Huntington v Imagine Group Holdings Ltd & Anor

In an employment contract, a material unilateral reduction or retrospective cancellation of agreed remuneration may be repudiatory. A contractual power to cancel an incentive plan permits prospective cancellation only where accrued or allocated payments are protected. The court construes the employer’s communication as a whole and in context. An offer of a replacement package does not itself cure a repudiatory breach. Where wording is ambiguous, evidence of the parties’ negotiations and intentions may resolve its meaning. An employee’s decision to await details of a replacement plan does not itself waive an accrued remuneration right. The question remains whether the employer’s conduct, viewed in its full context, evinced an intention no longer to be bound.

The appellant, a joint chief executive, claimed damages after purporting to accept the respondents’ repudiation of his employment contract. The contract entitled him to participate in a long-term incentive plan. The parties discussed replacing that plan from 1 January 2005. A note prepared by the appellant recorded the proposed elimination, a future replacement plan and an agreement that employees’ contractual rights would not be prejudiced or waived while they considered the replacement.

On a preliminary issue, the Commercial Court held that the respondents had not repudiated the contract in relation to the incentive-plan rights. The appeal concerned whether the respondents’ assent to the note evinced an intention retrospectively to remove accrued rights, and whether the surrounding context showed otherwise.

The appeal was dismissed unanimously. Lord Justice Dyson gave the leading judgment, with Lord Justices Thomas and Hooper agreeing.

1. The LTIP clause protected payments allocated or accrued at the date of cancellation. It gave Imagine power to cancel prospectively, but not to remove accrued remuneration retrospectively. A substantial unilateral alteration of agreed remuneration is, in principle, repudiatory, consistently with the approach in Cantor Fitzgerald International v Callaghan [1999] IRLR 234 and Rigby v Ferodo Ltd [1987] IRLR 516.
2. Repudiation depends on conduct evincing an intention no longer to be bound, assessed by the totality of the conduct. An offer of a replacement package does not itself prevent an otherwise repudiatory unilateral reduction. It may give the employee an opportunity to waive the breach or affirm the contract. The relevant communication must nevertheless be read as a whole and in its contextual setting.
3. Read in isolation, the 6 May note indicated retrospective elimination of the LTIP and would have amounted to repudiation. Its final sentence was ambiguous. The court could consider the parties’ negotiations and evidence of intended meaning. That material showed that neither side intended accrued LTIP rights to be removed. Temporary inaction while awaiting details of the replacement plan did not waive an accrued right. In its actual context, the note did not evince an intention to repudiate the contract.

The appellant therefore failed to establish repudiatory conduct. The order was that the appeal be dismissed.

1. Court of Appeal (Civil Division) — In [2008] EWCA Civ 159, the court unanimously dismissed the appeal.
2. Queen’s Bench Division, Commercial Court — Mr Justice Christopher Clarke determined the preliminary issue and held that the respondents had not repudiated the contract in relation to the appellant’s LTIP rights.