is founded on the proposition that an employee cannot claim wages where he declines to carry out the very work for which the wages are paid. As is stated in the headnote to the House of Lords decision in Miles v Wakefield MDC13 .. an employee's right to remuneration depended on his doing or being willing to do the work that he was employed to do and if he declined to do that work the employer need not pay him .. Thus, argues Mr Duggan, Mr Rodgers has no entitlement to wages for so long as he refuses to work for Sunrise. Were he to return to work, Sunrise is ready and willing to pay him; but unless and until he does, he has no entitlement to payment merely for sitting at home. Mr De Marco’s rejoinder is to the effect that, if Mr Duggan’s submissions were correct, Sunrise would be getting the benefit of what, in practice and reality, amounts to placing Mr Rodgers on “garden leave”, without the burden of paying him during that period. In Mr De Marco’s submission, while ‘garden leave’ has now become a common contractual clause, it developed as a means by which an employer could obtain injunctive relief to enforce the notice period without offending the rule against specific performance and the right to work. But, in Mr De Marco’s submission, the price almost invariably exacted by the Courts as a condition for enforcing garden leave provisions (in cases such as Provident Group v Hayward14, and Standard Life Health Care v Gorman15) is that the employer should continue to pay the worker. As is stated in Goulding, Employee Competition Covenants, Confidentiality, and Garden Leave16: 40. 41. .. In principle, any garden leave injunction will be conditional on the employer undertaking to the court, in addition to the claimant’s usual cross-undertaking in damages, that the claimant will continue to pay the employee his salary and provide his other contractual benefits, and not seek to recover such sums by way of damages .. 42. It would therefore, Mr De Marco submits, be wrong in principle for the Court to allow Sunrise to take the benefit of the restrictions imposed upon Mr Rodgers during 14 16 [1987] 1 AC 539. See, to similar effect, Henthorn and Taylor v CEGB [1980] IRLR 361, CA; Cresswell v Board of Inland Revenue [1984] ICR 508 at 522; Wiluszynski v Tower Hamlets [1988] IRLR 154, QBD. [1989] ICR 160 [2010] IRLR 233 (2nd ed) para 4.145. his notice period, without paying him during that period. Those restrictions, after all, are part of the consideration provided by Mr Rodgers in return for his salary. 43. In any event, to enforce such restrictions during the contractual notice period would, Mr De Marco submits, be to offend against the rule prohibiting indirect enforcement of a contract of employment. The old law on this topic was encapsulated by Lawton LJ in Evening Standard v Henderson17 as follows: .. there is a body of trite law .. that you cannot get an injunction against an employee under a contract of service to enforce a negative covenant if the consequences of that injunction would be to put the employee in the position that he would either have to go on working for his former employers or starve or be idle. 44. However, the modern trend is for the courts to take a more pragmatic view of what amounts to compulsion. As Oliver J observed in Nichols Advance Vehicle Systems Inc v De Angelis18: .. It simply does not, with respect, seem to me to be realistic to say that nothing short of idleness and starvation is compulsive, and therefore no injunction which involves anything less than that can be said to infringe the principle that the court will not specifically enforce a contract of personal services .. 45. Nourse LJ put the matter even more broadly, in Warren v Mendy19 .. in a contract for personal services inseparable from the exercise of some special skill or talent .. the court ought not to enforce the performance of the negative obligations if their enforcement will effectively compel the servant to perform his positive obligations under the contract. Compulsion is a question to be decided on the facts of each case, with a realistic regard for the probable reaction of an injunction on the psychological and material, and sometimes the physical, need of the servant to maintain the skill or talent. The longer the term for which an injunction is sought, the more readily will compulsion be inferred. Compulsion may be inferred where the injunction is sought not against the servant but against a third party, if either the third party is the only other available master or if it is likely that the master will 18 [1987] ICR 588. 21 December 1979, unreported. [1989] 3 All ER 103 at 114. seek relief against anyone who attempts to replace him. An injunction will less readily be granted where there are obligations of mutual trust and confidence, more especially where the servant's trust in the master may have been betrayed or his confidence in him has genuinely gone. 46. 