Mr B Churchill and others v Floreat Capital Markets Ltd: 2201364/2019 and others
EMPLOYMENT TRIBUNALS
Case No 2201364/2019
Between
(1) Mr B Churchill (2) Mr Z Nuseibeh (3) Mr O DialloClaimantFloreat Capital Markets LtdRespondent
Before
Employment Judge ElliottMs R Tuck (instructed by counsel) for claimantDate 7 February 2020
JUDGMENT
ON COSTS The judgment of the tribunal is that the claimant Mr Diallo shall pay the following costs:[1]To the respondent the sum of £6,000.[2]To the interested party the sum of £14,400.
REASONS
The procedural background(1) This decision was given orally on 6 December 2019. The claimants requested written reasons.(2) There are three claims, brought by Mr B Churchill, Mr Z Nuseibeh and Mr O Diallo. Mr Diallo is a co-director of the respondent and a shareholder. The respondent is part of the Floreat Group which is an investment business.(3) At a preliminary hearing on 15 August 2019 I extended time for the respondent to file the ET3’s and also ordered that the holding company, Floreat Holding Ltd 1 of 14 be joined as an interested party under Rule 35 to be present at the preliminary hearing on 15 August 2019, but not to participate and to participate in this costs hearing.(4) The full merits hearing is listed to take place over six days commencing on Wednesday 29 January 2020.(5) A further preliminary hearing for case management took place on 12 September 2019 before Employment Judge Snelson. An Order was made that the parties deliver the final agreed list of issues to the tribunal by 16 September 2019. A draft list of issues was made available at the 12 September hearing, as per the Order made on 15 August 2019. The list of issues has been completed and will be included in the trial bundle.(6) The value of the claims is around £250,000 as the statutory cap applies. Background(7) On 1 August 2019 a director of the respondent Mr M Otaibi, wrote to the tribunal saying that without the consent of claimant Mr Diallo, who was also a director, the respondent could not serve any defence or take part in the tribunal proceedings. He said that the “deadlock” could not be resolved by the date for filing the ET3s. The ET3 was originally due by 6 August 2019.(8) On behalf of claimant Mr Diallo it was said that Mr Otaibi was free to conduct any Response by the respondent and that Mr Diallo recognised his conflict of interest and would not be involved in the making of any such Response.(9) It is this situation that gives rise to the costs applications. The parties are all agreed that only one preliminary hearing was necessitated, whether it took place on 15 August or 12 September and that unnecessary costs were incurred by having to hold two preliminary hearings and then this costs hearing. Had the ET3’s been filed on time or before the 15 August preliminary hearing, no further case management hearing would have been necessary. Documents(10) I had two bundles from the interested party, one was a bundle for the preliminary hearing on 15 August 2019 and one was a core bundle for the costs hearing plus an authorities bundle. There was a skeleton argument from the claimants and from the interested party. There was a chronology from the respondent.(11) I had written submissions from the claimant and the interested party to which counsel spoke and oral submissions only from the respondent. All submissions were fully consider together with any authorities referred to whether or not expressly referred to below. The costs applications 2 of 14(12) Prior to the hearing on 15 August 2019, solicitors for the holding company wrote to the tribunal stating that their original application for a stay of proceedings was necessitated by claimant Mr Diallo’s “failure” to make his position clear as to whether he consented to Mr Otaibi filing a Response to the proceedings. They considered Mr Diallo’s conduct unreasonable, vexatious and disruptive and they made an application for costs under Rule 76 in the sum of £9,675.18. Further costs had been incurred by the date of this hearing on 6 December 2019.(13) The claimants opposed the application for costs. They said that the application made by the holding company for a stay of proceedings was made to put pressure on the claimants and to frustrate the claims. They reserved their position on costs.(14) The claimants and the respondent also made consequential applications for costs. The issue for this hearing(15) The issue for this hearing was the determination of the holding company’s costs application of 14 August 2019 plus the later applications for costs made by the claimants and the respondent.(16) It was confirmed by counsel for the claimants and counsel for the interested party that the costs application was only against claimant Mr Diallo.(17) There was also a costs application from the respondent against claimant Mr Diallo, dated 29 November 2019 (core bundle page 53).(18) There was also costs application from all three claimants against the respondent and the interested party dated the day before this hearing, 5 December 2019, core bundle page 79. The position of the holding company(19) In deciding to join the holding company as an interested party under Rule 35 on the terms set out above, I decided that it had a legitimate interest as a 50% shareholder in making its application for a stay because of the potential financial implications of the respondent failing to file an ET3 in each case. The stay application was abandoned when Mr Otaibi indicated that he was in a position to deal with the Response to the claim (letter 6 August 2019). I agreed that the holding company had an interest in making that application to protect its position as a substantial shareholder. That gave an interest in a costs application. The interested party’s application(20) The interested party’s position, was that Mr Otaibi was precluded by the respondent’s Articles of Association from taking any steps in defending the proceedings without claimant Mr Diallo’s consent. The interested party said that Mr Diallo should have given his consent when first requested, but he did not. It 3 of 14 was submitted that he withheld his consent in furtherance of his interests as a claimant.(21) The interested party said that it was not until the very last minute that Mr Diallo “relented” by which time the respondent had incurred significant costs and with the deadline for the ET3 looming, an application for a stay was made.(22) On 28 November 2019 the interested party made an open offer to settle with Mr Diallo paying its costs in the sum of £8,000 and to avoid the cost of this costs hearing.(23) On 4 December 2019 the claimants gave notice of intention to make an application for costs against the interested party in respect of this costs hearing (core bundle page 56). They offered a “drop hands” approach on the basis that the parties focus on the full merits hearing and drop their claims for costs against one another. Their substantive costs application was made on 5 December and was at page 79 of the bundle.(24) The interested party accused Mr Diallo of “game playing” by obfuscating with the intention of causing “maximum prejudice” to the respondent to cause both the respondent and the interested party to incur cost. The interested party said that this was “proven” by Mr Diallo’s “volte face” at the 15 August hearing when he consented to the respondent’s application for an extension of time for the filing of the ET3. The claimant’s position (Mr Diallo)(25) The claimant’s position was that Mr Otaibi was always able to defend these proceedings on behalf of the respondent and ought to have presented an ET3 by 6 August 2019 so that the 15 August 2019 preliminary hearing would have been the only one necessary and there would have been no need for the 12 September 2019 preliminary hearing. The claimant accused the respondent of “game playing”. The relevant law(26) Costs do not follow the event in employment tribunal proceedings and an award of costs is the exception and not the rule (Lord Justice Mummery in Barnsley Metropolitan Borough Council v Yerrakalva 2012 IRLR 78).(27) The power to award costs is contained in Rule 76 of the Employment Tribunal Rules of Procedure 2013 which provides that:
The relevant law
