Cook v MSHK Ltd & Ors [2009] EWCA Civ 624

[2009] EWCA Civ 624Case No 2008/1954
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
[2008] EWHC 1949 (QB)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Mr Justice Burton
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 09/07/2009
Before
LADY JUSTICE SMITHLORD JUSTICE WILSONLORD JUSTICE RIMER
Between
BEN COOKAppellantMSHK LIMITEDRespondents(2) MINISTRY OF SOUND RECORDINGS LIMITEDRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400, Fax No: 020 7404 1424Official Shorthand Writers to the Court)
Mr Andrew Hochhauser QC and Mr David Craig (instructed by Jones Day) for AppellantMr Ian Croxford QC and Mr Thomas Croxford (instructed by Lewis Silkin LLP) for RespondentsHearing Hearing dates: 5 February, 3 July 2009
JudgmentLord Justice Rimer :Introduction
[1]The claimants are MSHK Limited (formerly Ministry of Sound Holdings Limited) (‘Ministry’) and Ministry of Sound Recordings Limited (‘Recordings’). Ministry owns businesses operating in the dance music field. Recordings, a wholly-owned subsidiary, is Ministry’s record label and operates in the production and sale of recorded dance music. For practical purposes, the claimants operate as a single entity. The defendant, Ben Cook, was employed by Ministry from 1998 until 3 August 2007, when he was summarily dismissed. He had been employed as a member of Recordings’ artist and repertoire (‘A&R’) team.[2]By a claim form issued on 1 February 2008 the claimants sought a declaration of the lawfulness of Mr Cook’s summary dismissal, damages and equitable compensation. Their Particulars of Claim were answered by a (once amended) Defence and Counterclaim. On 13 May 2008 Mr Cook issued an application under CPR Part 24 seeking summary judgment. Extensive evidence was exchanged and the application came before Burton J.[3]The application was dealt with on the basis that, whilst Mr Cook disputes many of the factual allegations in the Particulars of Claim, he conceded them for the purposes of his application, as also for this appeal. His case was that the claim could not succeed even if the facts asserted were true. He was successful to the extent that the judge held that the four breaches pleaded in paragraphs 32.2 to 32.5 of the Particulars of Claim provided no lawful basis for his summary dismissal. But the judge dismissed Mr Cook’s application in respect of the balance of the pleaded issues, leaving them to go to trial. That left it open to the claimants to prove at trial that their other pleaded grounds justified the dismissal and to make good, if they could, their claim for damages and compensation.[4]This is Mr Cook’s appeal against part of Burton J’s order dated 21 July 2008 that was adverse to him; and he seeks permission to appeal against a further such part. He says the judge was wrong merely to find that the claimants had so affirmed the employment contract as to preclude them from dismissing him in reliance on the four breaches just referred to; and that he should have held that his employment contract had been affirmed in respect of all the breaches alleged in paragraph 32. As for the claim for damages, the periods in respect of which loss is asserted are(i) 23 May to 4 July 2007, when Mr Cook was away on sick leave and it is said no loss was suffered; and(ii) the period following the dismissal on 3 August 2007, in respect of which it is said the losses were caused by the claimants’ wrongful act in dismissing him.[5]Also before the court is the claimants’ renewed application to appeal against that part of Burton J’s order that was adverse to them.[6]In addition to the full written arguments that preceded the hearing, and the oral argument presented at the hearing, we have also had the benefit of further, very full, written submissions directed to a particular point on which the court requested further argument. Following the provision of our draft judgment to counsel, but before the formal hand down, we also had a short further hearing in relation to the claimants’ application to amend their particulars of claim and costs, upon which we ruled at that hearing.