47. Here, Mr De Marco submits, Mr Rodgers is a young man, the maintenance of whose skill requires continuing exposure to the market. Because of Sunrise’s attitude, his choices at present are either to work for Sunrise, or not to work at all and so not to earn any money. On the facts of this case, an injunction in the terms sought by Sunrise covering the notice period would in effect be compulsive, and so would be wrong in principle. As for the injunction sought covering the period after termination of his employment, it is not – having regard to Mr Rodgers’ lack of contact with Sunrise’s clients since 27 March 2014 – reasonably necessary to protect any legitimate interest of Sunrise, and so again would be wrong in principle. Mr Duggan’s response, on behalf of Sunrise, is to point out that this is a case of a senior employee, cynically and in a calculated fashion seeking to renege from his contractual obligations because he has obtained employment elsewhere with a competitor and wishes to leave as soon as possible. It would, in Mr Duggan’s submission, be wrong in principle for the Court to refuse to hold Mr Rodgers to his bargain out of any sympathy for his current plight. In any event Mr Rodgers has the protection of his new employers, EOX, and the prospect of a USD 50,000 signing on bonus to look forward to. He is in no realistic sense likely to starve: and, to the extent that he is idle and so unable to develop his skills (for his own benefit and that of EOX), Mr Rodgers is the author of his own misfortune. Analysis and conclusions 48. In principle, I accept Mr De Marco’s submission that, when considering the actions of a sophisticated employer with ready access to legal advice (such as Sunrise), it is legitimate to take into account, when considering that employer’s conduct, its likely knowledge of the limits to the legal remedies available to it. However, the fact that a right cannot be enforced by injunction or a decree of specific performance does not mean that that right does not exist. The remedy of injunction is, after all, only available to enforce positive obligations20 in those cases where it is unjust to confine the claimant to his remedy in damages21. 21 The fact that “damages would be an adequate remedy … is not generally a relevant consideration where the injunction restrains the breach of a negative covenant”: Araci v Fallon [2011] EWCA Civ 668 at [70], per Elias LJ (emphasis added). See Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349 at 379, suggesting this modern reformulation of the test of whether damages are an adequate remedy. 49. For the sake of clarity, it therefore seems to me to be necessary to separate the analysis of the extent of the parties’ legal rights from the subsequent consideration of the remedies that are available and appropriate to enforce those rights, once they have been identified at the first stage. Legal Rights 50. 51. 52. 53. 54. I therefore begin by considering the existence and extent of the parties’ rights arising from the facts set out above. It is plain, in the light of the decision in Geys, that when Mr Rodgers announced on 27 March 2014 that he was leaving and not coming back, Sunrise had the option to accept that renunciation by Mr Rodgers of his contractual obligations as bringing the Contract to an end, or – provided that it had good reason to do so - to affirm the Contract and to keep it alive. In my judgment, Sunrise did have good reason to do so, at least at the time when it made its original decision to affirm the Contract. In that connection, Mr Gibbs gave evidence and was cross-examined about Sunrise’s reasons for wishing to hold Mr Rodgers to the Contract, and about how realistic those reasons were. Mr Rodgers himself gave evidence and was cross-examined about his reasons for not telling Sunrise about his offer from EOX, and about his reasons for refusing to come back. In forming my conclusions about their evidence, I have taken into account their demeanour in the witness box, and have tested their evidence against all the other materials available to me, including the contemporary documents and the inherent probabilities, in accordance with the helpful guidance given by Robert Goff LJ (as he then was) in The Ocean Frost22. Mr Rodgers’ evidence was, at times, very candid, even when that was unhelpful to his case. Mr Gibbs’ evidence was more guarded. Mr Gibbs’ evidence was that Mr Rodgers was a friend of his “always was and always will be”, and that he would look after Mr Rodgers were he to return to Sunrise. Were Mr Rodgers to return to Sunrise, “he would get a round of applause and a big cheer”. Asked why he wanted Mr Rodgers back, given Mr Rodgers’ determination to leave and all the allegations made against Mr Rodgers in these proceedings, Mr Gibbs replied that it was in order to ensure a proper handover to Mr Rodgers’ successor, something which might take between 2-6 months – perhaps 3 months if Mr Rodgers were very motivated. Mr Rodgers, in his evidence, acknowledged his liking and respect for Mr Gibbs. However, there were others at Sunrise for whom he had a less high regard, and some (including the other directors of Sunrise) who in his view held him in less high esteem than Mr Gibbs did. According to Mr Rodgers, a return to Sunrise was just not going to happen. However, in answer to my questions, he frankly admitted that [1985] 1 Lloyd's Rep 1 at 57. 