Cook v MSHK Ltd & Ors

An employer that knows of an employee’s repudiatory breach may affirm the employment contract by conduct inconsistent with treating it as ended. Repeatedly insisting that the employee remains bound by the contract, requiring work through notice, and discussing a continuing role, without reserving rights, can amount to affirmation. The employer cannot later revive those known breaches by describing a later incident as a “last straw”. Knowledge of a failure to disclose a settled intention to compete is sufficient for affirmation even if the precise date on which the intention formed remains unknown. On a summary-judgment application, an issue should proceed to trial where the claim has a real, not fanciful, prospect of success. Unresolved factual disputes should not be tried summarily.

MSHK Limited and Ministry of Sound Recordings Limited sued their former senior A&R executive, Ben Cook, seeking a declaration that his summary dismissal was lawful, damages and equitable compensation. Cook applied for summary judgment under CPR Part 24.

Burton J held that four alleged breaches could not justify dismissal because the employers had affirmed the contract, but left other allegations and the damages claim for trial: [2008] EWHC 1949 (QB). Cook appealed. The respondents sought permission to cross-appeal on affirmation and costs. The central issues were whether the employers had affirmed the contract in respect of the remaining allegations, whether a later disciplinary allegation could operate as a last straw, and whether the disputed claims had a real prospect of success.

1. Respondents’ cross-appeal. Rimer LJ, with whom Wilson LJ and Smith LJ agreed, refused permission to cross-appeal. The employers knew by 22 May 2007 of the conduct relied on in paragraphs 32.2 to 32.5. They then repeatedly treated the employment contract as continuing, expected Cook to work through his notice period, sought his return to work and discussed his continuing role. They gave no reservation of rights in respect of those breaches. That conduct affirmed the contract and prevented reliance on those known breaches to justify summary dismissal.
2. Last straw. Even assuming that an employer could invoke the last-straw principle, a later breach could not retrospectively revive earlier breaches that had already been affirmed. The disciplinary allegation was not the reason for dismissal and could not be converted into an artificial last straw. Each successive breach does not automatically undo a prior election. The court explained the principle by reference to Omilaju v Waltham Forest London Borough Council [2005] ICR 481.
3. Settled intention to compete. Assuming, without deciding, that Cook owed a duty to disclose a settled intention to compete, the employers knew by 22 May that an intention had already been formed and had not been disclosed. The unknown date on which the intention was formed was potentially relevant to damages, but not to affirmation. The appeal was therefore allowed in respect of paragraph 32.1.
4. Disciplinary allegation. The existing pleading alleged that Cook had falsely advanced his own account. It did not necessarily allege that he accused Presencer of lying. A conflict between two recollections does not automatically involve such an accusation. The wider allegation could nevertheless proceed after amendment, since it caused no real surprise and the trial was not imminent. The court expressed no final view on affirmation or waiver in relation to that later allegation.
5. Loan allegation and procedure. It remained plainly arguable that accepting the £100,000 loan after resignation breached the implied term of trust and confidence. The employers had expressly reserved their position, and Cook’s return to work did not necessarily amount to affirmation. The issue was therefore properly left for trial under CPR Part 24. The damages claim was not struck out, and the costs order disclosed no error of principle.

• Court of Appeal (Civil Division): The appeal was allowed in relation to paragraph 32.1, otherwise dismissed, and permission to cross-appeal was refused: [2009] EWCA Civ 624.
• High Court of Justice, Queen’s Bench Division: Burton J allowed summary judgment in part, holding that paragraphs 32.2 to 32.5 could not justify dismissal, while leaving the remaining allegations and damages claim for trial: [2008] EWHC 1949 (QB).