Gallagher Benefit Services Management Company Ltd v Peter Meagher

Where an employee is contractually required to report threats to the employer’s business, failure to disclose a major client’s termination notice can breach express reporting and promotion duties, even if the employee hopes to retain the client. Employment by a parent company does not, by itself, make an employee a fiduciary; fiduciary obligations depend on the contract and the employee’s autonomy and powers. In arm’s-length earn-out negotiations, using historic revenue as a settlement basis does not, without clear words or context, represent that future revenue will be maintained. Contract damages remain compensatory: causation, remoteness, mitigation and net loss must be established. A breach may therefore produce no damages where the counterfactual shows that the claimant would have paid more absent the breach. A deed settling deferred consideration may bar known claims under the relevant earn-out provisions without releasing every SPA claim.

Gallagher Benefit Services Management Company Ltd v Peter Meagher arose after Gallagher acquired Churchills from Peter Meagher and agreed an earn-out linked to future revenue. During negotiations for an early lump-sum settlement, Meagher failed to disclose that Churchills’ largest client, Globalization Partnerships, had given notice to terminate its retainer. Gallagher claimed for breach of employment duties, fiduciary duty, fraudulent misrepresentation and breach of warranty. Meagher denied liability and counterclaimed for alleged breaches of the earn-out management obligations. The court had to determine the contractual and fiduciary duties owed, whether the negotiating communications were fraudulent misrepresentations, the proper counterfactual and measure of loss, and whether the deed of variation barred the counterclaim.

The claim and counterclaim were dismissed.

1. Contractual duties. Meagher breached employment contract clauses 3.3.1, 3.3.8 and 3.3.9 by failing, after 20 January 2023, to report the client’s termination notice and the resulting threat to future revenue. His earlier efforts to secure a further period of revenue were not a breach. No breach of clause 1.7 was found, and the pleaded implied terms added nothing. Clause 9.1.5 of the employment settlement agreement was also breached by the same non-disclosure.
2. Fiduciary duty. Employment alone does not create fiduciary duties. The court followed the approach in Nottingham University v Fishel [2000] IRLR 471 and Ranson v Customer Systems plc [2012] EWCA Civ 841. Such duties depend on specific contractual obligations and substantial autonomy or decision-making power. Meagher was not a director of Gallagher and had no substantial power over it. The fiduciary claim therefore failed.
3. Fraudulent misrepresentation. Applying Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 and the guidance in Credit Suisse Life (Bermuda) Ltd v Bidzina Ivanishvili and Others [2025] UKPC, the court found no actionable representation. The communications were arm’s-length negotiations based on the known year-one revenue figure. They did not represent that years two and three would produce equivalent revenue, or that no client presented a material risk. There was no sufficient proof of falsity, intention or reliance.
4. Loss. Contract damages are compensatory. The court applied the net-loss rule in Stanford International v HSBC [2022] UKSC 34. The employment contract, SPA and settlement arrangements were linked for remoteness purposes, but Gallagher had to prove causation and a net loss. Had Meagher been told of the notice, he would have rejected a substantially lower offer, continued in the business and achieved the full earn-out. Gallagher was therefore financially better off as a result of the settlement. The alternative unpleaded loss case was also rejected.
5. Mitigation. The court did not need to decide mitigation. Had it done so, it would have found that Gallagher’s efforts to retain the client were unreasonable and that there was a 40 per cent chance of securing further revenue.
6. Counterclaim. The deed of variation’s full and final settlement of deferred consideration covered known or arguable breaches of the relevant Schedule 9 provisions before signature, but did not release every SPA claim. Meagher could not sue on his wife’s behalf because she was not a party to the proceedings. The counterclaim was consequently barred.

not stated in the judgment.