[1]A Tribunal may make a costs order or a preparation time order, and shall consider whether to do so, where it considers that— (a) a party (or that party's representative) has acted vexatiously, abusively, disruptively or otherwise unreasonably in either the bringing of 4 of 14 the proceedings (or part) or the way that the proceedings (or part) have been conducted; (28) The Court of Appeal held in Yerrakalva (above) that the vital point in exercising the discretion to order costs is to look at the whole picture of what happened in the case and to ask whether there was unreasonable conduct in bringing and conducting the case and in doing so, to identify the conduct, what was unreasonable about it and what effects it had. There does not have to be a precise causal link between the unreasonable conduct in question and the specific costs being claimed. (29) The term ‘vexatious’ was described by Lord Bingham in Attorney General v Barker 2000 1 FLR 559 (cited with approval by the CA in Scott v Russell 2013 EWCA Civ 1432 which was a case concerning costs in the Employment Tribunal) at paragraph 19): “…the hallmark of a vexatious proceeding is…that it has little or no basis in law (or at least no discernible basis); that whatever the intention of the proceedings may be, its effect is to subject the defendant to inconvenience, harassment and expense out of all proportion to any gain likely to accrue to the claimant, and it involves an abuse of the process of the court, meaning that a use of the court process for a purpose or in a way which is significantly different from the ordinary and proper use of the court process.” (30) “Unreasonable” has its ordinary English meaning and is not to be interpreted as if it means something similar to vexatious: Dyer v Secretary of State for Employment EAT/183/83. (31) The claimant cited two case law examples of vexatious conduct, noting correctly that such a finding is fairly rare in the Employment Tribunal: Keskar v Governors of All Saints Church of England School [1991] ICR 493, EAT, where costs were awarded against a claimant in a discrimination case on the basis that he was 'motivated by resentment and spite in bringing the proceedings', and that there was 'virtually nothing to support his allegations of race discrimination'. The ground on which the award was made was unreasonable conduct but it could as easily have been vexatious conduct. Beynon v Scadden [1999] IRLR 700, EAT, an employment tribunal categorised a union's behaviour as vexatious and unreasonable on the ground that its pursuit of a case on behalf of the claimants was both without merit and done with the collateral purpose of achieving union recognition from the respondent, and awarded costs against the claimants. The EAT upheld the award and the grounds on which it was made even though it would itself have categorised the conduct as simply unreasonable rather than vexatious. (32) The EAT in Raggett v John Lewis plc 2012 IRLR 906 said that where a party is registered for VAT and able to recover VAT on its counsel’s fees and solicitors’ costs as input tax, to award costs including VAT would represent a bonus to that party compensating over and above the costs incurred and would represent a penalty to the paying party. I was informed that the interested party and the respondent were not VAT registered. 5 of 14 (33) On the issue of hourly rate is the interested party through to the tribunal’s attempt a recent decision from the High Court in the case of Ohpen Operations UK Ltd v Invesco Fund Managers Ltd HT-2019-000137 (O’Farrell J) commenting on the Solicitors Hourly Guideline Rates 2010 and stating in the judgment at paragraph 14 that the guideline rates were unsatisfactory and not helpful in determining reasonable rates in 2019 and that guideline rates are significantly lower than the current hourly rates in many London City solicitors’ firms. I took this into account on the question of hourly rates, City firms being instructed by all parties. (34) Section 175 of the Companies Act 2006 sets out the duty to avoid conflicts of interest. In relation to that duty, the House of Lords in Boardman v Phipps, [1967] 2 AC 46 said that a fiduciary (of which a director is one) “must not make a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and his interest may conflict”. (35) A director would not be in breach of the no conflict and no profit principles if the company gave its informed consent to the director being in such conflict - see Bristol & West v Mothew 1998 Ch 1. (36) The decision as to whether or not a company defends proceedings is one for the directors: Abdelmamoud v The Egyptian Association in Great Britain Ltd 2018 Bus LR 1354. Submissions from the interested party (37) The interested party said that the costs application by the claimant was made at 7pm the night before this hearing and they have had since 15 August 2019 to make their application and have known about this hearing since 14 November 2019. On 28 November 2019 the interested party made their open offer to settle in the sum of £8,000 seeking a reply by 4pm on Monday 2 December 2019. They received a reply on 4 December with the drop hands suggestion. (38) The interested party said that Mr Diallo ought to have given Mr Otaibi his express consent, first requested on 2 May 2019 repeated on 17 July 2019 and again on 1 August 2019. They said express consent was only given on 6 August 2019 in a letter of that date at pages 27-28 when he gave express consent. He said in that letter that Mr Otaibi “has been and is free to conduct any response by the respondent…”. (39) It was submitted that in the claimant’s solicitors’ letter of 3 May 2019 (page 14) by just accepting that Mr Diallo was in a conflict situation, this was not giving his express consent. (40) On 9 August 2019 the interested party wrote to the claimant’s solicitors, asking for an extension of time for the ET3 and gave a costs warning if this was not given. Consent was given at the hearing on 15 August 2019. The interested party said had this consent been given prior to 15 August, they would not have 6 of 14 made this costs application. (41) The point about Article 11 of the Articles of Association was raised for the first time on 4 December 2019, the interested party did not agree with what was said, but submitted that the point could have been raised earlier. (42) The interested party said that if I made findings as above, then Mr Diallo must have been unreasonable and vexatious and costs should be awarded. (43) For the interested party, they said that had Mr Diallo consented earlier, they would not have been here today and would not have incurred the costs. (44) The Articles of Association (“AA”) were at tab 35 of the bundle for the 15 August 2019 hearing. Article 11 was raised by the claimant on 4 December 2019. It was submitted that by raising this point on 4 December, it flew in the face of Mr Diallo giving his consent on 6 August 2019. It was said to be an “ex post facto” attempt to justify his actions. (45) Article 5 provides that the directors are to take decisions collectively as a majority and it is not in dispute that there were only 2 directors, Mr Otaibi and Mr Diallo. (46) Article 11 dealt with the situation where a director is in conflict with the company, specifically under section 175 of the Companies Act and to give or regulate the situation where a director requires authorisation from the company to carry on in conflict. Article 11 addresses section 175 of the Companies Act 2006, that a fiduciary, a director, must not make a profit out of his trust. (47) Article 11 said: Directors’ conflicts of interests11.1 For the purposes of this Article 11, a conflict of interest includes a conflict of interest and duty and a conflict of duties, and interest includes both direct and indirect interests.11.2 The directors may, in accordance with the requirements set out in this Article 11, authorise any matter proposed to them by any director which would, if not authorised, involved director in breaching his duty under section 175 of the Companies Act 2006 to avoid conflicts of interest…. 11.4 Any authorisation under this Article 11 will be effective only if: 11.4.1 the matter in question shall have been proposed by any director for consideration at a meeting of directors in the same way that any other matter may be proposed to the directors under the provisions of these articles or in such other manner as the directors may determine; (48) The interested party submitted that Article 11 of the AA did not apply because it related to a business transaction which this situation was not. Article 11 existed to authorise a conflict and the only way it could apply, was if Mr Diallo said he had brought a case against the respondent, I am in conflict with you, but I would like to conduct a defence. As he would not wish to conduct a defence against his own claim, the interested party said it could not apply. 