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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> ICAP Management Services Ltd v Berry & Anor [2017] EWHC 1321 (QB) (06 June 2017) URL: https://www.bailii.org/ew/cases/EWHC/QB/2017/1321.html Cite as: [2017] EWHC 1321 (QB), [2017] IRLR 811, [2017] 3 Costs LR 531 |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
ICAP MANAGEMENT SERVICES LIMITED |
Claimant |
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| - and - |
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DEAN BERRY-and- BGC SERVICES (HOLDINGS) LLP |
First Defendant Second Defendant |
____________________
Matthew Sheridan & Alexander Robson (instructed by Doyle Clayton) for the First Defendant
Paul Goulding QC & Diya Sen Gupta & Kerenza Davis (instructed by BGC Legal) for the Second Defendant
Hearing dates: 28th April 2017 & 2nd, 3rd, 4th May 2017
____________________
VERSION
OF JUDGMENT
Crown Copyright ©
Mr Justice Garnham:
Introduction
Berry,
the first defendant in these proceedings, was employed by
ICAP
Management Services Ltd, the claimant, as Chief Executive Officer of a division of the group of the Claimant group of companies called "Global e-Commerce", pursuant to a contract of employment dated 10 May 2013.
ICAP
Management Services Ltd (or "IMSL") was a service company providing services to companies in the
ICAP
Global Broking Business (or "IGBB").
Berry
could be terminated by either party on twelve months' prior written notice. The contract also entitled IMSL to place Mr
Berry
on what is called "garden leave", during which period he would not be required to perform any of his duties but would continue to be paid his salary (although not a bonus). The contract included post-termination restraints on competition, dealing with clients and poaching other staff.
Berry
gave written notice to the claimant terminating his employment on 21 July 2017. Three days later, BGC Services (Holdings) Limited ("BGC") a global brokerage company and a competitor of IGBB and the claimant, issued a public announcement indicating that the first defendant would be joining the company as an executive managing director in its global electronic and hybrid execution team, subject to his outstanding legal obligations.
ICAP
Holdings Limited, the shares of that company were owned by
ICAP
Global Broking Holdings Limited ("IGBHL") and the shares of that company were owned by
ICAP
plc. On that date
ICAP
plc sold the shares in IGBHL to a company called Tullett Prebon plc. On the completion of that sale Tullett Prebon plc was renamed, TP
ICAP
plc.
ICAP
group, and should not make use of any confidential information belonging to the
ICAP
group. She also ordered that until 5 May 2017 the second defendant should not induce or procure the first defendant to work for BGC.
Case Management
very
helpful.
vast
bulk of such pre-reading time as was allowed had to be devoted to reading them, rather than underlying documents. In fact, in this case, the length and complexity of the written argument served to obfuscate the real issues in the case. In truth, these were not skeleton arguments at all; the arguments contained in these documents were fully fleshed out and dressed in much unnecessary finery.
view.
volume
of documentation. The primary bundles for use in court ran to 13
volumes.
I also received a further 44 lever arch files of allegedly confidential documentation. Of the 14,000 pages of documentation in the confidential files, I was referred at the hearing to less than 100. I was also provided with six
volumes
of authorities.
volume
of material in a four day case is absurd. It too is contrary to the overriding objective. It betrays a failure by those acting for all the parties to adopt a sensible and constructive approach to preparation. My current
view,
again subject to submissions at the handing down of this judgment, is that a substantial part of the costs of producing or agreeing this
vast
quantity of material should also be disallowed.
view
that I might be assisted in understanding how the
various
businesses operated in practice by
visiting
their premises. As a result, and with the agreement of all parties, I was shown around the trading floors of
ICAP
and Tullett Prebon by
ICAP's
in-house solicitor before court on the last day of the hearing. I was accompanied by junior counsel for all three parties. The
visit
lasted in total some 30 minutes. I express my thanks to all concerned.
various
iterations of the parties' cases. But I make it clear, at the start of this judgment, that I do not intend to address each of the numerous arguments set out in the skeleton arguments, summary cases and closing submissions. Were I to do so, this judgment would run for hundreds of pages and would not be delivered until after that period for which the permanent injunctions are sought, thus rendering the exercise pointless, at least for the purposes of this action. I propose to do no more than is strictly necessary to decide the case.
The Oral Evidence
Vogels,
now the Chief Executive Officer ("CEO") of Global Broking for Europe, Middle East and Africa for the TP
ICAP
group and CEO for
ICAP
Global Broking EMEA, and from Donald McClumpha CEO of Global Broking for TP
ICAP
and the Chief Executive for "iSwap", and electronic trading platform for interest rate derivatives, both of whom were called by the claimant.
view
that, save in one respect, all four were honest and reliable witnesses who were doing their best to assist me.
ARD and TUPE
"3. A relevant transfer
(1) These Regulations apply to—
(a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity;
…
(2) In this regulation "economic entity" means an organised
grouping of resources which has the objective of pursuing an
economic activity, whether or not that activity is central or
ancillary.
…
(4) Subject to paragraph (1), these Regulations apply to—
(a) public and private undertakings engaged in economic activities whether or not they are operating for gain;
(b) a transfer or service provision change howsoever effected notwithstanding—
(i) that the transfer of an undertaking, business or part of an undertaking or business is governed or effected by the law of a country or territory outside the United Kingdom or that the service provision change is governed or effected by the law of a country or territory outside Great Britain;
(ii) that the employment of persons employed in the undertaking, business or part transferred or, in the case of a service provision change, persons employed in the organised grouping of employees, is governed by any such law;
(c) a transfer of an undertaking, business or part of an undertaking or business … where persons employed in the undertaking, business or part transferred ordinarily work outside the United Kingdom.