The facts

[7]The facts have not been the subject of investigation at trial and many are in dispute. When hereafter I refer to Mr Cook ‘admitting’ a fact or allegation, I make clear that he has done no more than admit them for the purposes of the application before Burton J and of this appeal. I will not repeat this mantra when referring to each such admission.[8]Mr Cook’s employment contract with Ministry, signed in November 2001 and subsequently amended (most recently in January 2005), entitled him to an annual salary of £90,000, participation in a bonus scheme and eligibility for royalties in respect of records he signed. It imposed post-termination restrictions on the soliciting of the claimants’ key employees, artists, suppliers and customers. It did not prevent him from competing with the claimants or dealing with any artist, supplier or customer whom he had not enticed away. The contract was terminable by six months’ notice by either side: Mr Cook could, therefore, give such notice and join a competitor. Although he was not a member of the board of either claimant, the claimants assert (and he admits) that on 23 April 2007 he was designated Recordings’ ‘managing director’ in its A&R team. It is agreed that, in the claimants’ hierarchy, he was second in importance only to Lohan Presencer, Ministry’s managing director, to whom he reported. Mr Palumbo was Ministry’s chairman and James Bacchus its head of operations. The critical events occurred between the summer of 2006 and August 2007. A. Events from summer 2006 to 22 May 2007[9]In the summer of 2006 Mr Palumbo, in Mr Presencer’s presence, told Mr Cook that if he secured a number one hit, he would be given a cheque for £100,000. Ministry admits this but asserts that it was ‘light-hearted banter rather than a promise intended to have contractual effect’. In October 2006 Mr Cook did achieve such a hit. He claims to have reminded Mr Palumbo and Mr Presencer of the promise at a meeting which the claimants deny. But in their Reply the claimants admit that in early 2007 Mr Presencer told Mr Cook that he:
‘… would be paid the £100,000 in a tax-efficient manner by way of an incentive to future commitment and recognition of past commitment. It is averred, that Mr Presencer informed [Mr Cook] that the £100,000 would only be paid on condition that were [Mr Cook] to leave the employment of [Ministry] within three years, he would have to repay part of that sum. The payment was to be made in the expectation that [Mr Cook] would remain a loyal employee of [Ministry]….’
[10]On 22 January 2007 Mr Holman of Ministry wrote to Mr Cook confirming the terms of a bridging loan that Ministry would (and did) make him in connection with his forthcoming house purchase, due to be completed on 10 February. The amount was £150,000, repayable on completion of the sale of Mr Cook’s flat and anyway no later than 31 July 2007. This was unrelated to the promised £100,000, but it is Mr Cook’s case (not disputed) that Mr Presencer also told him that, instead of repaying the full £150,000, he would be able to set the £100,000 off against it and need only repay £50,000 of the bridging loan. Ministry’s position is, however, that Mr Presencer told him this before Mr Cook’s resignation from Ministry, the event that led to his dismissal during the currency of his notice period.[11]On 23 March Mr Cook was offered the role of managing director of a new label with Warner Music UK Limited (‘Warner’). Warner provided him with a draft contract.[12]On 15 May Mr Presencer sent a text message to Mr Cook saying ‘your money is sorted!’ This was a reference to his £100,000 promise made earlier in the year. At some uncertain date after receiving that message, Mr Cook received a letter dated 10 May 2007 from Ms Ford of Nimbus Holdings Limited (Ministry’s Jersey holding company) offering a loan from Nimbus. The letter recorded that Mr Cook had various shares in Nimbus via an option granted by Ogier Employee Benefit Trustee Limited and that ‘as a key manager in [Ministry’s] business we wish to ensure your continued employment and we have agreed to do this by assisting you with the purchase of your new property’. Nimbus offered Mr Cook an interest free loan of £100,000, to be made on completion of the purchase of his new property. Repayment was to be only out of the proceeds of his Nimbus shares (estimated to be worth about £400,000) ‘… unless you cease to be an employee of [Ministry] (or any member of its group) … in circumstances constituting you a Bad Leaver, in which event Nimbus may (in its absolute discretion) require you to pay all or part of the Loan forthwith. … Please note that you will be a “Bad Leaver” if you cease to be an employee of [the Ministry group] in circumstances in which you could be summarily dismissed by your employing company for “gross misconduct” ….’ If Mr Cook agreed, he was invited to sign and return a copy of the letter. Ministry admits the loan was offered in part in relation to Mr Cook’s past commitment.[13]On Wednesday 16 May Mr Cook accepted an offer of employment with Warner to become the managing director of a new pop music record label for Warner known as ‘Asylum’. On 18 May he told Mr Presencer he was resigning to take up employment with Warner. In accordance with his employment contract, he gave six months’ notice to Mr Presencer, expiring on 18 November 2007, and confirmed it by email on Monday 21 May. Mr Bacchus accepted the notice on the same day and told Mr Cook his leaving date would be 16 November 2007.[14]In paragraph 20 of the Particulars of Claim, the claimants assert, and Mr Cook admits (but only in the sense explained) that in his conversation with Mr Presencer on 18 May he deliberately and intentionally (and so dishonestly) conveyed to Mr Presencer the impression that he would not be undertaking any activities at Warner that competed with the claimants and that his role with them would instead involve his starting a new record label and working on pop artist development rather than dance music. He said the purpose of going to Warner was to move away from dance music before he became too old to be credible. Both Mr Cook and Mr Presencer knew that Warner had not in recent years been significantly involved in dance music.[15]On the morning of Tuesday 22 May Mr Cook attended for work. Mr Presencer asked him to move from the recordings section of the building to another area, on the ground that this was necessary to protect the claimants’ confidential information. His PA was instructed not to assist him in the move. These instructions were given at a time when, on the claimants’ case, they believed Mr Cook would not be competing with them at Warner.[16]Later the same day Mr Presencer spoke on the telephone with John Reid (the President of Warner Music International and Warner Music UK) who told him that Mr Cook would be working on dance singles and compilations at Warner -- an activity directly competitive with the claimants. The claimants believed what Mr Reid had said and so also believed(a) that Mr Cook had misled Mr Presencer in the impression he had given him on 18 May and(b) that Mr Cook had, by 22 May, already formed a settled intention to compete with them. Later the same day, 22 May, Mr Presencer asked Mr Cook if he would be undertaking work on dance music and compilations at Warner, and Mr Cook (as he admits, in the sense explained) dishonestly denied that he would. Mr Presencer was angry that Mr Cook had lied to him on 18 May; and was infuriated by his assessment that Mr Cook had lied again on 22 May. Mr Presencer’s further reaction was that it was all the more essential to protect the claimants’ interests immediately and so he disabled Mr Cook’s computer access. He later explained to Mr Cook that he had become upset with him on 22 May, after speaking to Mr Reid, because he had just learned about his lies. B. Events from 23 May to 4 July 2007[17]On 23 May Mr Cook’s computer access was restricted and he discussed with Mr Presencer what work he could carry out during the notice period. That afternoon he sent an email to Mr Presencer saying he was ‘feeling extremely stressed out by events and the way I’ve been treated’ and felt incapable of returning to the office. He sent him a further email on 24 May saying his doctor had signed him off for two weeks, and he commenced a period of sickness absence as a result of work-related stress. He did not return to work until 4 July. The intervening events are important. The story emerges from correspondence which Mr Cook says manifested a clear election by Ministry to decline to accept any repudiatory breaches by him of his employment contract but instead to affirm it. The judge agreed with him in part, but on this appeal he says the judge did not go far enough.[18]Mr Bacchus wrote to Mr Cook on 24 May. The essence of his letter was as follows. He had spoken to Mr Presencer who believed that Mr Cook’s stress arose from the fact that he had shouted at him on 22 May. Mr Bacchus found this surprising as Mr Cook was a robust individual and he and his team, including Mr Presencer, had been ‘regularly involved in … heated debate ’ over Mr Cook’s nine years with Ministry. He referred to Mr Presencer’s shock and disappointment at Mr Cook’s announcement on 18 May that he was leaving Ministry to work on pop artist development at Warner. He said the resignation caused problems to Ministry, which is why it required him to work out his full notice and why Mr Presencer had given him a list of projects on 21 May that he wanted done on a ‘business as usual’ basis. He referred to Mr Presencer’s request on 22 May to move his location elsewhere ‘whilst he considered the implications of you working on some of the more sensitive projects’. He referred to Mr Reid’s explanation on the telephone to Mr Presencer that Mr Cook was going to be working on dance singles and compilations at Warner, which ‘flatly contradicted what you had said you would be doing and would of course put you in direct competition with [Ministry]’. This was followed by the angry confrontation on 22 May, when Mr Cook denied that he would be doing what Mr Reid had said and Mr Presencer was convinced Mr Cook had lied to him. Mr Bacchus explained that as Mr Cook was going to be in direct competition at Warner with Ministry, Ministry had to ensure that its business interests were protected. It had to take reasonable measures in the meantime to protect itself, including restricting Mr Cook’s access to confidential information. Mr Bacchus reminded Mr Cook of his continuing contractual obligations, including those of fidelity to Ministry, during his notice period. He expressed the hope that Mr Cook would ‘feel able to return to work sooner than the two weeks you have indicated’.