7 of 14 (49) The more common conflict situation would be where the director in question was seeking to form a contract where he also had an interest. The conflict should be disclosed so that any authority could be given. The interested party said it did not apply to filing a defence within proceedings. The interested party said that it was not about authorising conflicts. All that was needed was for Mr Diallo to authorise the filing of the ET3. (50) Two directors are necessary for a quorum. There were only 2 directors Mr Diallo and Mr Otaibi. When the company invokes Article 11 to authorise a conflict, the proposing director does not count for the purposes of quorum (Mr Diallo) nor can he. Mr Bhatt said that this did not apply to this situation of filing a defence to Employment Tribunal proceedings. (51) It was submitted that when the respondent asked for consent, Article 11 could have been raised and was not. (52) It was pointed out that in a letter dated 20 December 2018, solicitors for the claimant said that Mr Diallo did not accept that Mr Otaibi had any right to act on behalf of the company without board approval (bundle page 3). This was in the context of a Companies Court application. It was repeated on 12 April 2019 (bundle page 7). (53) On 2 May 2019 when the ET proceedings had been issued but not served, solicitors for the interested party requested a copy of the ET1 which was not provided. A request was made for Mr Diallo to consent to Mr Otaibi having full control of the litigation. A reply was given on 3 May, page 14, which was submitted acknowledged the conflict but did not give consent. (54) On 17 July (page 15) consent was sought. It expressly said: “If Mr Diallo does not consent to my proposal, an application to stay the ET proceedings in order to allow the parties to resolve the deadlock will be made”. Mr Diallo’s solicitors said in an email of 24 July 2019 that Mr Diallo’s position had been made clear on 3 May 2019, but it did not answer the express question. (55) Express consent was not given until 6 August 2019 at 18:40 hours. (56) In relation to the application for an extension of time, consent was not given until the 15 August 2019 hearing itself. Submissions from the respondent (57) The respondent made four points (i) context, (ii) authorisation, (iii) the correspondence and (iv) tactics. The respondent endorsed and repeated the submissions made by the interested party. (58) In terms of context this is not the only dispute between the parties, for example there are Companies Court proceedings, there are threatened High Court proceedings. It was submitted that this was not an isolated unfair dismissal claim. 8 of 14 It was said to indicate why the claimants may seek to behave unreasonably. Conduct could be fed into other proceedings. A straight answer to a straight question asked three times would have removed any ambiguity. A “Delphic” response left open the possibility of Mr Diallo arguing that Mr Otaibi had acted without proper authorisation. (59) On authorisation, the point was raised on 4 December 2019 and Article 11 concerned a situation where a director asks the company for authorisation on a particular conflict. It was not about a conflict whereby Mr Diallo was asking for authorisation of a conflict he was in. He did not need authorisation to bring his proceedings. (60) On the correspondence, the respondent agreed with the submissions of the interested party. On 2 May 2019 solicitors for the holding company asked for consent to conduct the defence (page 12) including as to privilege as to having sight of particular documents. The question was not answered. It was accepted for Mr Diallo that there was a conflict (page 14). On 17 July 2019 Mr Otaibi proposed to defend the proceedings and engage a legal team and sought consent and dealt with the issue of privilege. The response was on 24 July, saying refer to our previous letter “which makes Mr Diallo’s position clear”. The respondent was not clear as to his position. (61) By 1 August 2019, Mr Otaibi did not understand himself to be in possession of consent. He wrote to the tribunal, copied to the claimants’ solicitors, referring to the deadlock and seeking a stay. He said if he had authorisation he would file the ET3s. He said that Mr Diallo seemed to be intent on prejudicing the respondent (page 19). He said it was open to Mr Diallo to authorise the respondent to defend itself. (62) The response came at 18:40 on 6 August 2019, the day the ET3’s were due to be filed. (63) It was submitted that this was tactical manoeuvring with the claimants using sophisticated lawyers seeking to obtain a potential tactical advantage. It was submitted that they did not answer straightforward questions and only did so when the matter had been referred to the tribunal and responded after business hours on the day the ET3s were due to be filed. They did not agree to an extension of time for the ET3s until the parties were in the tribunal. The respondent needed separate representation and it was too complex for a mere holding defence. The respondent said that the claimants pursued an unreasonable tactical campaign which caused unnecessary costs. Submissions for the claimant Mr Diallo (64) The claimant agreed with Mr Kirby QC for the respondent that context was important. There was correspondence, starting in the core bundle on 20 December 2018 (page 1). In that letter it was not accepted that Mr Otaibi had the right to act without board approval. This was about the signing off of accounts 9 of 14 and was referred to in paragraph 15 of Mr Diallo’s ET1. In January 2019 proceedings were issued in the Companies Court seeking an order that the claimant sign off the 2017 accounts of the respondent on a going concern basis. Mr Diallo’s position was that the company was insolvent and not a going concern. According to the ET1, the Judge in the Companies Court said that Mr Diallo was right not to sign off the accounts on a going concern basis. (65) Paragraph 17 of the ET3 said that the loan that the interested party (holding company) had extended to the respondent was outstanding at £1.75m. (66) EC Certificates were issued on 25 March 2019 and on 26 March, the claimants’ solicitors enclosed the EC Certificates and said there would be unfair dismissal claims. There was reference to the Companies Court proceedings. In March and early April 2019 there was also correspondence about potential breach of post termination restrictions. (67) The ET1’s were presented on 12 April 2019. The tribunal served it on 10 July 2019. The claimant’s counsel could not say whether a copy of the ET1 was sent to the respondent. The respondent and the holding company said it was not and I find that it was not. Correspondence came from the solicitors for the holding company which was not the respondent. (68) The solicitors for the holding company asked whether Mr Diallo was going to resign his directorship (page 11 dated 2 May 2019) and went on to ask if he would irrevocably consent to Mr Otaibi having full claims control on behalf of the respondent. It was submitted that this was not a straightforward question in relation to the ET claim but was a broad question about irrevocable claims control by the respondent. There was also a request that advice in the legal proceedings would be privileged so that Mr Diallo could not access it. Mr Diallo was not prepared to resign his directorship pending other litigation issues. Mr Diallo accepted that there was a position of conflict. (69) The claimant accepted that the letter of 3 May 2019 did not give consent to the filing of an ET3 but said that this was not the question asked, it was a request for full irrevocable claims control. (70) The ET1 was not served by the tribunal until 10 July 2019. On 17 July 2019 Mr Otaibi expressly asked for consent to full claims control of the ET proceedings (page 15). The response was to refer to the 3 May 2019 letter saying it made “Mr Diallo’s position clear”. (71) The claimant submitted that by 17 July Mr Otaibi could start gathering information to go into the ET3. (72) The claimant said that there was no explanation as to why after the 6 August 2019 the ET3 could not have been filed or a draft presented on 15 August 2019. (73) The claimant’s counsel did not have instructions as to whether a copy of the ET1 was sent to the respondent prior to it being served on 10 July 2019. The claimant 10 of 14 relied upon the request coming from the holding company and there being no evidence that the respondent asked for it. (74) The claimant said that the respondent had the ET1 from 10 July and consent from 18:40 on 6 August, so the claimant queries what was holding them up from 6 August to 15 August. The position of the claimants is that it was always open to the respondent to deal with the ET3 and they did not need a tick box of needing consent. The claimant submitted that it was always the position that they could have done so. The claimant accepted that he could have been clearer. It was asked rhetorically: Was it vexatious not to spell it out in words of one syllable? The claimant submitted not. (75) The claimant also said that when the respondent asked for consent to an extension of time in a letter dated 9 August 2019, the unreasonable conduct relied upon was the claimant not saying “yes” immediately. The claimant said that they did not ask until 9 August, so that when the claimant’s responded on 13 August this would not have done away with the need for the case management hearing on 15 August. The claimants accept that they did not consent to an extension of time. (76) The claimant said it was sensible for