…
(6) A relevant transfer—
(a) may be effected by a series of two or more transactions; and
(b) may take place whether or not any property is transferred to the transferee by the transferor.
…
4. Effect of relevant transfer on contracts of employment
(1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.
(2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer—
(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred byvirtue
of this regulation to the transferee; and
(b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee.
…
(7) Paragraphs (1) and (2) shall not operate to transfer the contract of employment and the rights, powers, duties and liabilities under or in connection with it of an employee who informs the transferor or the transferee that he objects to becoming employed by the transferee.
(8) Subject to paragraphs (9) and (11), where an employee so objects, the relevant transfer shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor.
(9) Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer."
"Article 1
1. (a) This Directive shall apply to any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger.
(b) Subject to subparagraph (a) and the following provisions of this Article, there is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.
(c) This Directive shall apply to public and private undertakings engaged in economic activities whether or not they are operating for gain. An administrative reorganisation of public administrative authorities, or the transfer of administrative functions between public administrative authorities, is not a transfer within the meaning of this Directive.
2. This Directive shall apply where and in so far as the undertaking, business or part of the undertaking or business to be transferred is situated within the territorial scope of the Treaty…
Article 2
1. For the purposes of this Directive:
(a) "transferor" shall mean any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), ceases to be the employer in respect of the undertaking, business or part of the undertaking or business;
(b) "transferee" shall mean any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), becomes the employer in respect of the undertaking, business or part of the undertaking or business;…
(d) "employee" shall mean any person who, in the Member State concerned, is protected as an employee under national employment law.
2. This Directive shall be without prejudice to national law as regards the definition of contract of employment or employment relationship.
Safeguarding of employees' rights
Article 3
1. The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.
Member States may provide that, after the date of transfer, the transferor and the transferee shall be jointly and severally liable in respect of obligations which arose before the date of transfer from a contract of employment or an employment relationship existing on the date of the transfer.
2. Member States may adopt appropriate measures to ensure that the transferor notifies the transferee of all the rights and obligations which will be transferred to the transferee under this Article, so far as those rights and obligations are or ought to have been known to the transferor at the time of the transfer. A failure by the transferor to notify the transferee of any such right or obligation shall not affect the transfer of that right or obligation and the rights of any employees against the transferee and/or transferor in respect of that right or obligation.
3. Following the transfer, the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement."
The Employment Contract
Berry
was employed by IMSL pursuant to a service agreement dated 10 May 2013. That service agreement incorporated Part 1 of
ICAP's
employment handbook. He was employed as CEO of Global e-Commerce for the IGBB.
"During his employment hereunder the employee agrees to serve the company and its group of companies as CEO Global e-Commerce subject to the provisions of this agreement in Part 1(the staff handbook)"
"3.1 The Employment of Employee hereunder shall…..commence on 1 September 2013 (the commencement date)……"
3.2 The Employment of the Employee may be terminated by either party giving to the other not less than twelve months' prior notice"
Berry
was entitled to a salary of £250,000 (which was subsequently increased) and a bonus.
The History
ICAP
plc entered into a Share Purchase Agreement with Tullett Prebon plc by which it was agreed that
ICAP
plc would separate the commercial organisation of the IGBB so that it was capable of operating on a standalone basis. It was also agreed that
ICAP
plc would restructure the IGBB so that the companies by which it operated became subsidiaries of IGBHL. On that basis Tullett Prebon plc agreed to purchase a majority of the shares in IGBHL.
view,
his employment would terminate pursuant to reg.4(8) TUPE when the transfer occurred.
ICAP
plc completed the sale of the IGBB. Tullett Prebon was renamed TP
ICAP
plc.
Discussion
Issue 1 - TUPE
v
Care Services [1995] ICR 260, Mr Goulding contends that TUPE is to be interpreted in conformity with the Directive, and construed purposively, flexibly and focusing on substance not form. He says the situation should be
viewed
from an employment perspective and not one conditioned by principles of property, company or insolvency law. I agree and adopt that approach hereafter.
ICAP
plc pursuant to TUPE when, following the acquisition of the IGBB, TP
ICAP
plc assumed control of the activities of that undertaking. The first defendant puts his case on what amounted to the "undertaking" in three different ways. It was either the claimant or the IGBB, or the Global e-Commerce division of the IGBB. He says he was entitled to object to the transfer of his employment under TUPE. The consequence is that his employment ended on 7 February 2017 and the claimant was not (and is not) entitled to enforce garden leave thereafter since the contract of employment has terminated.
ICAP
and/or the IGBB subsidiaries, to TP
ICAP
plc, alongside the share transfer. They say that the first defendant objected to the transfer, as a result of which the transfer terminated his contract of employment with the claimant with effect from either the 30 December 2016 or 7 February 2017.
(i) Was IMSL or the business of IMSL an "economic entity" within the meaning of reg.3(2) ?
v
R Brewer Contracts Ltd [2001] IRLR 144 on the identification of an "economic entity" under the Regulations. At paragraph 10, Lindsay J said:
"(i) As to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective — Sanchez Hidalgo paragraph 25; Allen paragraph 24 andVidal
para 6 (which, confusingly, places the reference to "an economic activity" a little differently). It has been held that the reference to "one specific works contract" is to be restricted to a contract for building works — see Argyll Training infra EAT at paras 14–19.
(ii) In order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible —Vidal
paragraph 27; Sanchez Hidalgo paragraph 26.
(iii) In certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower — Sanchez Hidalgo paragraph 26.
(iv) An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity —Vidal
paragraph 27; Sanchez Hidalgo paragraph 26.
