Towry EJ Ltd v Bennett & Ors

An employer’s commercial reorganisation following an acquisition does not, without more, amount to a repudiatory breach of the implied term of mutual trust and confidence. The term cannot generally contradict an express contractual power or regulate the circumstances of dismissal. A non-solicitation covenant prohibits requesting, persuading or encouraging clients to transfer their business; it does not prevent a former employee from responding to a client who independently decides to move. Initial contact is relevant but not determinative. Solicitation requires a material element of persuasion, assessed on all the facts. Client identities and investment information may remain confidential even if remembered, but performance summaries containing no client-identifying information were not confidential information on the evidence.

Towry acquired Edward Jones’s UK business after it had incurred substantial losses. It proposed closing local offices, changing advisers from autonomous commission-based financial advisers to salaried wealth advisers, promoting its discretionary investment service and imposing new post-termination restrictions. The individual defendants declined the new contracts, resigned or were dismissed on notice, and later joined Raymond James.

Towry alleged repudiatory breach by Towry, wrongful dismissal, breach of restrictive covenants, misuse of confidential information, conspiracy and inducement of breach. A large number of former clients transferred investments to Raymond James. The central questions were whether Towry had repudiated the employment contracts and whether the defendants or Raymond James had unlawfully procured or effected those transfers.

1. Repudiatory breach. Applying the objective test in Malik v BCCI [1997] ICR 606 and Tullett Prebon v BGC Brokers [2011] IRLR 420, Towry had not clearly shown an intention to abandon the employment contracts. The difficult commercial context, insensitive presentations and failures in communication did not, individually or cumulatively, establish repudiation.
2. The implied term could not be used to contradict express contractual powers concerning the place of work or assigned duties. Under clause 3.7 Towry could determine the place of business, and under clauses 2, 3.1.1 and 21.1 it could alter the duties to be performed. Closure of local offices and removal of advisory stockbroking were therefore not repudiatory breaches. The proposed remuneration package, targets and emphasis on the IIM were also not shown to be objectively repudiatory.
3. The proposed non-dealing covenant was materially more restrictive than the existing non-solicitation covenant. Nevertheless, inviting the defendants to accept Towry’s standard terms, including that covenant, was not so unreasonable as to amount to repudiation. Termination on notice and garden leave were authorised by express contractual provisions and did not constitute wrongful dismissal.
4. Solicitation. A non-solicitation covenant prevents a former employee from requesting, persuading or encouraging a client to transfer business. A client’s initiation of contact is relevant but not conclusive. The court must examine all the circumstances, including the purpose and content of the communication. On the evidence, the clients had independently decided to retain their advisers or leave Towry before the defendants explained the Raymond James service and completed transfer documentation. No defendant had solicited a client.
5. Confidential information. Customer identities, contact details, investment requirements, strategies, objectives and investment holdings were confidential information. The defendants had not, however, used or disclosed such information improperly. FA Performance Summaries contained no client-identifying information and were not confidential information in the circumstances.
6. There was no breach of contract or confidence by the individual defendants. Consequently, the claims for inducing breach, unlawful-means conspiracy and breach of confidence against Raymond James also failed. The claim was dismissed.