them to suggest on 4 December 2019 that the parties drop their costs applications and focus on the substantive proceedings and that proceeding today was “game playing”. (77) The claimant did not make any submissions on the Article 11 point but it was not formally abandoned. Decision on costs application (78) My conclusion is that this was not at the time about the scope of Article 11 of the AA. It was about the defence of these proceedings. This was not about authorising a transaction, for example, in which Mr Diallo could profit. It was not about seeking authorisation to deal with a conflict, because the conflict was set to continue within the litigation. Mr Diallo did not need authorisation to continue with his claim. The company could not restrict him from bringing or conducting the litigation. Article 11 was never raised at the time. There were no submissions today from the claimant on the Article 11 point, although it was not formally abandoned. I find that it was a point considered at the last minute by the claimants’ solicitors and I accept Mr Bhatt’s submission that it was done after the event to seek to justify Mr Diallo’s actions. (79) Decisions are taken by a majority under Article 5 of the AA so Mr Otaibi could not defend the claim singlehandedly. He was bound by the AA. If he over reached his powers he would be acting outside his authority and potentially open to liability for any loss. (80) On the question of this consent Mr Diallo’s solicitors said in an email of 24 July 2019 that Mr Diallo’s position had been made clear on 3 May 2019, but it did not answer the express question. It was a very easy matter to say, “yes we confirm 11 of 14 Mr Diallo gives his consent to Mr Otaibi conducting the defence of the tribunal proceedings”. He did not do this. This would have resolved the problem, instead it was made obtuse. It was a straightforward question needing a straightforward answer. (81) On 1 August 2019, Mr Otaibi wrote to the tribunal explaining his and the respondent’s position. The letter was copied to the claimant’s solicitors (page 25). What Mr Otaibi needed was express consent, it could easily have been given by Mr Diallo, via his solicitors, by return on 2 August in a short sentence. (82) The claimant made the point that full claims authority had been requested for Mr Otaibi. I find that it would still have been simple to say, he had that authority for the Employment Tribunal proceedings, but not at present for anything else. The heading of the letter asking the question was clearly marked “Employment Tribunal Proceedings”. (83) It was plainly obvious that the respondent would need to file ET3s to the three claims and there was a conflict. It was the easiest step in the world to say – I give you have consent to file the ET3s and conduct the defence of the tribunal proceedings. The response was to refer to the 3 May 2019 letter saying it made “Mr Diallo’s position clear”. It would have been simple to say: “which for the avoidance of any doubt is yes, I give that consent”. The claimant accepted that it could have been clearer. I agree and find that there was no satisfactory explanation as to why such a clear answer could not have been given. It was unreasonable not to make this plain in one sentence, rather than referring back to previous correspondence which had not given the respondent the clarity it needed. (84) It is the straightforwardness of the issue, that Mr Otaibi needed consent to defend the tribunal proceedings and the lack of clear and unequivocal reply that I find was unreasonable conduct. (85) Moving on to consent to the extension of time for the ET3s. It was such a simple exercise for the claimants to agree. The claimant accepts that if there had been agreement between the parties the tribunal was most likely to have granted it. I find that if the respondent had told the tribunal on or before 13 August that there had been agreement to an extension of time and there was a case management hearing taking place on 15 August with a request for a postponement until the ET3’s were filed, this was highly likely to have been granted. Had I been the Judge called upon to decide that, I would have granted it. (86) The claimant argues that the ET3s could have been filed between effectively 7 and 14 August 2019 and the hearing on 15 August could have gone ahead without the need for the hearing on 12 September. It is technically possible but the background is such that the respondent could have been given the time it needed, 28 days is allowed, by granting the consent and volunteering at an early stage, a copy of the ET1 rather than hiding behind the fact that the request came from the holding company. It is obvious to parties represented by reputable City firms what needs to happen and how this can be facilitated or obstructed 12 of 14 (87) I find that Mr Diallo acted unreasonably in failing to clearly and unequivocally give his consent to Mr Otaibi defending the ET proceedings and in failing to agree to an extension of time so that a postponement application could have been made and only one case management hearing would have been required. There was no obligation on the respondent or the interested party to agree to the drop hands proposal made by the claimants when they wished to pursue their costs which they considered had been incurred as a result of unreasonable conduct of the claimant. (88) I therefore award the costs of one preliminary hearing and this costs hearing. Quantum (89) For the respondent the matter was dealt with by direct access and the only matter was counsel’s fees. The award for one preliminary hearing was made at £2,000 without objection from the claimant. The amount claimed for this hearing was £3,000. No opposing submissions were made about that amount. It is plus VAT because the respondent is not VAT registered. This is a total of £5,000 + VAT of £1,000 making a total award to the respondent of £6,000. (90) For the interested party, the point was made that the claimants’ costs were put at £8,690 for this hearing with counsel’s fees of £4,000 plus £1,750 for the case management hearing and £3,091 for preparation. Taking the sums of £8,690 + £3,091 + £4,000 = £15,781. By contrast he interested party claimed £14,408.24 + VAT. (91) The interested party said that the holding company’s costs were reasonable compared with the claimants’ costs. The holding company prepared the bundle, there was more correspondence on their side and the holding company as a shareholder needed to take legal advice so this was not just costs of the hearing but costs which flowed from Mr Diallo’s unreasonable conduct. (92) An offer of £8,000 was made which was rejected and the holding company said in the light of the decision made, it ought to have been accepted. (93) As to counsel’s fees: Both sides claimed £4,000 + VAT. Ms Tuck is more experienced that Mr Bhatt who is a 2014 call but his fees include fees for his leader, Mr David Lewis QC, who assisted in the preparation for this hearing, with the skeleton argument so that was submitted to be reasonable and proportionate. (94) The claimant said it was excessive, not just in relation to hourly rates, with the Guideline rate saying that the highest rate should be £296 rather than £375. It was clarified that the hourly rate claimed were lower as a discount had been applied. (95) In addition to taking issue with the rates, the claimant said that the involvement began on 23 July 2019 and in relation to 1 August 2019, the cost of the 4 page letter was for five hours with counsel, leading counsel and the solicitor at around 13 of 14 £1,300. (96) The claimant submitted that the £4,000 for today must have included duplication for the last hearing, so the claimant said a grand total of £5,000 was proportionate because this is what the respondent had been awarded. (97) Mr Bhatt said that £5,000 was too low. The letters were complicated and a great deal of thought had to go into it. The claim was for £14,408.24 + VAT. The offer was for £8,000 which was rejected and that should be the base line, plus the cost of today which would give a figure of £12,000. (98) I accepted that more work was involved on the part of the holding company as outlined above. I took account the offer of £8,000 and the cost of Mr Bhatt’s attendance today at £4,000. I agreed that 5 hours for one letter and 3 hours for a second letter was extremely high and included leading counsel’s fees. The claimants’ costs were claimed at £15,781 + VAT for this hearing and the 15 August hearing and for just this hearing it was £12,690 + VAT. (99) I agreed with Mr Bhatt that on a summary assessment that using the comparison with the claimants’ costs, the fact that more work was needed on behalf of his client and the case law relied upon in relation to hourly rates, that £12,000 was a proportionate and reasonable figure and this was awarded + VAT making a total of £14,400 to the interested party.