[19]The clear sense of Mr Bacchus’s letter was that Ministry believed that Mr Cook would be competing with it at Warner and that he had lied to Mr Presencer about his future activities. It did not warn Mr Cook of any disciplinary action against him or assert that his conduct warranted dismissal or might do so. Its contents were consistent with Ministry’s recognition that it expected Mr Cook to work out his full notice period. The inference from them was that, in so far as his activities at Ministry were to be restricted, that was because he would be in a competitive role when he moved to Warner, not because his dishonesty made him unfit for a wider role. Mr Cook was paid his usual salary on 26 May. Ministry did not, when paying it, reserve any rights it had against Mr Cook arising out of his misleading of Mr Presencer on 18 and 22 May. Nor did it ever do so.[20]Mr Cook rang Ministry and requested a meeting. Mr Palumbo wrote to him on 5 June saying he was happy to meet him and was simply concerned about his well being. Mr Cook’s doctor signed him off for two more weeks on 6 June, of which Mr Cook informed Mr Presencer by email on 7 June. Mr Bacchus wrote to Mr Cook on 7 June saying that Ministry wished him to return to work as soon as possible and that, to that end, it needed to find out about the causes of his absence and asked for his help by agreeing to provide his medical notes, submitting to a medical examination by Dr Moore on 12 June and agreeing to Dr Moore’s report being provided to Ministry. Once it had full information, Ministry would want to facilitate a return to work as soon as possible. Mr Bacchus wrote:
‘Our motivation to achieve this outcome is twofold: quite apart from everyone’s concern for your own personal well being, as things stand the company is without the services of its most senior A&R executive. We are therefore very keen to do all we reasonably can to help you to return to work and to resume the significant contribution to the business we have become accustomed to from you over the last nine years of your employment. … Unless there are other significant issues of which we are not aware at present, I would be confident that any outstanding issues or concerns arising from your discussion with [Mr Presencer] can easily be resolved through a constructive and reasonable dialogue.’
[21]Mr Cook and Mr Palumbo met on 11 June. Mr Bacchus was present and made notes. The thrust of what Mr Palumbo said was that Mr Cook was still needed by Ministry and it was expected that he would work professionally for it and fulfil his contractual duties. Although Mr Cook wanted an early release from his contract, Ministry did not intend to give him one. Mr Palumbo said Mr Presencer had made detailed plans for work that Mr Cook could do and he suggested that the two should meet ‘now that the dust had settled’. Mr Cook said, however, that he was not able to meet Mr Presencer at the moment and wanted time to consider that. At Mr Palumbo’s request, he withdrew any suggestion of a claim for constructive dismissal.[22]On 13 June Mr Cook signed by way of acceptance the copy letter that Ms Ford of Nimbus had sent him on 10 May (offering the £100,000 loan) and returned it to Ms Ford by fax on 14 June.[23]Mr Palumbo wrote to Mr Cook on 13 June saying that, following the meeting, he had a better understanding of Mr Cook’s concerns about the events following his resignation. He referred to Mr Cook’s concerns that he was being sidelined at Recordings, that his access to company information had been restricted and that he had felt excluded and poorly treated since his resignation. He explained that the group had to take reasonable measures to protect its interests in the face of the departure of a senior employee to a direct competitor. He appreciated that Mr Cook had concerns about his relationship with Mr Presencer following the argument in May but he said there was no need for any bad feeling to continue. He said, in language of reconciliation:
‘I have worked alongside you for a long time and I can recall any number of arguments and disagreements over the years that have been resolved and forgotten as quickly and as easily as they started, so I would encourage you to meet [Mr Presencer] and to approach things constructively and positively. I hope our discussions today have helped to deal with any feelings of uncertainty about the immediate future. As I mentioned today, the company will expect you to comply with your contractual notice period and your post-termination restrictions. Although for the reasons set out above it will not be appropriate for you to work on the more commercially sensitive projects that the company is undertaking, there is still an enormous contribution for you [to] make to the business in other similar areas and we will expect you to make all reasonable efforts to work things out with [Mr Presencer] in a positive fashion so that you can return to work as soon as possible.’
[24]Mr Cook wrote to Mr Bacchus on 14 June in reply to his letter of 7 June, reminding him that he had been signed off work with work-related stress, saying he felt very let down by Ministry and that until he felt better he was not in a position to decide whether he would be able to return to work. He again raised accusations of bullying, aggressive, ostracising and humiliating behaviour following the giving of his notice, making it impossible for him to continue in his role. Two doctors had already diagnosed his work-related stress, but he was willing, as requested, to submit to examination by a third.[25]Mr Bacchus’s response on 15 June was that Mr Cook’s complaints amounted to a grievance that would be dealt with at a formal hearing when his health permitted. He said that Ministry ‘regards you as continuing to be under contract.’ He wrote again on the same day, saying he had arranged for a medical examination by Dr Fry on 27 June, whose report would relate ‘to your ability to perform your duties under your contract …’. He pointed out that Mr Cook was required under his contract to attend that examination and to allow Ministry to see the results.[26]Mr Cook replied to Mr Bacchus on 19 June, saying he felt better and wanted to agree a programme enabling him to return to work the following week. He wanted to put Ministry’s conduct behind him, he did not want to pursue a grievance (and asked for the cancellation of any arrangements to that end) and he wanted to resume work commensurate with his role. He asked that Mr Presencer should provide him with notes of the projects he envisaged him working on for the duration of the notice period and for confirmation that, on his return, it would be ‘business as usual’, Mr Bacchus’s phrase in his letter of 24 May. He concluded as follows:
‘As there seems to have been some misunderstanding (not caused by me, I hasten to add) as to the role that I will be performing when I join Warner Music, I want to reiterate that I will not be doing work that is directly competitive with the work I have been doing for Ministry. In fact, as I have told Ministry all along, I will be focussing on artist-based A&R work rather than one-off dance hits and compilations. As such, I do not see any reason for requiring me to work outside the A&R section or to be otherwise excluded from my usual front-line A&R work and there are certainly no grounds for doubting my trustworthiness. I am, however, prepared to be reasonable and will co-operate with reasonable requests genuinely aimed at protecting Ministry’s confidential information etc. Whilst writing, I should just acknowledge receipt of my P11D. I also want to confirm the arrangements I have made for the repayment of my bridging loan. As suggested by [Mr Presencer], I am transferring £50,000 in funds to the bank account of [Ministry]. This represents the balance due from me when the bridging loan is set off against the £100,000 payment due to me under the new loan offered to me in the letter of 10 May 2007 from S. Ford which I have already accepted. I assume you will ensure that the company deals with any internal charges etc.’
I draw attention to the penultimate sentence, with its reference to the £100,000 loan. Mr Cook wrote a further letter to Mr Bacchus on the same day saying that as he now felt better, and hoped to return to work the following week, the examination by Dr Fry should be cancelled. Mr Bacchus replied on 22 June saying it must go ahead: Mr Cook had made a serious allegation that Ministry had caused him stress and it needed to understand the basis of the allegation and of any stress that Mr Cook had suffered ‘if only to ensure your well being when you return to work for the remainder of your notice period’. Mr Cook agreed and the medical examination took place on 27 June. Dr Fry diagnosed Mr Cook as suffering from adjustment reaction with anxiety.[27]Mr Bacchus wrote to Mr Cook on 25 June referring to the ‘return to work arrangements’, and saying that, as Mr Palumbo had recommended at the meeting, Mr Cook should meet Mr Presencer to discuss what he would be working on and what role he would be undertaking. He wrote:
‘I can assure you that there will be no unreasonable change in your status within the company or access to information and systems needed to enable you to perform your role for the remainder of your notice period. However, you must appreciate that [Ministry] does have legitimate business interests to protect. … That being the case, it is inevitable that there will be some direction and control based upon the information that you have access to throughout the remainder of your notice period and the work you are required to do.’
Mr Bacchus concluded the letter by referring to the loan of £100,000 that Mr Cook had accepted on 14 June. He wrote:
‘With regard to the final paragraph of your letter, there may have been some confusion in relation to the loans that have been made available to you. So far as the company is concerned, the loan of £150,000 that was made at the beginning of this year to assist in connection with your house purchase must be repaid in accordance with the terms of that loan. That is, upon completion of the sale of your flat or by no later than 31 July 2007, whichever is the later. I understand that you have in fact already completed the sale of your flat, so this loan is repayable now. So far as the offer of a loan made in the letter of 10 May 2007 for £100,000 is concerned, you will be aware that this loan was offered because “as a key manager in the business we wish to ensure your continued employment and we have agreed to do this by assisting you with the purchase of your new property.” I note that you signed and returned that letter only after you tendered your resignation, which in itself gives cause for concern and the company reserves its position entirely in this regard. However, in relation to your proposal that this loan be in some way set off against the earlier loan, I assume that you are not suggesting that you still expect the company to make this second loan available to you, notwithstanding the fact that you have resigned from [Ministry]. Perhaps you would be good enough to set out your position quite clearly on this.’