55. 56. 57. 58. 59. the principal reasons for that were the same reasons as he had had for leaving in the first place, and were not really anything to do with what had happened afterwards. In my judgment, both Mr Gibbs and Mr Rodgers were doing their best to assist the Court. However, I reject Mr Gibbs’ evidence that Sunrise still (in July 2014) wants Mr Rodgers to return for the purpose of effecting an orderly handover of his clients to his successor. It seems to me that that idea is (as Mr De Marco submitted) wholly unrealistic, and one which no prudent employer would countenance. A prudent employer in Sunrise’s position would, given the clear evidence that now exists that Mr Rodgers’ loyalties lie elsewhere, keep Mr Rodgers well away from Sunrise’s clients and Sunrise’s confidential information. In any event, on the evidence, I find as a fact that any such handover would now be wholly unnecessary and counterproductive, since all relevant clients already know of the situation with Mr Rodgers (which will, in any event, become public knowledge with the publication of this judgment), and are unlikely to be influenced by any handover at this juncture, however well stage-managed. Even so, that does not mean that Sunrise did not have a good reason for affirming the Contract when Mr Rodgers walked out in March 2014. At that point – and at all points thereafter until Mishcon de Reya’s letter dated 29th April informed Sunrise that Mr Rodgers had already accepted employment with EOX – Sunrise could legitimately have hoped (and did in fact hope) to persuade Mr Rodgers to return. Mr Gibbs said – and I accept – that in his long experience of dealing with brokers “they can be hot headed”, and that he hoped that Mr Rodgers could be persuaded to change his mind and to come back. If that had happened, according to Mr Gibbs, “we would smooth it [ie the walk-out] over”. As for the present position, I do not accept Mr De Marco’s submission that Sunrise’s desire to keep Mr Rodgers for as long as possible from working for EOX cannot amount to a good reason for continuing to affirm the contract. On the contrary, that desire seems to me to be an entirely legitimate and sensible commercial reason (looked at from Sunrise’s point of view) for Sunrise’s choice to continue to affirm the Contract, and to be very far from “perverse” or “wholly unreasonable”. The next issue that I must consider is whether Sunrise lost its right to affirm the contract by its decision to cease paying Mr Rodgers while he continued to refuse to come to work. In my judgment, it did not. The authorities relied on by Mr Duggan establish that work (or rather readiness and willingness to work) and wages are, in general, mutual obligations. Like the obligations of payment and delivery under a contract of sale23, they are concurrent conditions. The employee must be ready and willing to do the work in exchange for the wages, and the employer must be ready and willing to pay the wages in return for See the Sale of Goods Act 1979 s 28. the work. The fact that the non-performance of one obligation excuses performance of the other does not mean that the contract of which those obligations form part automatically ceases to exist if either is not performed. It merely means that the particular obligation is suspended until the other mutual obligation is performed. I therefore reject Mr De Marco’s submission that Sunrise’s decision to cease paying Mr Rodgers amounted to an acceptance of his repudiatory breach. I also reject Mr De Marco’s submission that, on the facts of this case and on the true interpretation of the Contract, Mr Rodgers was entitled to payment of his salary irrespective of work, as the price of the restrictions and other terms to which he was bound. As to the construction of the Contract, it seems to me to be implicit (for example) in clauses 9 (Holidays) and 10 (Incapacity) that Mr Rodgers’ entitlement to payment is dependent upon his readiness and willingness to work. There is nothing in the terms of the Contract which, in my judgment, would make it an exception to the general principles discussed in cases such as Miles. It follows that, in my judgment, Mr Rodgers still remains employed by Sunrise, and (and unless something occurs to change the position in the meantime) will so remain until the reduced period of notice to which Sunrise has voluntarily agreed expires on 16 October 2014. 60. 61. 