(v)
An activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it —
Vidal
paragraph 30; Sanchez Hidalgo paragraph 30; Allen paragraph 27."
ICAP
group to the IGBB. It had its own management and administrative structures. It employed human resources staff with the expertise to manage the recruitment and employment of staff. It operated its own payroll services. It is true to say that it was a subsidiary company within a group of companies. But that does not prevent it being an economic entity for the purposes of TUPE.
(ii) Were IGBB and Global e-Commerce "situated immediately before the transfer in the United Kingdom" for the purposes of reg.3(1)(a) TUPE
vast
majority of its employees working in the UK. In my
view
that cannot be right.
(iii) Was there a transfer to another person of an economic entity which retained its identity within the meaning of reg.3(1)(a) ?
ICAP
plc to TP
ICAP
plc. He argues that the company which formally operated the IGBB, namely
ICAP
plc, and its CEO (Mr Spencer) have "left the scene" and its executive management structure for operating IGBB has been closed down. He says that management and those structures have been replaced by the management and structures of TP
ICAP
plc. He says IGBB, Global e-Commerce and IMSL all retain their identities following the transfer.
ICAP
plc. Alternatively it is said that the transferor was IGBHL. Mr Goulding says that as far as IMSL and its business is concerned, the transferor was either
ICAP
plc, as the ultimate owner of IMSL, or IMSL itself. He contends that the transferee was TP
ICAP
plc and he argues that the date of the transfer was the date of the acquisition, namely 30 December 2016, or in the alternative that it had taken place by 7 February 2017, the date on which the first defendant treated his employment as terminated.
i) Of whom was the defendant an employee?ii) Need for a change of employer?
iii) What is the significance of the transfer of share ownership?
iv) What is the test for a transfer or what are the indicia of transfer?
v)
Is that test met here?
Employees of the Transferor
v
Askew [2000] ICR 286 the Court of Appeal had held that the relevant employees had to be employees of the transferor. Peter Gibson LJ said:
"It is not in dispute that an employee relationship is covered as well as a contract of employment but what is in dispute is whether that must be a contractual relationship…. In my judgment it is clear that the Regulations of 1981 proceed on the basis that there must be a contract. One gets that from the application of the ejusdem generis rule to "contract of service or apprenticeship or otherwise" in the definition of "employee", from the definition of "contract of employment" as meaning any agreement between an employee and his employer determining the terms and conditions of his employment, and from regulation 5 (1) which proceeds on the footing that there will be a contract of employment of a person employed by the transferor in the undertaking or part transferred."
v
FNV Bondgenoten [2011] ICR 373, the CJEU was concerned with an employee who was permanently seconded to a group company which company directly assumed responsibility for his employment. The CJEU held that it was possible to regard as "transferor", the group company to which the employees were assigned, notwithstanding that they were not linked to that company by a contract of employment. At paragraph 26 the Court held:
"Directive 2001/23 does not prevent the non-contractual employer, to which employees are assigned on a permanent basis, from being likewise capable of being regarded as a "transferor", within the meaning of Directive 2001/23" (my emphasis).
"The answer to the questions referred must therefore be that, in the event of a transfer, within the meaning of Directive 2001/23 , of an undertaking belonging to a group to an undertaking outside that group, it is also possible to regard as a "transferor", within the meaning of article 2(1)(a) of that Directive, the group company to which the employees were assigned on a permanent basis without however being linked to the latter by a contract of employment, even though there exists within that group an undertaking with which the employees concerned were linked by such a contract of employment" (my emphasis).
ICAP
plc for the purposes of reg.4(1). I am wholly unpersuaded by the defendants' arguments on that issue.
Berry
is employed by IMSL and not any Group Company, and clause 15.1 contains an entire agreement clause.
ICAP
plc under a contract of service between the claimant and the first defendant. He says the contract of service does not have to be between the employee and the transferor; there can be a contract of service between A and B under which B agrees to work for C. But, I have seen no evidence of a contract of service between the claimant and the first defendant pursuant to which the first defendant agreed to work for
ICAP
Plc. In my
view,
Mr Goulding is here advancing an artificial construct.
ICAP
plc "otherwise" than pursuant to a contract of service. Mr Goulding argues that
ICAP
plc was the first defendant's non-contractual employer as that expression was explained in Albron. I have heard or seen no evidence to support a suggestion that the first defendant was permanently assigned by the claimant to work for the parent company
ICAP
plc.
Need for a Change in Employer
V
Besselsen [1990] ICR 396 the CJEU held:
"where, following a legal transfer or merger, there is a change in the legal or natural person who is responsible for carrying on the business and who byvirtue
of that fact incurs the obligations of an employer
vis-à-vis
the employees of the undertaking, regardless of whether or not ownership of the undertaking is transferred" (my emphasis).
v
Martin
Valor
(C-463/09) [2011] 2 CMLR 30 at [30] the Court held:
"that the [ARD] is applicable wherever, in the context of contractual relations, there is a change in the legal or moral person who is responsible for carrying on the undertaking and who incurs the obligations of an employer towards employees of the undertaking"(my emphasis).
v
Borough Care Services [1998] ICR 1198, the applicants were employed by a local authority in care homes for the elderly. The local authority established a company limited by guarantee and transferred the homes, and the applicants' employment, to it. Three years later, an industrial and provident society expressed an interest in taking over the homes, but felt that, in order to put them on a sound financial footing, it would be essential to renegotiate the applicants' terms and conditions of employment. Thereafter the members of the company limited by guarantee resigned and were replaced by the industrial and provident society whose members became the directors of the company. The applicants were then required to accept new, less favourable, terms and conditions of employment.
"The Regulations and the Directive refer quite specifically to the change of employer and to a transferor and transferee being any natural or legal person."
