Geys v Societe Generale, London Branch

A repudiatory breach of an employment contract does not automatically terminate the contract. The innocent party must clearly and unequivocally elect to accept the breach. A contractual right to terminate immediately by payment in lieu of notice requires both payment and clear notice that the right is being exercised, unless the contract clearly provides otherwise.

Contractual provisions are construed as a whole. Apparently inconsistent terms should be reconciled where possible. A contractual formula based on historic calculation methods permits an adjustment only where a systematic method or assumption existed and was used in the specified historic calculation. A termination payment condition requiring waiver of claims operates prospectively and does not forfeit accrued contractual or damages claims pursued before the termination agreement.

The claimant was employed by the defendant bank under a contract incorporating an employment handbook. The bank told him on 29 November 2007 that his employment ended immediately, excluded him from the workplace and later paid money into his bank account. It did not clearly state until 4 January 2008 that the payment was intended to exercise a contractual right to terminate by payment in lieu of notice.

The court considered the termination date, the permissibility of negative sales credits in calculating contractual remuneration, the scope of a tax-efficiency obligation, and whether pursuing contractual claims deprived the claimant of termination payments. Quantum and certain related issues were reserved.

1. Termination. The bank’s conduct on 29 November 2007 was a repudiatory breach, but it also gave notice which would terminate the contract after three months. The breach did not automatically terminate the employment. The claimant’s silence, absence from work and correspondence reserving his rights did not amount to a clear and unequivocal election to accept the repudiation.
2. The handbook gave the bank a right to terminate immediately by making a payment in lieu of notice. The contract and handbook could be read together, so there was no conflict. However, effective exercise required both payment of the contractual sum and clear notice that the bank was exercising the right. The contract therefore terminated on 6 January 2008, when notice of the payment’s purpose was deemed received.
3. Negative sales credits. The contractual reference to calculation methods and assumptions required criteria capable of systematic, reasonably certain and predictable application. The relevant method or assumption had to exist when, and be used to calculate, the Division’s 2004 sales credit. The bank failed to establish such a method capable of justifying the Client A and Client B deductions. Those deductions were therefore unsupported by the contractual formula.
4. Tax efficiency. The obligation applied to the accelerated payment representing deferred FISS awards, but not to the replacement bonus arrangement. The compensation payment was to be calculated by reference to actual awards and could not be grossed up by reference to hypothetical tax-efficient awards. The obligation was continuing, but its detailed application was left for the further trial.
5. Condition precedent. The obligation in Schedule 1 paragraph 7(e)(i) was prospective. It applied to proceedings issued or pursued after the termination agreement, not claims already brought. The claimant therefore did not forfeit termination payments by pursuing contractual or damages claims. The court rejected the related failure-of-consideration argument.