[28]That letter did not suggest that Mr Cook’s acceptance of the loan was a disciplinary matter but (in contrast to Ministry’s other complaints about Mr Cook’s actions) did expressly reserve Ministry’s position in respect of it.[29]On 28 June Mr Cook wrote to Mr Bacchus proposing a meeting with Mr Presencer to discuss arrangements for his return to work and what he would be asked to do. On 29 June Mr Cook was again paid his full salary without any reservation of rights. Mr Bacchus replied to him on 2 July, proposing a meeting with Mr Presencer the following day ‘with a view to moving forward with your return to work …’.[30]Mr Cook and Mr Presencer met on 3 July. Mr Bacchus was also present. Notes were taken whose accuracy Mr Cook admits. Mr Presencer wanted to know what Mr Cook was going to do at Warner, which was relevant to what he could do at Ministry. Mr Cook replied ‘I’ll work on what I told you. There will obviously be some dance back catalogue and I might dabble in that’. Later Mr Presencer asserted that Mr Cook had told him on 18 May that he would be working at Warner on artist development, to which Mr Cook replied that ‘I might have mentioned something about dance singles’. Mr Presencer said he wanted Mr Cook to return to work as soon as possible, although ‘the competitive situation means that you can’t work on day-to-day singles’. He proposed that Mr Cook should work as a ‘Super A&R consultant; you’d A&R your own projects and also help to rebuild the Northern Dance team’. Mr Cook said he was ready to return to work, Mr Presencer asked if he could do so the following day and Mr Cook agreed, saying he had arranged holidays from 14 to 21 July and 13 to 24 September. They briefly discussed the projects he would be working on. Mr Presencer asked Mr Cook if he had sold his house and he said yes, but that he had not repaid the loan as it was offset against the Nimbus loan (he had repaid £50,000 of the former loan on the basis that the balance of £100,000 was replaced by the £100,000 loan). Mr Presencer made the point that the latter loan was a long-term incentive and Mr Cook agreed to give it up and repay the £100,000 balance of the bridging loan. Mr Cook asked for details of the bank account to which he should remit that balance and said he would transfer the money. He returned to work on 4 July, when he repaid the £100,000 by a cheque given to Mr Presencer. He never received the £100,000 loan.[31]This meeting can be said to mark a modulation in the story. Whereas hitherto Mr Cook’s stance appears to have been that he had truthfully conveyed to Mr Presencer on 18 May that he would not be competing at Warner, his position on 3 July was that he ‘might’ have mentioned that he would engage in some competitive activity. He does not appear to have put the matter very positively at that meeting. But Mr Presencer’s view, as expressed both in his statement for the disciplinary hearing which soon followed and in his witness statement for the summary judgment application, was that Mr Cook was lying yet again at that meeting in suggesting that he had, or might have, said anything on 18 May about engaging in competitive activities at Warner. He asserted that what Mr Cook said at that meeting contradicted what he had said on 18 May and 22 May. Mr Presencer’s position was that these assertions amounted to new lies as to things Mr Cook had notsaid before. C. Disciplinary proceedings: events from 4 July to 22 October 2007[32]Upon Mr Cook’s return to work, Ministry commenced an investigation into his activities. It lasted about a week. Statements were taken.[33]On 11 July Mr Cook was summoned to a disciplinary hearing by a five-page letter from Mr Holman, the allegations being said to be ‘potentially very serious’. He had been given no prior notice of such a possibility or even of the investigation. The hearing date was 13 July, which was short notice and it was re-fixed for 19 July. The allegations levelled against Mr Cook were that:(i) on 18 May he had lied to Mr Presencer in saying that his new employment with Warner would not be competitive with Ministry as it would involve him in setting up a new record label for them and working on developing pop artists. The untruth lay in the fact that Mr Cook knew that he would be competing with Ministry by working on dance singles and compilations. This was information that Mr Cook had a fiduciary duty to disclose to Ministry. He had been guilty of a dishonest breach of fiduciary duty by allowing his interests to conflict with those of Ministry and by putting his interests first. His breach of duty amounted to a breach of the obligation of mutual trust and confidence implied in his contract.(ii) he had provided a false and misleading account to Dr Fry of his allegedly stress-related absence, of which certain brief particulars were given. This was another breach of the same obligation.(iii) having given his resignation notice, he attempted to secure a £100,000 loan from Nimbus that had been expressly offered ‘to ensure you continued employment’. Reference was made to the acceptance of the Nimbus offer on 14 June, an acceptance said to be detrimental to Ministry from which he had resigned. This was another example of putting his interests ahead of Ministry’s and another breach of the same obligation.(iv) he had covertly recorded the meeting with Mr Palumbo on 11 June, another breach of the same obligation.(v) he had falsely claimed to be suffering from a stress-related illness. This was another breach of fiduciary duty and of the same obligation. The letter included no allegation that Mr Cook had lied to Mr Presencer at the meeting of 3 July by suggesting that on 18 May he had, or might have, told him he would be working at Warner at least partly in a competitive field. Nor had the claimants reserved their rights in respect of any such further lies. On the contrary, Mr Presencer had told Mr Cook at the meeting that his continuing role at Ministry would be as a ‘super A&R consultant’. Nor was any allegation made that, prior to 22 May, he had formed a ‘settled intention’ to compete with Ministry which he had failed to disclose to Ministry.[34]Mr Cook continued working until 16 July, when he was given time to prepare for the hearing on 19 July. Ministry provided extensive written evidence in support of its allegations and Mr Cook answered them by a statement of commensurate length. He denied lying to Mr Presencer on 18 May, saying he had told him there was a possibility that he would be involved in some dance work at Warner but that would not be the focus of his work there, which was to be running a label that would focus on pop artist development. He said Mr Presencer can have been under no illusion that there was a possibility that he would be undertaking work which would compete with Ministry. He denied any attempt to secure the £100,000 loan against Ministry’s interests, pointing out that he abandoned it on 3 July and repaid the balance of his bridging loan on 4 July. He claimed to have been entitled to the £100,000 loan because his employment was assured until 18 November 2007; and, if he decided not to go to Warner after all, he assumed Ministry would make an offer to keep him on.[35]The disciplinary hearing took place on 19 July. Mr Cook attended it, supported by Ms Variava. It was conducted by Mr Holman. Mr Bacchus was present to take notes. Mr Cook stuck to his case that he had told Mr Presencer the truth on 18 May. As to the £100,000 loan, he had withdrawn his threat to claim constructive dismissal and remained an employee at the time he accepted it.[36]Following the hearing, Mr Cook went on leave until the end of July.[37]On 3 August Mr Holman gave Mr Cook a 13-page letter summarily dismissing him. He found that Mr Cook had misled Dr Fry. He made no finding that Mr Cook had fabricated his claimed stress-related sickness. He found that Mr Cook had not told Mr Presencer on 18 May of the possibility that he would be working on dance music at Warner and he found he had lied to him as to what he would be doing at Warner. In relation to the acceptance of the loan, he was unimpressed by the argument that Mr Cook thought it acceptable to do so because he was still working out his notice period. He should have concluded that, once he had resigned, the offer no longer applied. He rejected as false Mr Cook’s argument that he thought that Ministry might, if he decided not to go to Warner after all, make him an offer to stay. As for the reliance placed by Mr Cook on the fact that at the meeting of 3 July Mr Presencer had admitted that he had agreed that he could set the £150,000 bridging loan off against the £100,000 loan, that was said before anyone at Ministry knew of Mr Cook’s intention to leave. Mr Holman upheld the allegation in respect of the £100,000 loan. He made no finding in relation to the allegedly covert recording of the Palumbo meeting.[38]The result was that Mr Holman found three of the disciplinary allegations against Mr Cook established:(i) he had made some dishonest statements to Dr Fry;(ii) he had failed to disclose to Mr Presencer information relating to his proposed role at Warner; and(iii) he had acted improperly in attempting to obtain the £100,000 loan. His conduct had amounted to a breach of the implied duty of mutual trust and confidence as well as of his fiduciary duties to Ministry. Mr Holman’s decision was that Mr Cook should be dismissed without notice or payment in lieu and with effect from 3 August. Of Mr Holman’s three findings, only the second and third relate to matters upon which the claimants rely in the present proceedings.[39]By a letter of 10 August, Mr Cook’s solicitors, Maxwell Winward LLP, gave notice to Ministry of his intention to appeal. The hearing took place on 12 October. Mr Chatterjee’s letter of 22 October gave his reasons for upholding Mr Holman’s decision and dismissing the appeal. In the meantime, Mr Cook had started working for Warner on 28 August.