Introduction
[1]By Claim Forms submitted to the Employment Tribunal on 12 April 2019 the Claimants brought complaints of unfair dismissal.
Issues
[2]The issues for determination were agreed, as set out in the Annex
Evidence
[3]The Claimants gave evidence.[4]The Respondent called Mutaz Otaibi, Director[5]I was provided with an agreed bundle of documents. References to page numbers in this Judgement are to the page number in the agreed bundle of documents.
Findings of fact
[6]The Floreat Group of Companies is a privately owned international financial group controlled by Mr Mutaz Otaibi, his brother Hussam Otaibi and James Wilcox. Its head office is at 33 Grosvenor Street, Mayfair.[7]The Claimants worked together for a number of years at Deutsche Bank on the fund derivates desk. They had a particular specialism in structuring products related to commercial aviation. The Claimants then worked for a business they set up, called Terium.[8]As a result of the financial crisis some hedge funds own distressed or illiquid assets. The Claimants considered that they had the skills that would allow them to “unwind” such assets.[9]The Claimants were introduced to Mr Hussam Otaibi. Discussions took place about a business, in the nature of a joint venture, to seek to exploit the opportunity they thought such illiquid assets might offer. In broad outline, the plan was that the Floreat Group, through one or more of its companies, would provide initial finance. As the business grew it would become self-financing with the profits thereafter being shared between the Claimants and the Floreat Group. The Claimants did not invest capital but brought their experience to the new business.[10]The Respondent, Floreat Capital Markets Limited, was incorporated on 15 July 2013 as a private company limited by shares. The Company's issued share capital is £6, divided into 6 ordinary shares of £1 each, all of which are fully paid up or credited as fully paid.[11]On incorporation, 3 shares were allotted to Floreat (UK) Limited (now Floreat Merchant Banking Limited). One share was allotted to each of the Claimants.[12]There are 2 directors of the Respondent. Mr Diallo was appointed as one of the directors. Mr Hussam Otaibi was the other director when the Respondent was incorporated. Mr Hussam Otaibi resigned on 1 September 2014 and Mr Mutaz Otaibi was appointed on the same day in his place. That day Floreat (UK) Limited/ Floreat Merchant Banking Limited transferred its three shares in the Respondent to Floreat Holdings Limited, another company in the Floreat Group.[13]This structure was designed to reflect the join venture nature of the business. However, there was likely to be deadlock should the Floreat Group fall out with the Claimants; as each has 3 shares, and 1 director.[14]The Claimants commenced employment with the Respondent on 22 July 2013. They signed contracts of employment on 15 August 2013. The material terms were the same for each of the Claimants. The Claimants were described as Partners. The contracts of employment contained the following terms in respect of salary and expenses:[15]The contracts of employment contained the following terms in respect of confidential information, including a definition in Interpretation section:[16]The notice period, and provisions for dismissal without notice, were made as follows:[17]There was also a schedule setting out the Claimants’ duties and responsibilities:[18]The salary provisions were amended, and revenue targets set, by letters dated 8 October 2013.[19]On 1 February 2014 Floreat Holdings Limited entered into a £1 million noninterest-bearing loan facility agreement with the Respondent that was due to be repaid in full by 31 December 2018. Over time considerably more that £1 million in debt was built up.[20]In addition to their involvement in the Respondent, the Claimants had shareholdings in two offshore companies, Floreat Advisors Limited and IR Relations Limited, through which they received substantial earnings.[21]Mr Mutaz Otaibi was keen to enter a shareholder agreement with the Claimants. Mr Churchill sent a response to a shareholder questionnaire on 18 September 2014, but little further progress was made.[22]On 20 August 2015 Floreat Investment Management Limited entered into an Investment Advisory Agreement with the Respondent. This was to be one of the Respondent’s significant sources of income.[23]In Summer 2016 the Floreat Group moved from Hanover Square to a townhouse at 33 Grosvenor Street. This substantially increased the accommodation available to the Floreat Group. The Respondent did not get significantly more space, or access to meeting rooms, but their costs increased substantially.[24]The Respondent was mainly funded from loans from companies in the Floreat Group. The Claimants did not establish the client base of hedge funds holding illiquid assets that had been hoped for. The majority of their work was directly, or indirectly, for Floreat Group companies.[25]The Claimant’s developed an aviation asset backed produce called Floreat Aviation Notes I (“FAN 1”).[26]By 2018 Mr Mutaz Otaibi and his brother had decided that they no longer wanted any of the Floreat Group companies to have shared equity. Mr Mutaz Otaibi decided that he wanted to set up a new joint venture with the Claimants that would operate outside of the Floreat Group, although a Floreat Group company would be a partner in the joint venture.[27]The Claimant had breakfast meeting at the Connaught Hotel at the beginning of the week to discuss their pans for the week ahead. They charged the cost as an expense. Initially Mr Mutaz Otaibi signed oft the Claimants’ expenses but latterly he only signed off the expenses of Mr Diallo his co-director of the business who, in turn, signed off the expenses of the other Claimants.[28]In June 2018 there was an audit of expenses. For a period the Claimants’ charge cards were suspended but they were reactivated after the audit. The Claimant's continued to incur expenses including breakfast meetings at the Connaught. Mr Mutaz Otaibi continued to sign off Mr Diallo’s expenses without challenge.[29]By June 2018 Mr Mutaz Otaibi was becoming frustrated by what he saw as excessive delay in determining the future relationship between the Floreat Group and the Claimants. He sent an email to Mr Diallo on 18 June 2018 stating:[30]On 20 June 2018 Mr Diallo replied by email suggesting that the Claimants were prepared to discuss all matters. However, they dragged there feet and sought to avoid discussing the matter further with Mr Mutaz Otaibi.[31]On 13 July 2018 Mr Mutaz Otaibi sent a proposed term sheet for a new joint venture to the Claimants which included a summary of the proposal:[32]The proposal was unattractive to the Claimants who thought it would offer them little protection and was considerably less in beneficial than the existing arrangements. They sought to string the process out, to delay the change in the arrangements. They did not provide a substantive response until 21 September 2018, raising various queries about the proposal.[33]On 2 October 2018 Mr Mutaz Otaibi responded to the Claimants’ queries, stating that:[34]The Claimants responded seeking further clarification. Mr Mutaz Otaibi replied by email on 3 October 2018 stating:[35]A revised version of the Termsheet was provided to the Claimants on 26 October 2018.[36]On 11 November 2018 the Claimants shared, in a Bloomberg chat, a response that they were proposing that Mr Mutaz Otaibi would send to Mr Mutaz Otaibi on their behalf.