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The High Court dismissed a claim for inducement of breach of contract brought by ICAP against BGC when an employee of ICAP commenced employment with BGC in breach of his contract with ICAP. The case is a useful illustration of the requirement to prove intention on the part of the alleged inducer, which is a necessary element of the tort of inducement of breach of contract.

The facts

Mr Berry was employed by ICAP Management Services Limited (“IMSL”) as CEO of Global e-Commerce which was part of ICAP’s global broking business (“IGBB”). IMSL provided services to the IGBB, including the services of employees such as Mr Berry. In November 2015, ICAP plc (“ICAP”) and Tullett Prebon plc (“TP”) entered into an agreement whereby TP agreed to acquire the IGBB. As part of the agreement, ICAP agreed to separate the IGBB from its other businesses such that the IGBB and its operating companies became wholly owned by ICAP Global Broking Holdings Limited (“IGBHL”). In December 2016, the acquisition was completed when TP acquired the majority shareholding in IGBHL, and changed its name from TP to TP ICAP plc. TP ICAP then embarked on a process of integrating ICAP’s global broking business with TP’s own global broking business. This involved replacing ICAP’s management structure with TP ICAP’s management structure which was ultimately accountable to the TP ICAP Board.

Meanwhile, in July 2016, Mr Berry gave 12 months’ notice of resignation from his employment with ICAP in order to take up a position that he had been offered with BGC, as soon as he was lawfully entitled to do so. He was immediately placed on garden leave. In October 2016, Mr Berry notified ICAP that he considered that TP’s acquisition of the IGBB amounted to a transfer of a business within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) and that he objected to the transfer of his employment from the date of transfer, as he was entitled to do pursuant to regulation 4(7) of TUPE. The effect of such an objection under TUPE is that the transfer operates to terminate the contract of employment under regulation 4(8). ICAP denied that the acquisition amounted to a TUPE transfer.

In February 2017, Mr Berry notified ICAP that he considered that the TUPE transfer had by then taken place and that he considered his employment to be terminated by the transfer with effect from 7 February 2017. He added that he would not take up any new employment for a period of 10 days.

The proceedings

On Friday 24 February 2017, IMSL commenced proceedings and served an application for interim relief returnable on Thursday 2 March. On Monday 27 February 2017, Mr Berry commenced employment with BGC.

On 3 March 2017, O’Farrell J granted an interim injunction against (i) Mr Berry restraining him from working for BGC, and (ii) BGC restraining it from inducing a breach of contract by employing Mr Berry, pending a speedy trial.

The trial took place between 28 April and 4 May 2017, and judgment was handed down on 6 June 2017. Garnham J continued the injunction against Mr Berry until the expiry of his notice period, but dismissed ICAP’s claim for inducement against BGC. The judgment involves a discussion of when a TUPE transfer can occur in the context of a share acquisition, and also the principles applicable to the enforcement of garden leave by injunction. Of interest for present purposes is the court’s approach to the inducement claim.

Inducement of breach of contract: the law

The ingredients of the tort of inducement of breach of contract are: (1) there must be a contract; (2) there must be a breach of that contract; (3) the conduct of the alleged inducer must have been such as to induce that breach; (4) the alleged inducer must have known of the existence of the relevant term in the contract or turned a blind eye to the existence of such a term; (5) the alleged inducer must have actually realised that the conduct, which was being induced, would result in a breach of the term (the “intention” element); and (6) the claimant must have suffered damage as a result: Aerostar Maintenance International Ltd v Wilson [2010] EWHC 2032 (Ch), per Morgan J at [163]; OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1, per Lord Hoffmann at [39]-[44], and Lord Nicholls at [191]-[193] and [202].

The dismissal of the inducement claim

ICAP argued that if, as he did, the judge found that Mr Berry was in breach of his contract of employment by working for BGC for three days between 27 February and the interim relief hearing, he should find that BGC induced that breach. ICAP argued that BGC was aware that Mr Berry would be subject to an implied duty of fidelity and that inducing him to work for it would constitute a breach. ICAP argued that BGC could not rely on the TUPE argument (ie. that Mr Berry had validly objected under TUPE and so was free to work for BGC) as it had no reasonable belief that that argument was sound: [142]-[143].

The judge rejected that argument. He heard evidence from BGC’s Chief Operating Officer as to the view he had taken as to the application of TUPE. It was true that BGC chose not to disclose the legal advice it had received but in the judge’s judgment it was entitled to rely on legal privilege. The COO’s explanation that he relied on legal advice and took a commercial view of the application of TUPE, struck the judge as “entirely reasonable”. In those circumstances, he rejected the claim that BGC induced Mr Berry’s breach of contract and held that ICAP was not entitled to an injunction against BGC: [144]-[146].

The full judgment can be read here. 

Paul Goulding QC, Diya Sen Gupta and Kerenza Davis were instructed by BGC.

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Staff