Collidge v Freeport Plc

A termination agreement may make payment conditional upon the truth of warranties concerning the employee’s prior conduct. Where the wording identifies the warranty as a strict condition and makes payment conditional upon it, the warranty operates as a sine qua non of the payment obligation.

Summary dismissal may be justified where an employee’s conduct seriously undermines the trust and confidence inherent in the employment relationship. Misuse of company resources and dishonest expense claims may amount to repudiatory breaches. In assessing expense misconduct, the court should consider both dishonesty and whether the conduct forms a pattern. Directors are expected to set, rather than fall below, the standards required of other employees.

Mr Sean Collidge, the former chief executive of Freeport plc, claimed payments due under a termination agreement dated 31 March 2006. Freeport defended the claim on the basis that clause 7(b) was a strict condition of its obligation to pay and that the warranty was untrue.

Freeport alleged that Mr Collidge had used a company driver for private work, misused company property and funds, claimed personal expenses as business expenses, claimed both mileage and petrol costs, and removed equipment from a company site for his hotel. The central questions were the construction and effect of clause 7(b), and whether the conduct would have entitled Freeport to dismiss him summarily.

1. Construction of the termination agreement. The introductory words making payment subject to and conditional upon the agreement, together with the words describing clause 7 as a strict condition, meant that Freeport’s obligation to pay arose only if the facts warranted by clause 7 were true. “Warranty” was used in the sense of a condition forming a prerequisite to liability, rather than in the Sale of Goods Act distinction between conditions and warranties.
2. Summary dismissal. The governing question was whether the conduct so undermined the trust and confidence inherent in the employment relationship that Freeport could no longer be required to retain Mr Collidge. The court accepted the approach stated in Neary v Dean of Westminster [1999] IRLR 228, which had been followed in Briscoe v Lubrizol Ltd [2002] IRLR 607.
3. Mr Collidge had used Mr Bradshaw, a company driver, for substantial private work at the Vallauris villa, the Castle Hotel and Greta Side. He had also removed a large quantity of equipment from Freeport’s West Calder site to his hotel without intending to pay for it. These matters independently constituted repudiatory breaches entitling Freeport to dismiss him summarily.
4. Dishonest claims for personal expenses, including company-card expenditure, could justify summary dismissal. The court should consider the dishonesty involved and whether the conduct was isolated or part of a pattern. Here, the repeated dishonest expense claims amounted to a repudiation of the employment contract. A director was not entitled to greater latitude than a more junior employee and should set the standard for employees.
5. There were numerous circumstances known to Mr Collidge which constituted repudiatory breaches and would have entitled Freeport to terminate his employment without notice. Clause 7(b) therefore prevented payment under the termination agreement. Mr Collidge’s claim was dismissed. The financial consequences were left for further directions, and Freeport’s counterclaim was adjourned for that purpose.

First-instance decision. No prior appellate decision is stated in the judgment.