The proceedings

[40]Ministry and Recordings issued their claim form on 1 February 2008. The claim was for damages, equitable compensation for breach of fiduciary duty and a declaration of the lawfulness of Mr Cook’s dismissal. The Particulars of Claim summarised Mr Cook’s contractual history and asserted that he possessed all Recordings’ confidential information in relation to its activities, including in relation to artists for the time being under development and its plans for record releases and related projects. Paragraph 13 alleged that, by reason of his senior position, Mr Cook owed fiduciary duties to the claimants to act in good faith in their best interests and not to put himself in a position of conflict of interest. Paragraph 14 alleged that, as incidents of such duties, Mr Cook owed the claimants obligations:
‘14.1 To inform the Claimants of any nascent or impending threats to the interest of the Claimants; 14.2 To inform the Claimants as soon as he had formed a settled intention to compete with the Claimants; 14.3 To answer questions as to his future intentions honestly, accurately and without misleading the Claimants.’
[41]Paragraph 15 pleaded the Nimbus loan and the facts I have summarised, adding that:
‘The loan was agreed orally by [Mr Cook] and Lohan Presencer prior to the end of 2006 and was granted on the understanding that it was an advance against the future value of equity and that it was intended to “secure loyalty” for 2/3 years.’
[42]Paragraph 16 alleged that:
‘On a date unknown to the Claimants but prior to 18 May 2007, [Mr Cook] formed the settled intention to leave the Claimants and commence employment with Warner Music.’
Paragraph 17 alleged that Mr Cook’s role with Warner would be competitive with his role at Ministry. Paragraph 18 pleaded his giving of notice to Mr Presencer. Paragraph 19 alleged that Mr Cook knew that the period May to November was the most valuable to Ministry, with most sales in the pre-Christmas period, and knew that the extent to which he would be competing with Ministry was critical to the measures Ministry would have to consider in protection of its confidential information. Paragraph 20 pleaded (with six paragraphs of particulars) that:
‘During the course of his conversation with Mr Presencer on 18 May 2007, [Mr Cook] deliberately and intentionally conveyed the impression that he would not be undertaking competitive activity for Warner Music.’
Paragraph 22 pleaded that, in light of what it then knew, Ministry decided on 21 May 2007 to keep Mr Cook at work during the entirety of his notice period. Paragraph 24 pleaded Mr Presencer’s telephone conversation on 22 May 2007 with Mr Reid, when Mr Reid told him that Mr Cook ‘would be working on dance singles and compilations [and] did not state or convey the impression that [Mr Cook] would be working on pop artist development or on any non-competitive work.’ Paragraph 25 pleaded that, when confronted with this, Mr Cook denied the truth of what Mr Reid had said.[43]Paragraphs 32 and 33 are central to the appeal and read:
‘Breach of contract and fiduciary duty 32. In breach of contractual duty of good faith and fidelity and his fiduciary duty [Mr Cook]: 32.1 failed to inform the Claimants that he had a settled intention to compete with them at any stage prior to John Reid revealing that information on 22 May 2007; 32.2 failed to reveal the true nature and extent of his competitive intentions to Mr Presencer at any time prior to his dismissal; 32.3 failed to give [Ministry] proper and accurate information on which to exercise its discretion to alter his role or place him on garden leave in circumstances where he knew that it was relying on him, to provide such information; 32.4 deliberately and intentionally misled Mr Presencer on both 18 May and 22 May in relation to his competitive intentions; 32.5 acted in the manner set out above with the intention (which is the natural inference to be drawn from the circumstances set out above) to secure an early release from his contract of employment; 32.6 falsely asserted to the disciplinary hearing that he had informed Mr Presencer that he would be undertaking dance music work at the meeting of 18 May 2007; 32.7 sought to take the benefit of the loan in circumstances where he knew that he was no longer entitled to the benefit of the loan and/or knew that it was no longer in the interests of [Ministry] for its holding company to provide the loan. 33. In the circumstances, given the breach of contractual obligations and misconduct, [Ministry] was entitled to and did dismiss [Mr Cook] summarily on 3 August 2007.’
[44]It is, therefore, in reliance on those allegations that Ministry claimed to be entitled to dismiss Mr Cook summarily. The damages claim is pleaded in paragraphs 34 to 37. The case is that, but for his breaches of contract and duty, Mr Cook(a) would not have been off sick between 24 May and 3 July 2007, his stress being induced by confrontation with his own lies, and(b) would have worked out his full notice period and so achieved a similar number of successful dance records for the fourth quarter of 2007 as he had in previous years. The claimed damages are enormous (five or six figures). It is, I consider, a fair interpretation that the major part of the alleged loss is said to be dependent upon the non-availability of Mr Cook’s services as a result of his dismissal on 3 August 2007. If his dismissal was justified, it is accepted that in principle the claimants can recover for such loss. If it was not justified, they cannot so recover; and the measure of any recoverable loss in respect of the prior period is, I infer, infinitely smaller, if any can be proved at all, which Mr Cook says it cannot. Mr Cook served a Defence and Counterclaim, by which he claimed damages for the stress that Ministry’s conduct inflicted on him and for wrongful dismissal (loss of remuneration between 4 and 28 August 2007).

