BGC Capital Markets (Switzerland) LLC v Rees & Ors

Under Swiss law, an employee may terminate an employment contract immediately for good cause only where continuation has become unconscionable in good faith. A contractual salary-reduction power may be exercised if its terms are observed, provided the resulting salary remains appropriate remuneration. That assessment is fact-sensitive and includes the job, customary remuneration, work commitment and relevant personal circumstances.

A post-termination restriction must protect a genuine interest and must not unfairly compromise the employee’s future economic activity. Release-payment damages are unavailable where conventional damages can be assessed and the claimant has suffered no loss. Inducing breach of contract requires an intention to procure the breach, including knowledge that the contract will be broken or wilful blindness.

BGC employed Mr Rees under a Swiss-law contract for work on its Swiss forward desk. After BGC reduced his salary, Mr Rees purported to terminate the contract immediately and joined Tullett’s forward cable desk.

BGC claimed damages against Mr Rees for wrongful termination, repayment of a forgivable loan, breach of restrictive covenants and misuse of confidential information. It also claimed against Tullett for inducing termination and breach of covenant. Mr Rees counterclaimed for constructive dismissal. The central issues were whether the salary reduction gave rise to good cause under Swiss law, whether the restrictions were enforceable, whether damages were recoverable, and whether Tullett had the necessary intention to induce a breach.

1. Termination. Mr Rees had not established good cause under Article 337 of the Swiss Code of Obligations. BGC had operated the contractual salary-reduction clause in accordance with its terms. It had considered market conditions, relevant responsibilities and other relevant factors, and had acted in good faith.
2. The reduced salary of CHF170,000 constituted appropriate remuneration under Article 349a.2, applied by analogy. The assessment was case-specific. Relevant considerations included the nature of the job, customary remuneration in the trade, the employee’s work commitment, age, seniority, training and social commitments. The salary was not rendered inappropriate by Mr Rees’s personal financial difficulties or by the absence of a UBS line.
3. Loan. Because Mr Rees had wrongly terminated the contract, the forgivable loan became immediately repayable under clause 3(d). BGC was entitled to recover the full net amount of £144,525.
4. Damages. BGC failed to establish loss of profit. The probable counterfactual was that Mr Rees would have entered a new London contract, worked for six months and then left, with the loan forgiven. The evidence did not establish any net loss. Release-payment or Wrotham Park damages were unavailable under either Swiss or English law where the claimant had suffered no loss and conventional damages could be assessed.
5. Restrictions and confidence. Working on Tullett’s forward cable desk did not compete materially with BGC’s Swiss forward desk. The non-deal covenant was valid and was breached by six Swiss-franc trades with former clients, but no damage was proved. The other covenant claims and the confidential-information claim failed.
6. Inducement. Applying OBG Ltd v Allan [2008] AC 1, Tullett lacked the necessary intention to procure a breach. It reasonably required evidence that Mr Rees was free from his contract. All claims against Tullett therefore failed.