62. Remedies 63. I now turn to the issue of whether I should enforce the terms of the Contract against Mr Rodgers by injunction. In that connection, I remind myself that I am forbidden by statute from doing so, if the effect of my order would be to compel Mr Rodgers “to do any work or attend at any place for the doing of any work”. I also remind myself of the observations of Nourse LJ in Warren v Mendy24, which follow the passage cited in paragraph 45 above: .. In stating the principles as we have, we are not to be taken as intending to pay anything less than a full and proper regard to the sanctity of contract. No judge would wish to detract from his duty to enforce the performance of contracts to the very limit which established principles allow him to go. Nowhere is that duty better indicated than in the words of Lord St Leonards LC in Lumley v Wagner25. To that end the judge will scrutinise most carefully, even sceptically, any claim by the servant that he is under the human necessity of maintaining the skill or talent and thus will be compelled to perform the contract, or that his trust in the master has been betrayed or that his confidence in him has genuinely gone. 25 [1989] 3 All ER 103 at 114. (1852) 1 De GM & G 604 at 619, [1843–60] All ER Rep 368 at 373. But, if, having done that, the judge is satisfied that the grant of an injunction will effectively compel performance of the contract, he ought to refuse it. 64. 65. It is common ground that the grant or refusal of an injunction is a matter for the discretion of the court26, to be exercised in the light of all the relevant circumstances at the time when the matter comes before the Court for decision. Mr Duggan urges me to take into account the fact that Mr Rodgers is a well- remunerated young man who has shown a cynical disregard for his contractual obligations. I agree with him that Mr Rodgers’ behaviour has been entirely selfish, and has shown scant regard for his contractual obligations. However, as Oliver J remarked in Nichols Advance Vehicle Systems Inc v De Angelis27 .. There is a very natural repugnance to permit a defendant to break with impunity, save for such damages as may be ultimately awarded, a clear contractual commitment into which he has freely entered, or to condone or encourage a cynical disregard by others of subsisting contractual obligations of which they are perfectly well aware. But it is not the function of this Court to punish what it may regard as shabby conduct .. I must therefore not allow my natural reluctance to give Mr Rodgers the benefit of his flagrant breaches of contract to influence my decision as to the remedies to which Sunrise is entitled. 66. It is, again, necessary to consider this issue in two stages: first, in relation to the period up to 16 October 2014, and then in relation to the period thereafter. The notice period 67. Mr Rodgers said in evidence – and I accept – that he is living on his savings, which are likely to run out in the next couple of months. He also said (and I again accept) that the things which make a broker attractive to his clients are (I paraphrase) his sociability, and his knowledge of the market. While he is being prevented from working as a broker, he is not able to maintain either his social contacts with his (and Sunrise’s) former clients, or his knowledge of what is happening in the market. 68. The terms of clause 11 of the Contract would prevent Mr Rodgers from doing any work of any kind during his notice period without Sunrise’s prior consent. As a 27 Though “the discretion is not one to be exercised according to the fancy of whoever is to exercise the jurisdiction of Equity: it must be exercised judicially according to the rules which have been established by precedent”: Snell’s Equity (32nd ed) para18-036. 21 December 1979, unreported. 69. 70. 71. matter of discretion28, I am not prepared to make an order in those absolute terms, which are inapposite to the present situation. However, in my judgment, an injunction requiring Mr Rodgers to obey the terms of the Contract until 16th October 2014 – at least to the extent of not working for EOX or for any similar competitor firm to Sunrise, and not contacting his former clients from Sunrise – would be an appropriate Order for me to make. Such an Order would not mean that Mr Rodgers “would either have to go on working for his former employers or starve or be idle”. Having regard to the particular facts of this case, and bearing in mind the probable effect of such an injunction on the psychological and material need of Mr Rodgers to maintain the skill or talent, it seems to me that such an injunction would have no relevant compulsive effect, and so would not be likely to offend the statutory prohibition. Nor would such an injunction be oppressive to Mr Rodgers29. On the contrary, Mr Rodgers himself was quite happy to confirm to Sunrise in his 16 April 2014 email30 that he would not start work elsewhere until September 2014. In that context, the extra month to 17 October 2014 can hardly be said to be materially compulsive on him to return to his former employer, or to be oppressive. Moreover, although Mr Rodgers naturally wishes to start work for EOX as soon as possible, the Employment Contract which he signed in early March 201431 had a start date as late as 1st January 2015. I do not accept Mr De Marco’s submission that, if I made such an order enforcing the Contract during the notice period, I should (by analogy with the “garden leave” cases) require Sunrise to pay Mr Rodgers. In this case, Sunrise has not put Mr Rodgers on “garden leave”. Mr Rodgers has simply absented himself from work. It is, however, implicit in my Order