Burton J’s judgment

[45]Burton J dealt first with ‘the original lies’ alleged in paragraphs 32.2 to 32.5 of the Particulars of Claim, which were admitted in the sense I have explained. He pointed out that Mr Cook had never actually admitted that he had so lied and referred to his letter of 19 June to Mr Bacchus in which he said that he had ‘told Ministry all along, I will be focusing on artist-based A&R work rather than one-off dance hits and compilations.’ Burton J also referred to the notes of the 3 July meeting between Mr Cook and Mr Presencer, in which Mr Cook is noted as saying that ‘I might have mentioned [to you] something about dance singles.’ Mr Cook’s case was that, having discovered on 22 May that he had lied, Ministry elected against treating his conduct as repudiatory of his employment contract and instead opted to affirm the contract. Reliance was placed on Mr Bacchus’s letters of 24 May and 7 June, the notes of the meeting of 11 June, Mr Palumbo’s letter of 13 June, Mr Bacchus’s letters of 22 and 25 June and 2 July, the notes of the meeting of 3 July and an email from Mr Bacchus to Mr Cook on 4 July.[46]Burton J found overwhelming the case that, with knowledge of his repudiatory conduct, Ministry had affirmed Mr Cook’s contract. They had not (as was open to them) reserved their position with regard to the effect of Mr Cook’s lies but had unarguably provided, with suitable safeguards, for the continuance of his contract during the duration of the notice period. Moreover, Mr Bacchus’s evidence admitted that Ministry only decided to commence a disciplinary process after the meeting on 3 July. Ministry knew perfectly well how to reserve its position if it had wanted to: it did just that in its letter of 25 June in relation to the loan allegation. The judge concluded and held that it followed that it was not open to Ministry to rely on any of the allegations in paragraph 32.2 to 32.5 to justify its dismissal of Mr Cook.[47]That left for consideration three other alleged breaches of duty, each of which was also said to justify the summary dismissal. First, there was the ‘settled intention’ allegation in paragraph 32.1. The judge said this depended on(i) whether Mr Cook owed a duty to Ministry to disclose any such ‘settled intention’ and, if so,(ii) when he formed such intention, Ministry’s case being that there was sufficient to justify an inference that it pre-dated 16 May 2007 and that disclosure would provide the full story. The judge’s view was that, if there was such a breach, there would not have been any affirmation of it and the principle in Boston Deep Sea Fishing & Ice Co v. Ansell (1888) 39 LR Ch.D. 339 would or might enable Ministry to invoke it in retrospective justification of the dismissal. It is implicit that the judge concluded that it is arguable that Mr Cook did owe Ministry a duty to disclose any such ‘settled intention’ that he had formed and that an investigation of the evidence at the trial might enable Ministry to justify the dismissal. He was not prepared to conclude that the paragraph 32.1 case was unarguable and he allowed it to go to trial.[48]As for the allegation in paragraph 32.6,

the judge said that:

‘This was the first time [Mr Cook] had asserted, not that he was not going to compete, but that he was going to compete, and had so told Mr Presencer in May. Mr Croxford relies upon this, particularly in the light of the concession for the purposes of this application, as amounting to an assertion that Mr Presencer, his superior, was lying.’
Ministry’s case was that this was a ‘last straw’ breach that had the effect of re-opening, and entitling reliance upon, the breaches alleged in paragraph 32.2 to 32.5. Mr Cook’s case was that the disciplinary hearing at which this further alleged breach occurred should not have been held at all. The judge rejected the ‘last straw’ argument but held that it was arguable that this was a fresh repudiatory breach that, if proved, could justify the dismissal.[49]Finally, the judge dealt with the paragraph 32.7 allegation. Mr Cook’s case was that his acceptance of the £100,000 loan offer was not even arguably a breach of the implied term of trust and confidence. The offer had not been withdrawn once he had resigned. The judge held it was plainly arguable that the acceptance of the loan was a breach of contract or duty justifying dismissal and that as Ministry had expressly reserved its rights in respect of such breach it had not precluded itself from treating it as repudiatory.[50]The outcome was that Burton J made an order whose effect I summarised in paragraph [3].

