Inspired Education Online Limited v Tom Crombie

Gross misconduct requires conduct sufficiently serious to justify summary dismissal and to undermine the employment relationship. Repeated breaches of workplace policy do not automatically meet that threshold. The court must assess the conduct objectively, in its contractual and factual context, including its seriousness, consequences, the employee’s position and the nature of the business.

A warranty of compliance with all applicable laws may include directors’ statutory duties, but does not ordinarily include breaches of internal policies. A contractual mechanism deeming accounts agreed on failure to respond is not engaged where the contract requires only any written notification and the party has made a timely written objection identifying the disputed adjustments.

The claimant acquired the defendant’s online-school business under a share purchase agreement. It alleged that offensive and inappropriate private emails sent by the defendant to a senior colleague amounted to gross misconduct, breached warranties concerning legal compliance and employment disputes, and constituted fraudulent misrepresentations.

The claimant also alleged that the defendant breached non-compete provisions by encouraging a departing employee to establish a rival online school. Further disputes concerned the calculation of completion accounts and deferred cash consideration, including whether a notice of a contractual event of default was valid and whether the relevant sums had been deemed agreed.

1. Gross misconduct. Gross misconduct is conduct sufficiently serious to justify summary dismissal and amount to a repudiatory breach of the employment contract. The assessment is objective and requires consideration of the nature of the contract and employment relationship, the employee’s position, the nature and degree of the breach, its consequences and the surrounding context.
2. The ten emails were unprofessional and breached company policies. Some contained racist, obscene, sexist or drug-related language. They were private exchanges between close friends, intended as banter, and did not evidence drug use, excessive alcohol consumption, discriminatory conduct or harmful conduct towards pupils. Viewed separately or cumulatively, they were not sufficiently grave and weighty to justify dismissal. There was therefore no gross misconduct.
3. Warranty 8.2 covered directors’ duties under sections 172 and 174 of the Companies Act 2006, because those duties were applicable laws governing directors acting in the course of their duties. It did not cover internal company policies unless the same conduct also breached applicable law. The private emails did not involve the exercise of a director’s functions or the making of business decisions, and did not breach those statutory duties.
4. Warranty 16.15 concerned disputes, claims or litigation, not mere allegations, internal investigations or suspensions. The defendant had no reason to know that the emails were likely to give rise to legal proceedings. The warranty was not breached.
5. The fraudulent-misrepresentation claim failed. The alleged fraud had not been squarely put to the defendant in cross-examination, and there was no sufficient evidence that he knew a warranty was false or was reckless as to its truth.
6. The non-compete provisions were not breached. Discussing possible future collaboration and offering general support to a departing employee did not make the defendant directly or indirectly concerned in, or financially interested in, a rival business. There was no proof that he solicited or endeavoured to solicit restricted persons, or intentionally or recklessly damaged goodwill.
7. The completion accounts were not deemed agreed. The defendant’s timely email was a written notification identifying the disputed adjustments. Schedule 7 did not require a formal notice under clause 27.1 or amended draft documents as a condition of avoiding the deeming provision.
8. The court also held, in the alternative, that the June 2023 notification concerning deferred cash consideration was sufficient written notification to prevent deemed agreement. No term requiring an automatic stay of the contractual process pending litigation was implied, and the claimant had not acted in bad faith.
9. The claimant’s claims were dismissed. The defendant was granted declarations that the completion accounts and purchase price statement were not deemed agreed and that his objections were to be resolved under Schedule 7.