Transfer of Shareholding
"could have addressed, but did not, the circumstances in which there was no transfer from a legal person to another legal person, but the shareholding membership of the legal person changed though its separate legal identity remained untouched."
v
Print Factory (London) 1991 Ltd [2007] ICR 1331. There a parent company sold the business of its subsidiary to a third party by way of a share sale agreement. Prior to the share sale the claimant was employed by the subsidiary. The question before the court was whether there had been a TUPE transfer. Buxton LJ (with whom Wilson and Moses LJJ agreed) said this:
"3 The question under TUPE is whether the business in which the claimant is employed has been transferred from one owner to another. That question is attended by some legal issues. For instance, it is well established, and accepted on all sides in this case, that a change in the legal control of the original corporate employer, such as occurs on a share sale of the kind that took place in this case, does not of itself transfer the business in TUPE terms. That was decided by the EAT in Brookesv
Borough Care Services [1998] ICR 1198, a decision the correctness of which was not in issue before us. It is also well established that the mere fact that two companies are part of the same group, or that one company is the parent of another, does not of itself mean that the one company controls the business of the other. That is inherent in the decision of the Court of Justice in Case C-234/98 [1999] ECR I-8643 (Allen) . However, those rules as to what does not constitute a transfer under the TUPE Regulations are merely reminders that the question is whether as a matter of fact the business in which the claimant is employed has been transferred from one company to another." (Emphasis Added)
v
Smith & Ors, UKEAT/0127/13, a case I return to below.
The Indicia of Transfer
"It is…correct to say that a subsidiary's lack of independence does not demonstrate that the holding company owns the business. But that observation, when adopted as crucial to the decision in this case, does not give weight to the fact that the ET found, drawing on its experience, that the arrangements in the present case were not typical, to the extent that the business was that of McCorquodale. And the same has to be said of the observations that as a matter of law Fencourt was independent from McCorquodale; and that that concludes the matter in the absence of proof that Fencourt's presence was a sham. The legal structure is of course important, but it cannot be conclusive in deciding the issue of whether, within that legal structure, control of the business has been transferred as a matter of fact. That was the conclusion of the ET, and the EAT demonstrated no proper basis for displacing that conclusion" (my emphasis).
"12. The proposition that the transfer of shares in one company to another is not the same as the transfer of the business of the one to the other gives rise to the difficulty apparent in the instant case. Where, following a transfer of shares, a subsidiary is 100% owned by a parent, how can one tell whether the business has been transferred to the parent for the purposes of the TUPE Regulations? It is that, sometimes difficult, question of fact which must be resolved deploying the experience and expertise of the employment tribunal.
13. The mere fact of control, which will follow from the relationship between parent and subsidiary, will not be sufficient to establish the transfer of the business from subsidiary to parent. There will often be little to distinguish between the case of transfer of control on acquisition by a new parent and transfer of the business to a new parent. Faced with such difficulties, the employment tribunal, is not entitled to indulge in the industrial equivalent of a Gallic shrug.
14. In the instant case the employment tribunal identified a number of evidential indications, which, in combination, established that control of the business, in the sense of how its day-to-day activities were run, had passed from Fencourt to McCorquodale" (my emphasis).
"30. That the Tribunal understood the task required of them and applied the test correctly is in ourview
clear from their findings of fact and reasoned conclusions. On 1 October 2010 and upon the share purchase by ML, MG announced that it had acquired JL and that it was embarking on a process of integration. A team of integration managers and staff arrived on site that same day. The Tribunal were in our
view
entitled to take into account what happened after 1 October, having regard to that clear statement of intent and the arrival of the integration team on 1 October."
v
Besselsen and CLECE SA
v
Martin
Valor,
cited above and from the Court of Appeal's decision in Millam is that the critical elements of the test are whether the new party (i) has become responsible for carrying on the business, (ii) has incurred the obligations of employer and (iii) has taken over day to day running of the business. It seems to me that those elements of the test can be captured in more colloquial terms – "Has the new party stepped into the shoes of the employer?"
The Application of the Test to the Facts of this Case
ICAP
plc, took control of the business in which Mr
Berry
worked and as a result became a new employer for TUPE purposes. It is impossible for the defendants to suggest that their acquisition of a controlling percentage of the shareholding in the first defendant's employer of itself meant TP
ICAP
plc became the new employer. The defendants accept that the authorities set out above, notably Brookes and Millam, demonstrate that a simple acquisition of control of shares does not constitute a transfer within TUPE.
ICAP
and Tullett Prebon under common ownership at the level of the ultimate parent company. It is common ground that that transfer involved the introduction of oversight and strategic management across the enlarged corporate group. It is accepted by the claimant that measures were introduced with the intention of producing costs-savings from economies of scale and rationalisation of support services. That meant that services such as legal or human resources, which were formerly provided in two separate corporate groups, were now to be provided in a single corporate structure. It is also agreed that the setting of strategic targets and the consolidation of systems and procedures were introduced to ensure consistency across the new group. But whichever economic entity is the focus of the inquiry, none of that establishes a change in employer in the sense identified above.
ICAP
to TP
ICAP
and to the claimant's response to those arguments.
ICAP's
other business before completion of the acquisition. Second, he refers to the creation of a new TP
ICAP
brand including website, email and logo. Third, he refers to the replacement of
ICAP's
governance and management structure by TP
ICAP's
governance management structure. Fourth, he refers to the replacement of directors of the claimant and other IGBB subsidiaries with TP
ICAP
directors on the day of completion of the acquisition. Fifth, he refers to the integration of the IGBB into TP
ICAP's
business, overseen as he says it was by an integration management office and involving, as he says it did, desk mergers, the integration of IT systems, global corporate functions systems, controls and broker compensation. Sixth, he refers to cost synergies from integration and redundancies. Seventh, he refers to changes in the employment terms and conditions of employees assigned to the IGBB. And, eighth, he refers to the fact that
ICAP's
Global e-Commerce division is to be integrated with Tullett Prebon's ebroking division to form a new e-market division.