The claimants’ application for permission to cross-appeal

[51]Smith LJ refused this application on the papers but permitted its renewal on the hearing of Mr Cook’s appeal. The claimants admit that, had Mr Cook not appealed against Burton J’s judgment, they would not have cross-appealed. That was because ‘the major allegations’ were left by Burton J to be tried. But as Mr Cook did appeal, the claimants want to correct what they say were errors by the judge in finding that they had precluded themselves from dismissing Mr Cook in reliance on the paragraph 32.2 to 32.5 breaches. They say he was also in error in making the costs order that he did. I deal with the claimants’ application first, since if it is to any extent correct it will affect the disposition of Mr Cook’s appeal.[52]Mr Croxford QC’s submission was that Burton J’s finding on affirmation failed to apply the appropriately high test that Mr Cook had to pass on a summary judgment application. The question was whether the claimants had a real (as opposed to fanciful) prospect of establishing at trial that they were entitled to dismiss Mr Cook summarily. The court should not be willing to find that a repudiated contract has been affirmed without ‘very clear evidence that the injured party has indeed chosen to go with the contract notwithstanding the other party’s repudiation’ (Yukong Line Ltd of Korea v. Rendsberg Investments Corp. of Liberia [1996] 2 Ll Rep. 604, at 608, per Moore-Bick J).[53]Affirmation in the employment context – ‘essentially the legal embodiment of the everyday concept of “letting bygones be bygones”’ (Cantor Fitzgerald v. Bird [2002] IRLR 867, paragraph 129, per McCombe J) - should, it is said, be something that the court should not be too ready to find having regard to the onerous statutory regime providing protection against employees from unfair dismissal and which in turn imposes burdens on employers not to act precipitately. Good employer/employee relations demand that employers instead act sensitively, with a view to maintaining the employment relationship. They have a statutory duty to follow proper procedures before dismissing an employee, in default of which the dismissal will be automatically unfair. They should make proper investigations before instigating disciplinary procedures.[54]In the present case, it is said that Ministry acted as an exemplary employer during the period of the alleged affirmation, by treating the sick Mr Cook with sympathy and thoughtfulness. Although Ministry was at that time aware of his repudiatory conduct, it sought to persuade him to return to work prior to taking any decision as to disciplinary action. That is said to have been in accordance with good employment practice, although Ministry admits its motivation in this respect was focused primarily on its own interests rather than his. He had made early complaints of improper treatment by Ministry, and Ministry was terrified he might bring a successful claim for constructive dismissal and so obtain a release from the restrictive covenants in his employment contract: Ministry did not, therefore, want to say or do anything that might push him into making such a claim. The submission was, as I followed it, that these were legitimate considerations to take into account in assessing the correctness of the judge’s finding that Ministry had elected not to accept Mr Cook’s repudiations of the contract manifested by the paragraph 32.2 to 32.5 breaches.[55]Mr Croxford accepted that, during this period of expressed care and concern, it was open to Ministry to make clear to Mr Cook that it was reserving its position with regard to those various breaches. It did not, however, do so. He said that to do so could itself have damaged the relationship of trust and confidence that is at the heart of the employment relationship. It is, he said, unreasonable to expect employers to reserve their rights in this way. The omission to do so is, therefore, not something that should be held against an employer in the context of an assertion that it has affirmed the employment contract. The submission that Ministry did not need to reserve its rights, and acted reasonably in not doing so, lies uneasily with the fact that, at least in relation to the matter of the £100,000 loan, it did expressly reserve its rights.[56]In my judgment these submissions go nowhere. Burton J’s considerable experience of employment law is such that there is no doubt that he was sensitive to an employer’s duties towards its employees, including the need for employers to tread carefully and act fairly when taking steps that might result in a dismissal. I have no difficulty in accepting that in a case in which an employee commits what is apparently a repudiatory breach of his employment contract, following which the employer engages in disciplinary investigations and procedures leading to dismissal, it will rarely be capable of being said that the employer has at the same time somehow affirmed the contract. But that is not this case by several leagues. The undisputed facts are that during the weeks following the known commission by Mr Cook of conduct that Ministry was (much later) to assert was so destructive of the employment relationship as to merit his summary dismissal, Ministry(a) gave no indication to Mr Cook that it was disposed to bring disciplinary proceedings against him as a result of his actions,(b) did not even consider such disciplinary proceedings until after 3 July 2007, and(c) on the contrary, in the knowledge of the facts, repeatedly made it clear to him that it regarded him as bound by his contract of employment, which it expected him to work out to the bitter end, with the immediate task being to decide what his continuing role was to be. There is no reason why, if it had wanted to, Ministry could not have kept its options open by expressly reserving its rights against Mr Cook until (for example) he returned to work, and it did reserve its rights in respect of the £100,000 loan transaction. In my judgment Burton J was fully entitled, and right, to find that, on the admitted facts, Ministry had affirmed the contract in the face of the known commission of the paragraph 32.2 to 32.5 breaches.[57]Mr Croxford’s alternative, fall-back submission was that the commission of the alleged paragraph 32.6 breach (which Burton J permitted to go to trial) was a ‘last straw’ justifying Ministry’s summary dismissal of Mr Cook which also had the effect of re-opening the ‘affirmed’ breaches so as to entitle Ministry to rely on them as well. The judge gave short shrift to that submission, for reasons that Mr Croxford said were wrong (the judge saying that it was ‘neither fair nor just that the alleged breach should reopen those allegations’). There is, I consider, something in that criticism but I anyway regard the submission as having deserved its rejection.[58]The ‘last straw’ principle received consideration by this court in Omilaju v. Waltham Forest London Borough Council [2005] ICR 481. It is usually invoked by an employee who seeks to show that a series of incidents, some perhaps quite trivial, cumulatively combined to constitute a breach by the employer of the implied term not without reasonable and proper cause to act in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee (‘the implied term of trust and confidence’); and that such breach justified him in leaving and claiming to have been constructively dismissed. What will finally have caused him to leave will be the last incident in the series – the ‘last straw’ – which need not by itself amount to a breach of contract, but whose essential quality must be that ‘… when taken in conjunction with the earlier acts on which the employee relies, it amounts to a breach of the implied term of trust and confidence. It must contribute something to that breach, although what it adds may be relatively insignificant.’ (Dyson LJ, at paragraph 19) The question in such cases is whether the cumulative series of acts taken together amounted to a breach of the implied term.[59]An employee is subject to a like implied term of trust and confidence although I am unaware of any case in which the ‘last straw’ principle has been invoked by an employer against an employee. Even assuming it can be, I do not understand how it is thought to be relevant in this case. The paragraph 32.6 breach said to have been the ‘last straw’ is the allegation that Mr Cook ‘falsely asserted to the disciplinary hearing that he had informed Mr Presencer that he would be undertaking dance music work at the meeting of 18 May 2007.’ This was translated by the judge as being an allegation that at the hearing Mr Cook had accused Mr Presencer of lying in his assertion that Mr Cook had said nothing about the possibility of undertaking such work. The case that I understand Mr Croxford to have invited us to accept is that this alleged breach by Mr Cook of the implied term of trust and confidence was ‘the last straw’ that, on top of all the grief he is said to have caused Ministry down to that point, finally caused Ministry to sack him; and Ministry ought therefore to be entitled to rely on the whole course of his previous misdeeds in considering whether the commission of this ‘last straw’ breach justified his summary dismissal – including the four misdeeds which the judge held Ministry had declined to accept as repudiatory breaches.[60]With respect, I regard the argument as mistaken. By 11 July 2007 Ministry, having concluded its investigation, considered that Mr Cook had a case to answer in relation to five separate alleged breaches of the implied term of trust and confidence. It summoned him to a disciplinary hearing to answer them. The hearing took place, three of the allegations were found proved and Mr Cook was dismissed on the basis that they justified his dismissal. He was not dismissed because of the imputation on Mr Presencer’s honesty said to have been implicit or explicit in his evidence at the disciplinary hearing. The suggestion that such imputation was, or can now be regarded as, the ‘last straw’ resulting in his dismissal is unsupported by and contrary to the evidence. If the judge was right to allow the paragraph 32.6 allegation to go to trial, that allegation, if proved, may perhaps be held to justify the summary dismissal. But that is all. It will not enable Ministry retrospectively to create an artificial ‘last straw’ case. Ministry’s attempt to invoke this principle amounts to nothing more than an assertion that each successive breach entitles the innocent party to undo its prior affirmation made in the knowledge of the prior breaches. That is not the law.[61]The final issue raised in the application to cross-appeal is in relation to the judge’s costs order, which was that half the costs of the Part 24 application should be Mr Cook’s costs in the case and half should be costs in the case. It is said the judge should have identified who was the substantial winner and who the substantial loser and awarded costs on that basis. It is said that the claimants were the substantial winners, because the judge’s order left alive their bid to justify Mr Cook’s summary dismissal and their claim for damages. Mr Cook’s purpose had been to strike out the whole claim and so prevent a trial, but he had failed.[62]All I would say about the judge’s costs order is that there is probably a variety of orders he could have made in respect of costs and other judges might have made one or other of them. I cannot, however, see that the judge erred in principle in his approach to the question of costs, which was pre-eminently a matter for his discretion. Mr Cook achieved a modest measure of success on his application and the judge’s order reflected this with commensurate modesty. I would not re-open it.[63]I would refuse permission to the claimants to cross-appeal.