[37]The reference to FAN 2 was to a new aviation note. The slightly sarcastic tone of the first paragraph, and the following chat exchanges, show that the Claimants were playing for time:[38]It does not appear that the draft email was sent. Mr Mutaz Otaibi was not aware of the chat at the time. However, he was annoyed that the Claimants were not discussing the issue with him, and was determined to have a solution to the issue by the end of the year. He decided to take a hard-line approach. On 23 November 2018 he wrote to the Claimants in the following terms:[39]I find that by this time Mr Mutaz Otaibi no longer thought that there was much future in a possible new joint venture with the Claimants. He had decided that it was very likely that he would end the business relationship between the Floreat Group and the Claimants. I consider that he wanted a managed winding down of the Respondent, with the Claimants contributing to pay off some of the outstanding debt. The business would cease, having paid its creditors, without the need for insolvency proceedings. He did not want to risk the possible reputational damage that insolvency might bring to him as a director of the Respondent. However, in order to persuade the Claimants to contribute to paying off the debts of the Respondent, he wanted them to think that insolvency was likely and that they might suffer damage to their reputation if they did not agree to his alternative proposal.[40]Partly to cease making more potentially unrecoverable payments, but also to ramp up the pressure on the Claimants, Mr Mutaz Otaibi decided that Floreat Investment Management Limited would terminate the Investment Advisory Agreement. A letter was sent to that effect on 23 November 2018.[41]Seeing that the writing was an the wall the Claimants decided to send themselves large quantities of the data that they had stored while working for the Respondent. Large amounts of data were stored on the Merrill Datasite. From 25-29 November Mr Churchill copied very large quantities of data from the Merrill Datasite to his provate accounts. For example, on 28 November 2018, Mr Churchill uploaded 429 documents to the Norwegian Air Shuttle data room on the Merrill Datasite. Later that day he downloaded the same 429 documents. Mr Churchill then proceeded, on 29 November 2018, to delete the 429 documents he had previously uploaded/downloaded. The documents are listed from p910. From the titles it is clear that they relate to core aspects of the Respondent’s business, including full details of FAN 1 and the potential cleints for such products. At around this time all of the Claimants downloaded significant amounts of documentation. They all accepted in cross examination that the data was, in general terms, “confidential” although they contended that it was not subject to copyright, involved no intellectual property and was in the public domain. Looking at the titles of the documents that the Claimants took from the Respondent it is obvious that they were documents that they thought would be likely to be useful in any future business venture they would be involved in.[42]Mr Mutaz Otaibi met with Mr Nuseibeh on 28 November 2018. Mr Nuseibeh said that the Claimant understood the need for a shareholder agreement, but considered that the terms proposed by Mr Mutaz Otaibi were unacceptable. The fact that Mr Mutaz Otaibi had decided to end the business relationship between the Floreat Group and the Claimants is emphasized by the fact that at the end of the meeting he urged Mr Nuseibeh (and the other two the Claimants on the basis that Mr Nuseibeh would be sharing our discussion with them), "not to make a scene" in the board meeting and to make things "as painless as possible".[43]The board meeting took place on 29 November 2018. The Claimants stated that they would not put money into the Respondent. By the end of the meeting it was clear that the Respondent would cease to trade. I do not accept that a decision had been made that it would enter insolvency, but Mr Mutaz Otaibi led the Claimants to believe that was likely. He wanted to hold the prospect of insolvency over their heads to encourage them to accept his preferred option for a winding down of the Respondent with the Claimants contributing to its debts.[44]On 30 November 2018 the sum of £55,000 was transferred from Floreat Holdings Limited to the Respondent. This was to cover wages for the Respondent’s staff. A similar sum was transferred every month to fund wages by addition to the debt owed by the Respondent. I accept that Mr Mutaz Otaibi as a director of Floreat Holdings Limited regularly authorised such payments and did not give much thought to authorising this payment. In authorising the payment he was acting on behalf of Floreat Holdings Limited. After the payment had been made Mr Mutaz Otaibi thought further about the matter and gave an instruction that the salary payments should not be made. In so doing he was acting as a director of the Respondent.[45]On 3 December 2018 Mark Rogers, a Sales Executive employed by the Respondent wrote to Mr Mutaz Otaibi and Mr Diallo complaining about the fact he had not been paid, alleging that the Respondent was in breach of contract. Mr Diallo wrote to Mr Mutaz Otaibi on 3 December 2018 stating:[46]At that stage Mr Diallo concern seemed to be abut the non-payment of staff members other than the Claimants.[47]Later that day Mr Mutaz Otaibi wrote to Mr Diallo stating:[48]This is consistent with my conclusion that at the end of the meeting on 29 November 2018 it was clear that the Respondent would cease to trade, but not how that would happen. The email also made it clear that Mr Mutaz Otaibi did not wish the Claimants to be involved in the Respondent, other than to discuss how it could cease to trade.[49]Mr Mutaz Otaibi offered opportunities to the other staff members of the Respondent to move to other companies in the Floreat Group.[50]The Claimants by this stage were becoming increasingly concerned that, as the Floreat Group had stated that they would cease to provide financial support to the Respondent, it was now not only balance sheet insolvent but cashflow insolvent, putting them at risk should it continue to trade. Later on 3 December 2018 Mr Diallo sent an email to Mr Mutaz Otaibi stating:[51]Mr Mutaz Otaibi replied:[52]On 5 December 2018 a sum of 9,900 was transferred by Floreat Holdings Limited to the Respondent to cover the salaries of the staff other than the Claimants. They were paid that day, but the Claimants were not. Instead Mr Mutaz Otaibi arranged for the original payment of £55,000 to be repaid to Floreat Holdings Limited with the description “RTN PAYMENT ERROR”. In so doing he was acting in his capacity as a director of the Respondent. It clearly was his intention that the Claimants would not be paid. I accept that the Claimants were aggrieved that there colleagues had been paid but that they had not.[53]On 6 December 2018 Mr Mutaz Otaibi wrote to the Claimants with his proposal for the winding down of the Respondent. While the email was marked “Without prejudice and subject to contract” the Respondent did not seek to rely on privilege in this hearing. Mr Mutaz Otaibi stated his various roles in the email:[54]The letter sought to emphasise the risks faced by the Claimants should the Respondent enter formal insolvency:[55]The letter put forward a proposal for settlement. The letter emphasied the risks for the Claimants of formal insolvency.[56]On 6 December 2018 Mr Diallo sent a series of email chains attaching the Respondent’s data to his personal email account.[57]On 6 December 2018 the Claimants decided to call Mr Mutaz Otaibi bluff and their solicitors wrote to insist that the Respondent enter insolvency proceedings:[58]The Claimants’ solicitors noted the lack of payment of the Claimants’ salaries but did not specifically assert it was a repudiatory breach of contract.[59]The Claimants went on to issue an ultimatum to Mr Mutaz Otaibi:[60]Mr Mutaz Otaibi did not respond within the required timeframe. On 10 December 2018 the Claimants resigned by emails written in similar terms. Mr Diallo wrote the longest of the emails in the following terms:[61]Later that day Mark Banham, Head of Legal & Compliance, Floreat Merchant Banking Limited wrote to the Claimants:[62]Investigations were commenced into the Claimants after they had resigned, including checking their computer accounts.[63]Subsequently, the Floreat Group has put further funds into the Respondent to prevent compulsory liquidation.[64]The Claimants’ outstanding salaries were paid on 20 December 2018.[65]The consequences of the arrangement made in happier, and more optimistic, times, specifically, the 50% split of shareholding and fact that only Mr Mutaz Otaibi and Mr Diallo are directors, leaves the Respondent in limbo, and has resulted other litigation, including in the Companies Court.