ICAP
plc's other businesses before the acquisition was a necessary legal step, because
ICAP
plc was only proposing to sell the IGBB and not its other divisions. In my judgment it does not demonstrate that the new owner has 'stepped into the shoes' of the existing employer. As Mr Oudkerk pointed out in his closing submissions, there was no cross-examination of Mr
Vogels
about the creation of a new TP
ICAP
brand and Mr
Vogels
provided convincing evidence that separate
ICAP
and Tullett Prebon websites, email addresses and logos continued to be used for day to day business.
ICAP's
governance and management structures by the new company's governance and management structures provides no assistance to Mr Goulding's case. Those changes are the obvious manifestation of change in legal ownership. They say nothing about responsibility for the day-to-day business or the identity of the body who had incurred the obligations of employer.
ICAP
directors on the day of completion of the acquisition is not made out on the evidence I heard. I accept Mr Oudkerk's argument that the evidence suggests that at least two directors of IMSL, namely Mr McClumpha and Mr Scard-Morgan, remained in place after 30 December 2016.
ICAP's
business and that integration was overseen by an integration management office. That process was certainly not completed by the date of the transaction and, on the evidence I heard, was far from complete even by the date of trial. I was told by Mr
Vogels
that the two businesses, Tullett Prebon and
ICAP,
continue to be run from separate premises in the city. I
visited
them and it was apparent that both were busy, active offices. I was told, and I accept, that there had been no change in what the individual brokers working in those premises were doing between the period prior to the transaction and the present time.
ICAP
and Tullett Prebon desks. It is right that I heard evidence from Mr
Vogels
that the IGBB closed two desks but I accept that that was pursuant to long standing concerns about profitability of those desks rather than an attempt to integrate
ICAP
and Tullett Prebon desks.
ICAP
has become responsible for running the business of the IGBB or has incurred the obligations of employer of the staff of the IGBB or has taken over the day to day running of that business. "Cost synergies" presumably refers to the cost savings that will be made by integration of back office functions. The same points apply to that as to the factor discussed immediately above.
Vogels
to the effect that some staff had taken on additional responsibilities.
ICAP
and Tullett Prebon, businesses remain intact and continue to function as they did before the merger. He told me that project managers could not operate for both
ICAP
and Tullett Prebon brands because there is competition between them. I accept that evidence.
ICAP
and Tullett Prebon now have a common ownership, they remain two distinct, competing brands. Furthermore, the conclusion I have drawn from the evidence is that the claimant, IMSL, continues to be responsible for its own business and continues to bear the obligations of employer of its staff, including the first defendant. Furthermore, in my judgment, the IGBB continues to be responsible for its business and its employees. There is no new owner who has stepped into the shoes of the claimant.
Issue 2 - Garden Leave
The Issues and the Contract
- Has the claimant proved legitimate business interests (confidential information, customer connections and workforce stability)?
- If so (a) is the period of 12 months garden leave sought by the claimant justified having regard to restraint of trade principles? (b) should the Court grant injunctive relief in the exercise of its discretion to 21 July 2017?
- If not should the Court grant injunctive relief for a shorter period and if so for which period?
- If no further injunctive relief is granted, was the grant of interim injunctive relief by Order dated 3 March 2017 justified?
"10.1 During his notice period or any part or parts thereof, or at any other time, the Company may in its absolute discretion require the Employee to perform only such duties or other such other duties (including without limitation research projects) as it may allocate to him or not to perform any of his duties and may require him not to have any contact with clients of the Company or any Group Company nor any contact with such employees of the Company and any Group Company as the Company shall determine and/or may exclude him from any premises of the Company or of any Group Company (without providing any reason therefore) PROVIDED ALWAYS that throughout the period of any such action referred to in this Clause ("Garden Leave") the Employee's Salary and contractual benefits shall continue to accrue or be paid or provided subject to the other provisions of this Agreement and Part 1; and
10.2 that any such action taken on the part of the Company shall not constitute a breach of this Agreement or Part 1 of any kind whatsoever nor shall the Employee have any claim against the Company or any Group Company in respect of any such action; and
10.3 that he shall during any such period remain readily contactable and available for work and, should he fail to make himself available for work having been requested by the Company to attend, he shall, notwithstanding any other provision of this Agreement and without prejudice to the Company's other rights and remedies, forfeit his right to Salary, bonus or any other remuneration in respect of such period of non-availability."
"information of a confidential nature and in the nature of a trade secret including but not limited to information concerning the organisation, business, finances, databases or affairs of the Company or other Group Company or any of their respective customers or clients whether they come to the Employees knowledge orally or in writing…"
and then provides a list of types of documentation and record.