that, should Mr Rodgers (contrary to his settled and stated intention) in fact choose to return to work out his notice with Sunrise, Sunrise must keep its promise to pay him in accordance with the Contract terms. Following termination 29 31 I take this view for two overlapping reasons. First of all, “an injunction should not be granted except where it leaves the employee with some other reasonable means of earning a living”: Chitty on Contracts (31st ed) para 27-066. Secondly, “stipulations which operate during employment (no less than those which operate thereafter) can .. have their validity tested under the restraint of trade doctrine; but even where their validity is not subject to these tests, the remedy of injunction is likely to be granted only where these tests are satisfied”: ibid para 27-069. An injunction in such wide terms is not reasonably necessary for the protection of any legitimate interest of Sunrise. Which is the “key question” in the application of the working rule for deciding whether or not to award damages in substitution for an injunction which was laid down by AL Smith LJ in Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287: see generally Snell’s Equity paras 18-043 and 18-044, and Chitty on Contracts (31st ed) paras 27-060 and 27-064. See paragraph 19 above. See paragraph 13 above. 72. 73. 74. 75. 76. Coda 77. 33 It is common ground that the post-termination restrictions which Sunrise now seeks to enforce were “reasonable with reference to the interests of the parties concerned and of the public”32 at the time when the Contract was made, and so are not unenforceable as being in restraint of trade. However, that does not automatically mean that the Court should enforce them by injunction at the time of termination. That issue must be judged in the light of the circumstances as they exist at the time when the Court is asked to make orders to enforce them33. It seems to me that there is considerable force in Mr De Marco’s argument that the terms of the Contract – particularly Cause 17.4 – indicate that the maximum period of restraint that Sunrise reasonably requires for the protection of its legitimate interests is one of 6 months from the last client contact. However, I bear in mind that the Contract requires a minimum of 12 months’ notice from the employee, and states that the period of garden leave will not usually exceed 6 months of that 12. I also accept Mr Gibbs’ evidence that, in the case of a “good leaver” who (unlike Mr Rodgers) gave the full contractual period of notice, between 2 and 6 months of the first half of the notice period would be spent in a structured handover process, which would be designed to help Sunrise to keep the departing broker’s clients for itself. In my judgment, I can properly take that factor into account in deciding what the maximum period reasonably necessary for the protection of Sunrise’s legitimate interests is. Doing the best I can, it seems to me that I can properly add 4 months (being the middle of Mr Gibbs’ 2-6 month estimate) to the 6 month period specified in the covenants in clause 17, to make a total period of 10 months from the last client contact. Since, in Mr Rodgers’ case, his last client contact was on 27 March 2014, it seems to me that I should limit any order to enforce the post-termination covenants in the Contract so as to expire 10 months after that date, on 26 January 2015. Again, having regard to the 1st January 2015 start date agreed by Mr Rodgers for his Employment Contract with EOX, it does not seem to me that such an Order would be oppressive to Mr Rodgers. I therefore propose to make orders (a) declaring that Mr Rodgers still remains employed by Sunrise, and (and unless something occurs to change the position in the meantime) will so remain until the reduced period of notice to which Sunrise has See Chitty on Contracts (31st ed) para 16–076. Inter alia, “the Court has the power to modify the extent to which it will enforce the contractual embargo so long as that contractual embargo is valid (see J A Mont (UK) Ltd v Mills [1993] IRLR 172) so as to ensure that at the time of such enforcement it does not operate in unreasonable restraint of trade”: Symbian Ltd v Christensen [2001] IRLR 77 at [47], per Morritt LJ. voluntarily agreed expires on 16 October 2014; (b) enforcing in modified form until that date the restrictions in the Contract that operate prior to termination, and (c) enforcing in modified form the specified post-termination restrictions in the contract for the period from 16 October 2014 until 26 January 2015. 78. I am grateful to both counsel for their full and helpful written arguments, and for their succinct and clear oral submissions. I have taken all such submissions fully into account, and intend no discourtesy if the urgent need to produce this Judgment over the weekend (in order that it should be available before the long vacation) has meant that I have not addressed all of the points raised in argument. 79. I invite counsel to agree a Minute of Order to give effect to this Judgment. I will hear counsel on the issue of costs. 29