Tullett Prebon Plc & Ors v BGC Brokers LP & Ors

Whether conduct amounts to a repudiatory breach of the implied obligation of trust and confidence is a highly context-specific question, assessed objectively in all the circumstances. The contract-breaker’s motive may be relevant where it was known, or would have been apparent, to a reasonable person in the innocent party’s position and illuminates the apparent intention towards contractual performance.

An agreement to commence employment in the future may carry obligations of trust and confidence before work begins. Their content depends on the contractual context and may be attenuated by an existing employment relationship. Conduct before performance which repudiates those obligations may release the prospective employee from the agreement upon acceptance of the repudiation.

The respondents operated an inter-dealer brokerage business. A competing brokerage and its senior officers implemented a coordinated plan to recruit teams of the respondents’ brokers through forward contracts, signing payments and indemnities. Several brokers subsequently left their existing employment claiming constructive dismissal, while three recruits terminated their forward contracts and remained with the respondents.

Jack J, in [2010] EWHC 484 (QB), rejected the constructive dismissal claims and found an unlawful means conspiracy involving inducement of contractual breaches. He also dismissed the competitor’s Part 20 claim concerning the three recruits because its own conduct entitled them to terminate their forward contracts.

The appeal concerned whether the respondents had repudiated the existing employment contracts and whether obligations of trust and confidence operated under the forward contracts before employment commenced.

1. Appeal dismissed. Maurice Kay LJ, with whom Hooper and Tomlinson LJJ agreed, held that the judge had correctly rejected the brokers’ constructive dismissal claims. Whether an employer has repudiated the implied obligation of trust and confidence is a question of fact requiring an objective assessment of all the circumstances. The relevant question was whether the employer had clearly demonstrated an intention to abandon or refuse contractual performance.

2. The judge was entitled to consider the employer’s objectively apparent intention. Motive is not relevant merely as evidence of subjective intention, but it may illuminate how a reasonable person in the employee’s position would understand the alleged repudiatory conduct. The respondents’ attempts to retain their brokers, notwithstanding criticism of how they acted, manifested an intention to preserve and strengthen the employment relationships rather than abandon them.

3. Obligations of trust and confidence could arise under the forward contracts before the brokers commenced work. A contract requiring future employment may itself be a contract of employment, and the detailed terms in issue closely resembled employment contracts. The concurrent existence of duties towards a present and prospective employer created no legal inconsistency. The content of each obligation depended on its context and could be attenuated to reflect the continuing employment relationship.

4. The competitor’s illegal and dishonest conduct, directed towards securing a concerted early departure regardless of whether lawful grounds existed, was objectively communicated to the three recruits. It amounted to an anticipatory and repudiatory breach of their forward contracts. They validly accepted that repudiation and were released from their future obligations. Consequently, the respondents induced them to do only what they were contractually entitled to do, and the Part 20 claim failed without consideration of the alternative defences of justification and absence of loss.

5. Hooper LJ added, without deciding the issue, that the cumulative effect of certain forward-contract terms could be incompatible with an employee’s duties to the existing employer. The features causing concern included an obligation to commence work at the earliest lawful time, an indemnity against claims by the existing employer, substantial financial incentives and substantial liquidated damages for failing to resign.

6. The renewed applications for permission to challenge the injunctions were refused.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously and the renewed applications for permission to appeal were refused: [2011] EWCA Civ 131.

2. High Court of Justice, Queen’s Bench Division: Jack J rejected the brokers’ constructive dismissal claims, found an unlawful means conspiracy, dismissed the competitor’s Part 20 claim and granted final injunctive relief. The damages claim was adjourned: [2010] EWHC 484 (QB).