"12.1 The Employee acknowledges that during the course of his employment under this Agreement among other things he will be privy to Confidential Information and he will at the expense of the Company and its Group Companies make maintain and developvaluable
relationships with clients, customers, staff and third parties. He therefore covenants with the Company and its Group Companies that he will not directly or indirectly on his own behalf or on behalf of any other person, concern, undertaking, firm or body corporate during his employment and:-
12.1.1 for the period of six calendar months following the date his employment terminates, deal with, be employed or engaged by or engage in business with or be in any way interested in or connected with any business which competes with any business carried on by the Company or any Group Company at the date of termination of the employment of the Employee in which the Employee has been involved on behalf of the Company or any Group Company at any time within the 12 months immediately preceding the termination of his employment, either (i) by providing services the same as or similar to those he provided to the Company or any Group Company within the 12 months immediately preceding the termination of his employment or (ii) for any other purpose;
12.1.2 for the period of nine calendar months following the date his employment terminates, deal with, solicit business from or engage in business with or work on any account or business of any customer or client of the Company or any Group Company for the purpose of providing to that customer or client services which are the same as or similar to those which he has been involved in providing to that customer or client in the 12 months preceding the termination of his employment or discourage such a customer or client from dealing with the Company or any Group Company;
12.1.3 for the period of nine calendar months following the date his employment terminates, solicit or endeavour to entice away from or encourage to leave the Company or any Group Company any employee, officer or consultant of the Company or any Group Company known personally to the Employee and with whom the Employee has had contact as part of his employment, other than secretarial staff or employees whose total salary and bonus in the 12 months prior to the date the Employee's employment terminates was less than the annual equivalent of £50,000, (whether or not such person would commit any breach of his contract of employment or engagement by reason of leaving the service of such company) or knowingly procure or assist in procuring the employment by any other person, concern, undertaking, firm or body corporate of any such person;
12.1.4 save as required by law, at any time after the date his employment terminates, communicate to any person, concern, undertaking, firm or body corporate anything which is intended to or which will or may damage the reputation or good standing of the Company or any Group Company or which may discourage any client or supplier from dealing with the Company or any Group Company."
12.2 The Employee agrees that the restrictions contained in Clause 12.1 are reasonable and necessary for the protection of the legitimate interests of the Company and the Group Companies, and that, having regard to those interests, those restrictions do not work unreasonably on him. It is nevertheless agreed that if any of those restrictions shall taken together or separately be held to bevoid
or ineffective for any reason but would be held to be
valid
and effective if part of its wording were deleted or if the period of restraint were reduced that restriction shall apply with such deletions or reduction in duration as may be necessary to make it
valid
and effective.
12.3 The Employee further acknowledges that the restrictions contained in Clause 12.1 shall apply in relation to all clients and customers in respect of whom it is expressed to apply notwithstanding that such clients and customers may have been introduced to the Company or any Group Company by the Employee or any person under his control before or during his employment with the Company or its Group Companies. The Employee acknowledges that any and all of his relationships from time to time with clients of the Company and/or its Group Companies are the property of the Company and/or its Group Companies, that he has no interest, right or entitlement to maintain particular relationships or accounts with any particular clients or customers of the Company and/or its Group Companies and/or any allocation of revenue or bonus that such relationships may generate and that the Company and/or its Group Companies shall be entitled in its or their sole discretion from time to time (including without limitation during any period of notice) to require him to terminate any or all such relationships, hand over any or all such relationships or accounts to person/s nominated by the Company and/or its Group Companies (including without limitation to other employees of the Company and/or its Group Companies) and/or to seek to generate and maintain relationships or accounts with other existing or new clients.
12.4 In the event that the Company exercises its rights to place the Employee on Garden Leave then each of the periods referred to in Clauses 12.1.1 and 12.1.2 shall be reduced by any period/s spent by the Employee on Garden Leave in the twelve months prior to the date his employment terminates.…
12.7 The Employee warrants and agrees that he has received or has had the opportunity to receive legal advice as to the terms and effect of this Agreement and Part 1 and, in particular, in relation to the restrictions contained in Clause 12.1.
12.8 If the Company or any Group Company transfers all or any part of its business to a third party ("the transferee"), the restrictions contained in Clause 12.1 shall, with effect from the Employee becoming an employee of the transferee, apply to the Employee as if references to the Company included the transferee and references to any Group Company were construed accordingly and as if references to customers or clients or suppliers were to customers or clients or suppliers of the Company and/or the transferee and their respective Group Companies."
v
Hall [2007] ICR 1539 and I do not understand it to be disputed by the defendants.
The Correct Approach
v
Holliday [2014] IRLR 102. In that case the employee was subject to a twelve month notice period with six months post termination restraints. He was placed on garden leave for twelve months. At paragraph 57 of her judgment Simler J said:
"During the currency of the employment relationship, when an express negative covenant or the implied duty of good faith apply to prevent an employee working for another employer, the doctrine of restraint of trade will not apply to such a restraint; nor is there a need to justify an express contractual garden leave provision by reference to this doctrine. However in circumstances where an employer has put an employee on garden leave and then seeks an injunction to restrain the unwilling employee from joining a competitor before the expiry of his notice period, an injunction to enforce or aid that period of garden leave must be considered in light of the restraint of trade doctrine. The fact that the employee agreed to the contractual provisions may be a factor in the court's consideration but it is not the only or primary factor. The scope for abuse by an employer of a garden leave provision is well recognised and I agree with Mr Quinn, that public policy considerations compel consideration of the restraint of trade doctrine in this context" (emphasis added).
v
BGC [2010] IRLR 648. At paragraph 221 in his judgment in that case Jack J said:
"221 Where the enforcement of a garden leave provision differs from the enforcement of a covenant is that the enforceability of a covenant is to be judged at the time that it was entered into. If, on that basis, it is unenforceable, that is the end of the matter. If it is enforceable, then prima facie an injunction will follow. But there may be situations where the court will nonetheless hold that, because of what has actually happened, an injunction is inappropriate, or is inappropriate for the whole period of the covenant. The enforcement of a garden leave provision may come in at this stage as a reason for declining to enforce the covenant in whole or part.