The Law
[66]Pursuant to Section 94 of the Employment Rights Act 1996 (“ERA”), an employee has the right not to be unfairly dismissed.[67]Dismissal includes, pursuant to Section 95(1)(c) ERA, circumstances in which the employee terminates the contract under which he is employed, with or without notice, in circumstances in which he is entitled to terminate it without notice by reason of the employers conduct. This is generally referred to as constructive dismissal.[68]In Western Excavating v Sharp [1979] ICR 221, Lord Denning held that where the employer is guilty of conduct which is a significant breach going to the route of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer’s conduct: he is constructively dismissed.[69]Where the employee relies on a breach of an express term of the contract the employee must also establish that the breach was fundamental.[70]A failure to pay salary on the due date will generally be a fundamental breach of contract. If an employer deliberately withholds or reduces an employee’s pay or diminishes the value of the employee’s salary package, that is a fundamental and repudiatory breach of the contract of employment, regardless of the amount involved. It is only where the employer’s default relates to an inadvertent failure to pay or a delay in payment that the question of whether the breach of contract is fundamental arrises: Cantor Fitzgerald International v Callaghan and ors [1999] ICR 639. Lord Justice Judge held: “In my Judgement the question whether non-payment of agreed wages, or interference by an employer with a salary package, is or is not fundamental to the continued existence of a contract of employment, depends on the critical distinction to be drawn between an employer's failure to pay, or delay in paying, agreed remuneration, and his deliberate refusal to do so. Where the failure or delay constitutes a breach of contract, depending on the circumstances, this may represent no more than a temporary fault in the employer's technology, an accounting error or simple mistake, or illness, or accident, or unexpected events (see eg Adams v Charles Zub Associates Ltd [1978] IRLR 551 ). If so it would be open to the court to conclude that the breach did not go to the root of the contract. On the other hand if the failure or delay in payment were repeated and persistent, perhaps also unexplained, the court might be driven to conclude that the breach or breaches were indeed repudiatory.”[71]If there is a fundamental breach of contract, the reason why that breach occurred is irrelevant to determining a claim of constructive dismissal: Wadham Stringer Commercials (London) Ltd v Brown [1983] IRLR 46 EAT[72]For example, in an insolvency situation, it may not be possible for salary payments to be made, but that does not prevent the failure to make the payments being in breach of contract.[73]There is an implied term of mutual trust and confidence in all contracts of employment. The term has its origin in the decision of the Employment Appeal Tribunal in Woods v WM Car Services (Peterborough) Ltd [1981] IRLR 347, where it was held it that is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated, or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. The term has been repeatedly approved in a number of cases in the House of Lords, including Mamood v BCCI [1997] ICR 606 where the clause is slightly misquoted with a reference to behaviour “calculated and likely” to destroy or seriously damage the relationship of trust and confidence.[74]The test is not whether the actions of the employer were reasonable. The test is whether their actions when objectively viewed are such that they are designed, or likely, to destroy, or seriously damage, the trust and confidence that the employee is reasonably entitled to have in his employer: see Waltham Forest v Omilaju [2005] ICR 481.[75]Whether there has been a breach of the implied term of mutual trust and confidence is a question of fact. The Employment Tribunal must consider whether, objectively, in all the circumstances, the contract breaker has shown an intention to abandon and altogether refuse to perform the contract: Tullett Prebon Plc v BCG Brokers LP [2011] IRLR 420, CA).[76]For a breach of the term to be made out the conduct of the employer must be serious. Employers are entitled to expect a reasonable level of robustness in their employees. The conduct must be so serious that it shows that the employer does not intend to continue to be bound by the terms of the contract of employment. Where a breach of the implied term of mutual trust and confidence is made out it is necessarily a fundamental breach going to the route of the contract: see Moore v Safeway Stores Ltd [2002] IRLR 9.[77]The implied terms of mutual trust and confidence applies equally to the employee.[78]Where a fundamental breach is made out the employee must still establish that that breach played a material part in the decision to leave, see Nottinghamshire City Council v Meikle [2004] IRLR 703, although it need not be the sole, or even principal, reason for the decision to resign.[79]Where the Claimant establishes a constructive dismissal it is still open to the Respondent to establish a potentially fair reason for dismissal. The burden to do so rests on the Respondent.[80]Where the employer establishes a potentially fair reason for dismissal the Tribunal will go on to consider, on a neutral burden of proof, whether the dismissal was fair or unfair having regard to the reason shown by the employer. This depends on whether in the circumstances, including the size and administrative resources of the employer’s undertaking, the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee. This is to be determined in accordance with equity and the substantial merits of the case.[81]Section 122(2) ERA provides for a reduction of the basic award where the Tribunal considers that any conduct of the complainant before the dismissal was such that it would be just and equitable to reduce it.[82]There are two stages at which the Tribunal has regard to justice and equity in considering the compensatory award. Pursuant to Section 123(1) ERA the Tribunal should award compensation of such an amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal, insofar as the loss is attributable to the action taken by the employer. Section 123(6) ERA provides that where the Tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant it shall reduce the amount of the compensatory award by such proportion that it considers just and equitable having regard to that finding. The equivalent predecessor provision to Section 123(1) ERA founds what is referred to as a Polkey reduction where it is decided that there is a chance that had a fair procedure been adopted the employee would have been dismissed in any event.[83]In considering Polkey, contribution and just and equitable compensation the Tribunal has to make its own factual findings about what would have happened had a fair procedure been applied and/or whether the misconduct did in fact take place.[84]Provision is made by Section 207A of the Trade Union & Labour Relations Consolidation Act 1992 for an increase in compensation of up to 25% where an employer has failed to comply with the provisions of applicable code of practice, in this case the ACAS Code on Disciplinary and Grievance Procedures, and where that failure is unreasonable.
