Is an employee claiming to have been wrongfully dismissed entitled to rely on a repudiatory breach discovered after his resignation?: Square Global Ltd v Leonard [2020] EWHC 1008

Facts and Decision

Mr. Leonard was recruited as a broker at Square Global Ltd (“Square”) in 2015. He resigned summarily on 11 November 2019. His employment contract required him to give 6 months’ written notice of termination and included a number of post-termination restrictive covenants, including a non-compete covenant prohibiting him from undertaking competitive employment for a period of 6 months after the termination of his employment.

Square brought a claim in the High Court seeking: (1) a declaration that Mr. Leonard remained an employee until 11 May 2020; (2) an order prohibiting Mr. Leonard from engaging in competitive employment while he remained an employee of Square; and (3) injunctive relief to enforce the post-termination restrictive covenants. Mr. Leonard claimed that he was entitled to give summary notice of termination in acceptance of Square’s repudiatory breach of the employment contract. His claim for constructive dismissal relied on a series of events spanning the period of his employment, involving bullying/aggressive behaviour, unfairness over the allocation of remuneration and a failure and/or refusal to deal with complaints and grievances.

The Court ordered a speedy trial, with the matter heard over three days in March 2020. Jon Turner QC (sitting as Deputy High Court Judge) concluded that there was nothing on the facts relied on by Mr. Leonard which amounted to a repudiatory breach of contract and granted the relief sought by Square (§§152-168; 193).

The Judge’s Obiter Remarks

For employment practitioners, the issue of real interest was the Judge’s obiter remarks on the following point: to claim for constructive dismissal, does an employee have to resign at least in part “in response” to the repudiation (as argued by Square) or is he entitled to rely on a repudiatory breach by his employer even if that was not the reason he left his employment at the time (as claimed by Mr. Leonard)?

The Judge took the view that, whilst there were situations in which it would matter to establish whether the employee resigned in response to the repudiatory breach of contract, the correct starting point (following Malik v. BCCI [1997] ECR 606 at 611F, 624E-F) was to consider the remedy that the Court was being asked to grant, and to whom (§146).

He agreed with the position taken by Mr. Leonard, adopting the reasoning of Jack J in Tullett Prebon Plc v BGC Brokers LP [2010] EWHC 484 (QB) at §78:

“[A]s Malik shows, breach of the duty as to trust and confidence may have other consequences besides founding a claim for unfair or wrongful constructive dismissal. Even though the employee does not know of the breach when his employment terminates, he may have a claim for damages. It can also be used to justify his leaving, whether or not he left because of it. So if an employer asserts that the employee should not have left, the employee may show that he was entitled to leave because of the employer’s conduct, regardless of why he in fact left.”

So, if Square was in repudiatory breach, even if this was learned about by Mr. Leonard after he had resigned, he would still have been able to rely on them in order to oppose Square’s action. This approach is consistent with (and the converse of) the well-known Boston Deep Sea principle that an employer who dismisses his employee can rely on grounds of which he was unaware at the time of his dismissal (§§148-149). However, the issue did not strictly arise because the Judge found that, on the facts, there was no repudiatory breach on which Mr. Leonard could rely (§150).

Comments

For employment practitioners, there are the following take homes:

1.     If acting for an employee, it is important to consider whether there are any matters which are extraneous to the ones given for resignation which might amount to a repudiatory breach (either on its own or constituting a course of conduct) on the part of the employer.

2.     By the same token, solicitors acting for an employer should ensure they are aware of any other matters which might be said to justify a summary resignation (and ask relevant questions of their clients).

3.     If acting for an employee, there might be certain strategic advantages to being the defendant to a claim for breach of the employment contract, relying on the entitlement to give summary notice of termination in acceptance of repudiatory breach. It seems that an employee could not terminate his employment and bring a claim for wrongful constructive dismissal on a ground of which he was aware at the time of termination. However, Square Global shows that an employee could rely on matters which the employer had successfully concealed, or practices subsequently discovered, as part of a defence against a claim brought by an employer.

Tom Croxford QC and Kerenza Davis acted for Mr. Leonard

A copy of the decision is available here.