222 Where the issue is garden leave, the court looks at the situation at the time enforcement is sought. The court will look primarily at what is required for the reasonable protection of the protectable interest, here trade connection. It will also take account of the situation of the employee. That brings in here the facts that the brokers are on garden leave as a result of their having walked out from their employment in reliance on their indemnities from BGC without, as I have held, having grounds to do so; that they are suffering no financial loss because they are receiving salary from Tullett and will be indemnified for bonus by BGC and are in fact better off as a result of what has happened by reason of their signing payments from BGC. The court will also have in mind the strong public interest in employees being held to contracts which they have freely entered into for substantial remuneration. That interest pulls in the opposite direction to the public interest in employees being freely able to exercise their skills in work by transferring from one employer to another. It is also a factor that the brokers will take time to get back up to speed once they begin work again. It is also ironic that under their contracts with BGC they will have rather less freedom of future movement than under their contracts with Tullett. These are all factors which are subsidiary to the main issue as to the time required for the reasonable protection of the employer's protectable interests.
223 The public interest in employees being held to their contracts may be satisfied not only by means of injunctions. Where an employee breaks his contract, he will be liable in damages for such loss as his employer can establish as caused by his breach. Whether or not an injunction is granted, that remains. For an injunction to be granted the employer must show that damages would not be an adequate remedy. This is usually established, perhaps without much difficulty, by showing that the assessment of the loss would be speculative and so the loss hard to prove. In such circumstances the threat of a claim for damages is reduced: but it does not disappear.
224 Where the court considers that the period for which the employer is entitled to protection ends during the time for which the employee may be on garden leave, it will enforce the garden leave provision for that period, and will decline to enforce any enforceable post termination restriction. It will decline the latter because the employer will have already got all the protection he is entitled to, and the court has a discretion not to enforce an enforceable post termination restriction or covenant where the circumstances are such that it should not" (emphasis added).
"60 I accept however that in exercising that wide discretion both as to the period of the injunction to enforce garden leave and as to its scope, the court will be astute to recognise that the practice of long periods of garden leave is obviously capable of abuse: it is a weapon in the hands of the employer that might be used to ensure that an ambitious employee will not give notice if he is going to be unable to work at all for anyone else for a long period of notice: Provident Group plcv.
Heywood [1989] ICR 160 at 165 (Dillon LJ).
61 Accordingly, an injunction sought to aid or enforce a garden leave clause must be justified on similar grounds as a restrictive covenant. This means that the Claimant must demonstrate a legitimate interest to protect and must show that the injunction sought extends no further than is reasonably necessary to protect that legitimate interest. The grant of an injunction is a discretionary remedy, and may be refused if in fact the Claimant will suffer no damage (or because of delay). Finally, there is greater flexibility in cutting down the terms of the restriction when dealing with garden leave than when dealing with the terms of a restrictive covenant. The court accordingly has the flexibility to grant an injunction for less than the full notice period if that is the extent of the period in respect of which it can be justified."
v
George (unreported) per Sir Thomas Bingham MR at paragraph 6). As Mr Oudkerk accepts in his skeleton argument the employer must show that the proposed restraint is both reasonable in the interest of the contracting party and reasonable in the interest of the public.
Client relationships and stable workforce
very
limited. Apart from generalities, it related primarily to evidence relating to a broker called Lee Manning. I was shown an exchange of text messages between the first defendant and Mr Manning shortly after the first defendant's resignation. Those text messages included a message from Mr Manning that read "if you do anything that you ever think might maybe suit me…..I'd work for you in a heartbeat". I was told Mr Manning is now on garden leave having signed a forward contract with the second defendant.
Confidential Information
v
Fowler [1987] Ch 117). An employer is entitled to protect confidential information using garden leave irrespective of a specific confidential information clause. As Mr Oudkerk argues, potential difficulties in the proper interpretation of the contractual term serves only to reinforce the need for garden leave.
v
Harris [1997] 1 WLR 1472 at 1479 Lord Denning MR said:
"It is thus established that an employer can stipulate for protection against having his confidential information passed on to a rival in trade. But experience has shown that it is not satisfactory to have simply a covenant against disclosing confidential information. The reason is because it is so difficult to draw the line between information which is confidential and information which is not: and it isvery
difficult to prove a breach when the information is of such a character that a servant can carry it away in his head. The difficulties are such that the only practicable solution is to take a covenant from the servant by which he is not to go to work for a rival in trade. Such a covenant may well be held to be reasonable if limited to a short period. That appears from the judgment of Cross J. in Printers & Finishers Ltd.
v.
Holloway [1965] 1 W.L.R. 1, 6:
"Although the law will not enforce a covenant directed against competition by an ex-employee it will enforce a covenant reasonably necessary to protect trade secrets … If the managing director is right in thinking that there are features in the plaintiffs' process which can fairly be regarded as trade secrets and which their employees will inevitably carry away with them in their heads, then the proper way for the plaintiffs to protect themselves would be by exacting covenants from their employees restricting their field of activity after they have left their employment, not by asking the court to extend the general equitable doctrine to prevent breaking confidence beyond all reasonable bounds.""
v
Farr plc [2007] ICR 932 Toulson LJ (as he then was) referred to that passage in the judgment of Lord Denning and set out the proper approach:
"41 In order to establish that the inclusion of a non-competition clause in an employment contract was reasonably necessary for the protection of the employer's interest in confidential information, the first matter which the employer obviously needs to establish is that at the time of the contract the nature of the proposed employment was such as would expose the employee to information of the kind capable of protection beyond the term of the contract (i e trade secrets or other information of equivalent confidentiality). The degree of the particularity of the evidence required to establish that matter must inevitably depend on the facts of the case. To say this is to say nothing new. Aldous LJ stated the principle in Scully (UK) Ltdv
Lee [1998] IRLR 259 , 263, para 23:
"In cases where a restrictive covenant is sought to be enforced, the confidential information must be particularised sufficiently to enable the court to be satisfied that the plaintiff has a legitimate interest to protect. That requires an inquiry as to whether the plaintiff is in possession of confidential information which it is entitled to protect. (See Littlewoods Organisation Ltdv
Harris [1977] 1 WLR 1472 at 1479 f .) Sufficient detail must be given to enable that to be decided but no more is necessary."