Analysis
[85]In considering this matter, I have kept very much in mind that, when considering the actions of Mr Mutaz Otaibi, I have to consider the role in which he was acting. In his various roles within the Floreat Group, other than as a director of the Respondent, he was entitled to seek to change the basis on which the Floreat Group would deal with the Claimants in the future, if at all. There was nothing to stop Mr Mutaz Otaibi and his brother deciding that they wished to have control of the equity of companies within the Floreat Group. There was nothing to stop them robustly seeking to purchase the shares from the Claimants. Mr Mutaz Otaibi was entitled to do so in his roles within the Floreat Group, and as a fellow shareholder of the Respondent. There was nothing to prevent him deciding that Floreat Holdings Limited was no longer prepared to provide finance to the Respondent. He was also entitled to determine that Floreat Investment Management Limited would terminate the Investment Advisory Agreement.[86]I can only concern myself with things that Mr Mutaz Otaibi did as a director of the Respondent. In that role, after monies had been transferred to the Respondent, specifically so that salaries could be paid, he took a decision that employees would not be paid. He must necessarily have been acting in his role as a director of the Respondent when he decided that the Claimants would not be paid. The monies were in the Respondent’s account. He could only require that the payments were not made as a director of the Respondent.[87]The Claimants rely on a breach of the express term of their contract to pay salary. Each of the Claimants had the following term in their contracts of employment:[88]Mr Kirby conceded that at the time the Claimants resigned the Respondent was in breach of contract through failure to pay salary. It was not argued that by 10 December 2018 it was within the period covered by the wording “on or about the last working day of the month”. The Respondent contended that, while there was an admitted breach of contract it was not, in the unusual circumstances of this case, fundamental.[89]Mr Mutaz Otaibi made the decision that other employees would be paid, but that the Claimants would not, and a repayment would be made to Floreat Holdings Limited. This was a deliberate decision not to pay salary. It was not a question of a short delay, or an inadvertent failure. Not only was it a breach of the Claimant's contracts of employment, as conceded by the Respondent, it was a fundamental breach because of the deliberate decision not to pay.[90]In addition, Mr Mutaz Otaibi sought to put pressure on the Claimants to agree to his terms for a wind down of the Respondent, including them making payments to cover a proportion of the Respondent’s debt. Mr Mutaz Otaibi wished to hold the possibility of insolvency over them to persuade them to agree to his terms. In his roles, other than as a director of the Respondent, Mr Mutaz Otaibi was entitled to seek to improve his negotiating position and put pressure on the Claimants. However, it was made clear by the Claimants’ solicitors that they would not agree to his terms. As the Respondent was now not only balance-sheet insolvent, but cash flow insolvent, steps had to be taken, as a matter of urgency, to deal formally with the insolvency which as far as the Claimant knew was unavoidable because Mr Mutaz Otaibi said there would be no more funding for the business . Mr Mutaz Otaibi failed to respond within the time limit imposed by the Respondent's solicitor, and left the Claimants in a position in which Mr Diallo as a director and, so Mr Mutaz Otaibi would have them believe, the other two Claimants, as potential de facto directors, continued to run an insolvent business. This was a breach of the implied term of mutual trust and confidence. He was refusing to take steps to resolve the insolvency of the Respondent as a director of the Respondent.[91]Accordingly, I find that there wre fundamental breaches of the express term to pay salary and of the implied term of mutual trust and confidence as set out above. I do not find that any of the other breaches of the implied term of mutual trust and confidence asserted in the Claim Form are made out.[92]The Claimants knew that their relationship with the Floreat Group was coming to an end. They were seeking an exit from the business on the best possible terms. However, I accept that they were motivated, in material part, in deciding to resign, by the fact that the Respondent had failed to pay their salaries, particularly after the salaries of other employees had been paid. I also consider that a material part of their decision to resign was the fact that they were being left in a position where the Respondent appeared to be cash flow insolvent, but Mr Mutaz Otaibi as the fellow director of Mr Diallo, was failing to take urgent steps to formalise the insolvency, with the consequence that they would be at risk of having been found to have traded while the company was insolvent.[93]I find that a material part of the Claimants’ decision to resign was the breaches of contract brought about by Mr Mutaz Otaibi acting in his role as a director of the Respondent.[94]I appreciate that Mr Mutaz Otaibi felt enraged because the Claimants were dragging their feet and trying to put off the day when the problems of the Respondent would have to be resolved. That does not affect my decision that he, in his role of director of the Respondent, brought about the Respondent’s breach of the Claimant's contracts of employment, in response to which, at least in part, they resigned. The reason that Mr Mutaz Otaibi acted as he did is irrelevant to the breach of contract.[95]Accordingly, the Claimants were dismissed. The Respondent did not put forward in its pleading or in closing submissions any potentially fair reason for the dismissal of the Claimant. Although the fairness of the dismissal was one of the agreed issues, in the absence of a potentially fair reason for dismissal, the dismissal must necessarily have been unfair.[96]I next consider what would have happened absent the dismissal of the Claimants. It was clear that the relationship between Mr Mutaz Otaibi, on behalf of the Floreat Group, and the Claimants, was at an end. They no longer wished to do business together. Absent the conduct that led to their resignations, I consider that there then would have been a further meeting, or meetings, in which steps were taken to urgently find a solution that would result in either the winding down of the Respondent or in its insolvency. I accept that Mr Mutaz Otaibi was determined that this should be concluded by the end of the year.[97]I also consider that, in the light of the breakdown in relations with the Claimants, investigations would have been undertaken, including investigating the activity on the Claimant's computer accounts. This would have discovered that they had downloaded very substantial amounts of the Respondent's data. The Claimants accepted that the information was confidential in broad terms and that they should not have taken it, but contended that it was the type of information that was available in the public domain. While having looked at the titles of the documents, I very much doubt that all of the information was in the public domain, that was not a matter upon which they were specifically challenged. The definition of confidential information used in their contracts of employment included an exclusion where information was in the public domain. This was so that the definition covered removal of the type of information that could give rise to an injunction in reliance on the restrictive covenants in their contracts. Irrespective of whether the information removed fell within the contractual definition of confidential information, I consider that it is clear that the Claimants, while employed by the Respondent, took substantial amounts of information from the Respondent, knowing full well that they were not permitted to do so. They did so because they thought that the information would prove useful in a future business venture. They were using their time and efforts while employed by the Respondents to do this. It was, if not in breach of an express term of their contract, a breach of the implied term of mutual trust and confidence on their part to remove such information while working for the Respondent. I reject their evidence that they did not really think what they were doing. They knew what they were doing and that it was wrong, and contrary to their duties as senior employees of the Respondent.[98]I conclude that by the end of two weeks from the dates on which the Claimants were dismissed, their contracts would either have ended by mutual agreement2 (without notice payment bearing in mind the discovery that they had taken data from the Respondent), with the Claimants agreeing to destroy all information that they had taken in a manner that was verifiable by the Respondent or they would have been fairly dismissed for gross misconduct for taking the Respondent’s data. Accordingly, the compensatory award is limited to the period of two weeks from the date on which the Claimants resigned.[99]I consider that the Claimants were guilty of blameworthy conduct that occurred before their dismissal and renders it just and equitable to reduce the basic award. I accept that their actions were, in part, because of the hard-line approach that had been taken by Mr Mutaz Otaibi and their feeling that he was bringing about the insolvency of the Respondent which led the Claimants to wish to protect their positions. Nevertheless, downloading such large amounts of information was wholly improper conduct. I conclude that all of the Claimants were involved in the decision to download the information in a concerted manner. I consider that their basic awards should be reduced by 50% for contributory conduct.[100]Having regard to the short period of the loss to be compensated for by the compensatory award, I do not consider it is just and equitable to further reduced the compensatory award for contributory conduct.[101]I do not accept that there was other wrongful conduct on the part of the Claimants as alleged by the Respondent. I consider that their expenses were not significantly out of the ordinary for a business of this nature. They went through the appropriate approval process. I do not consider that the Claimant had got past the preliminary consideration of a potential new business venture that might compete with the Respondent. I do not accept that the when the Claimants were tasked with selling FAN 1 notes they were in breach of their duties by not informing others that GAM Investments might be selling some FAN 1 notes at under face value. I do not accept that the Claimants were required to put further funds into the Respondent. It was the funding decision of the Floreat Group that brought about the risk of insolvency. I do not consider that the Claimant were wrongfully seeking to bring about the insolvency of the Respondent. 2 I make no decision in this case as to how the outstanding debt of the Respondent would have been dealt with.[102]Although the possibility of an ACAS uplift was raised in the list of issues. When it was agreed that liability would be determined first, together the specific remedy issues of contribution and/or Polkey reduction, we did not include ACAS uplift as one of the matters to be determined. Accordingly, if it is a matter that is pursued by the Claimants, it will be considered as part of the determination of remedy.