42 Provided that the employer overcomes that hurdle, it is no argument against a restrictive covenant that it may bevery
difficult for either the employer or the employee to know where exactly the line may lie between information which remains confidential after the end of the employment and the information which does not. The fact that the distinction can be
very
hard to draw may support the reasonableness of a non-competition clause. As was observed by Lord Denning MR in Littlewoods Organisation Ltd
v
Harris [1977] 1 WLR 1472 , 1479, and by Waller LJ in Turner
v
Commonwealth & British Minerals Ltd [2000] IRLR 114 , para 18, it is because there may be serious difficulties in identifying precisely what is or what is not confidential information that a non-competition clause may be the most satisfactory form of restraint, provided that it is reasonable in time and space."
vast
quantity of allegedly confidential information by the claimant. Much of that information was either not confidential or irrelevant. However it did contain some plainly confidential information.
"Q. So even as at May 2016, there is a discussion about
what's going to be happening in 2017, isn't there?
A. So my recollection of this is that the discussion was
very
limited. It was talked about at length that
a detailed setting of new objectives would be fruitless,
and given the transaction was then thought to bevery
close to closing, which it subsequently wasn't, but it
was at that point thought it would closevery
soon, that
that should wait.
So whilst I believe there was reference to it in the
meeting, I don't believe that the objectives were in any
way set or refreshed, in fact the opposite.
Q. Let me just understand this. Do I understand your
evidence to my Lord to be you in fact have a specific
memory of this discussion?
A. So I have a memory of objectives being discussed in
general. I remember that there was an issue around the
transaction closing. I recall that because it was the
hot topic for a number of months prior to that. So the
transaction was the main theme and the objectives
I remember were parked. I don't remember what the
detail of that was, but I remember they were parked, so
they were not set in detail.
Q. Now, that meeting took place almost a year ago to the
day, 12th May 2016. We are now in May 2017. You are
able to remember it and that demonstrates, doesn't it,
MrBerry,
that you both read and can remember the
information in these packs?
A. So I would like to clarify that exactly, because I think
this isvery
important. The crux of these meetings were
around the transaction. So that is one of the most
poignant important facts that that was talked about at
length. So the fact that the transaction was pretty
much the main focus, yes, I can remember that because it
was one of the biggest points. I just want to clarify
that point."
" Q. Now, I want to compare what you say you now remember
with what you say in your witness statement. …
Could you look at paragraph 4 of that witness
statement. Now, you say there at 4(a), …, it says:
"MrVogels
at paragraph 7 states I would have had
access to information relating to the relative
commercial strength and weaknesses of the IGBB across
product lines, desks and geographies. He states I was
provided with detailed information. This was in effect
the commercial formula for what makes particular areas
of the IDB successful."
Then you say:
"I go into more detail about the specific categories
that MrVogels
refers to in his statement, but to
summarise response to these general points:
"(a) to the extent that I in fact accessed or read
such information, it did not stick in my mind because
the information was sovoluminous
and detailed and most
of it did not relate directly to my role of CEO of
global e-commerce."
Then you continue:
"To the extent that any detail did stick in my mind
at the time, I would not have remembered it for long and
would have forgotten it within a few weeks. I certainly
do not remember it now."
Now, the statement at paragraph 4 is not a complete
picture, is it, because you certainly do remember some
of the information even now?
A. There are parts of the information of which were centred
around the transaction whichvery
much stick in my
mind --
MR JUSTICE GARNHAM: The answer to the question is yes, then, isn't it?
A. So, yes, there were parts of the information which stick
in my mind more than others around the transaction
because it was discussed more. However, having not seen
this information since whenever this was, I think you
said May of 16, then seeing the word "objectives", yes,
that element discussed around the transactions came back
to my mind."
valuable
to competitors. I am also satisfied first, that the first defendant would be able to recall some of the confidential information he saw, second, that he would remember some of the trends revealed by that information, third, that some of that information and those trends would remain of great interest to competitors, and fourth, the disclosure of such information would cause significant harm to the claimant.
value.
But, as Lord Denning explained in Littlewoods, that is precisely why restrictions are agreed as part of employment contracts. In my judgment, protection of confidential information constitutes a legitimate business interest which the claimant here is entitled to seek to protect.
v
Dymoke [2012] IRLR 458 at [215]:
"It will be seen it is only if the Court finds that a "much less far-reaching" covenant would have afforded adequate protection is it likely to regard the existing restriction as unreasonable. The exercise is not a marginal one, otherwise Courts would be faced with a paralysing debate in every case about whether a covenant with x days shaved off would still provide adequate protection."
Issue 3 - Alleged Inducement by the Second Defendant
view
he had taken as to the application of TUPE. It is true that the second defendant has chosen not to disclose the legal advice they had received but in my judgment they were entitled to rely on legal privilege. Mr Windeatt's explanation that he relied on legal advice and took a commercial
view
of the application of TUPE, struck me as entirely reasonable.
view that the claimant is not entitled to an injunction against the second defendant. I see no basis upon which I could conclude that the claimant could reasonably fear that the second defendant will continue to rely on the TUPE arguments, which I have rejected, in order to arrange for the first defendant to commence work with them prior to the expiry of his contractual period in July 2017.
Conclusions