Mr Cook’s appeal

[64]The thrust of Mr Cook’s appeal, advanced by Mr Hochhauser QC, is that the judge ought to have taken his findings on affirmation to their logical conclusion and found that Ministry had so conducted itself as to affirm the employment contract in respect of all the paragraph 32 allegations. Had he done so, he should have held that the dismissal was unlawful, that any loss suffered by Ministry after 3 August 2007 was the consequence of its own breach of contract in wrongfully dismissing Mr Cook, and that it had not suffered any provable loss by reason of Mr Cook’s absence on sick leave between 24 May and 3 July. The whole claim should have been struck out.[65]Mr Hochhauser reminded the court of the principles by reference to which an innocent contracting party, faced with a repudiation of the contract by the other contracting party, has an option to affirm the contract and treat it as continuing or to accept the repudiation and treat itself as discharged from further obligations under it. If he affirms it, that affirmation is irrevocable and he cannot thereafter claim to treat the contract as discharged. Mere delay will not amount to affirmation, but if prolonged it may be evidence of an implied affirmation. If the innocent party calls on the guilty one to perform the contract further, he will normally be taken to have affirmed the contract since his conduct is consistent only with the continued existence of the contractual obligation. The same principles apply in an employment context, as explained in the illuminating judgment of Browne-Wilkinson J in the Employment Appeal Tribunal in W.E. Cox Toner (International) Ltd v. Crook [1981] ICR 823, at 828, 829, from which my above summary derives. I deal separately with each of the three sub-paragraphs in paragraph 32 that are in issue.

Paragraph 32.1

[66]The allegation is that Mr Cook ‘failed to inform the Claimants that he had a settled intention to compete with them at any stage prior to John Reid revealing that information on 22 May 2007.’ Mr Hochhauser’s submission was, first, that the allegation is based on an alleged breach of a non-existent duty and he referred to G.D. Searle & Co. Ltd v. Celltech Ltd and Others [1982] FSR 92, at 99, 101, 102, per Cumming-Bruce LJ; Framlington Group plc and another v. Anderson and others [1995] 1 BCLC 475, at 497, 498, per Blackburne J; Saatchi & Saatchi Company Plc and Others v. Saatchi and Others 13 February 1995, unreported, at 33, 34, per Jonathan Parker J; and Helmet Integrated Systems Ltd v. Tunnard [2007] IRLR 126, at paragraphs 46 to 49, per Moses LJ.[67]If, contrary to that submission, Mr Cook did come under a duty of the nature alleged, Mr Hochhauser submitted that he could not have been under such duty prior to 16 May 2007, when he signed up with Warner: previous thoughts about the possibility of a job change cannot have amounted to a ‘settled intention’. He said that it is also obvious that Ministry knew by 22 May that Mr Cook had earlier formed that intention and had not disclosed it to them: that is their pleaded case, that case also being that such non-disclosure was a repudiatory breach of his contract. Just as Ministry’s subsequent affirmation of that contract had, as the judge held, prevented reliance on the paragraph 32.2 to 32.5 allegations to justify his summary dismissal, so must it prevent reliance on this alleged breach. Ministry did not reserve its rights in respect of it any more than in respect of the paragraph 32.2 to 32.5 breaches. The judge’s observation that the principle in Boston Deep Sea Fishing might enable the claimants to invoke paragraph 32.1 in aid of a retrospective justification of the dismissal does not work, because the paragraph 32.1 allegation is not a post-dismissal discovery.[68]Furthermore, submitted Mr Hochauser, even if any breach of contract had been committed by this particular non-disclosure, no measurable loss could be said to have flowed from it because Ministry’s diversion of Mr Cook’s energies at Ministry to activities other than those in which he had previously been engaged was not because of any breach of his contract of employment, but because they were regarded as sensible commercial steps to take given that he had lawfully decided to join a competitor. There was therefore no causal link between his alleged breach of contract and any loss suffered by Ministry arising from the fact that he did not continue during his notice period to work in the same manner as before.[69]Mr Croxford QC’s submission for the claimants was that it was plain that, as a fiduciary, Mr Cook was obliged to ensure that his self-interest and duty to Ministry did not come into conflict; that he was faced with such a conflict as soon as he formed a settled intention to compete with them at Warner; and that he could only resolve it by a prompt resignation. He invoked British Midland Tool Ltd v. Midland International Tooling Ltd and Others [2003] 2 BCLC 523, at 558, per Hart J; and Shepherds Investments Ltd v. Walters and Others [2007] IRLR 110, at paragraph 108, per Etherton J. He submitted that there can, in relation to this breach, be no question of Ministry having affirmed the employment contract with knowledge of it, because Ministry does not know when the ‘settled intention’ was formed; and it is not possible for an effective affirmation to be made without knowledge of the relevant facts. It did not know the facts when it dismissed Mr Cook and it does not know them now.[70]I will assume, without deciding, that Mr Croxford is correct that once any so-called ‘settled intention’ to compete was formed, Mr Cook had a duty to disclose it to Ministry; and that any omission to do so was a breach of the implied term of trust and confidence to which it is said he was subject. The difficulty that I have, however, with this part of the claimants’ case is that the plain sense of their assertion in paragraph 32.1 is that Mr Cook formed such settled intention at some unknown time prior to 22 May 2007 and that it was on that day that they learnt of it from Mr Reid.[71]In my judgment it must follow, therefore, that as from 22 May 2007 the claimants were as much aware of this breach of duty as of the paragraph 32.2 to 32.5 breaches: their own pleaded case so shows. I recognise that they neither know nor allege when Mr Cook formed his settled intention. But that is irrelevant to the question of whether or not they affirmed the employment contract in the knowledge of this particular breach. Their case is that he had wrongfully failed to disclose an already settled intention, of which they knew by 22 May. Any such failure would, on their case, amount to a fundamental breach of the employment contract, whether the failure had continued for six days or six weeks. That is because every breach of the implied term of trust and confidence is a fundamental one (Morrow v. Safeway Stores [2002] IRLR 9). Once they knew that the breach had occurred, they had to make a decision as to what to do about it. Their decision was to affirm the contract.[72]I recognise that a discovery of precisely when the ‘settled intention’ was formed might be relevant to a claim for damages based on such breach. But I do not accept that it is relevant to the question of whether or not Ministry can be taken to have affirmed the contract in the knowledge of the breach. I would allow Mr Cook’s appeal in relation to paragraph 32.1 and vary paragraph 1 of the judge’s order so as to extend it also to this alleged breach.

Paragraph 32.6

[73]This allegation is that Mr Cook ‘falsely asserted to the disciplinary hearing that he had informed Mr Presencer that he would be undertaking dance music work at the meeting of 18 May 2007’. The judge allowed this allegation to go to trial on the basis (raised by him) that it amounted to an assertion by Mr Cook that Mr Presencer, his superior, had lied. If it were proved, it could, the judge held, arguably amount to a breach by Mr Cook of the implied term of trust and confidence. It is this interpretation of the paragraph 32.6 allegation that the claimants want to make good at the trial. I will call this the ‘wider’ interpretation.[74]Mr Hochhauser submitted that paragraph 32.6 contains no allegation that Mr Cook had accused Mr Presencer of lying. It amounts to no more than an allegation that Mr Cook had advanced a ‘false’ case. The pleaded basis for paragraph 32.6 is to be found in paragraph 30, which similarly falls short of alleging that Mr Cook had accused Mr Presencer of lying. It reads:
‘In a submission prepared for the purposes of his disciplinary hearing which was held on 19 July 2007, [Mr Cook] asserted that he had informed Mr Presencer at the meeting on 18 May 2007 that “there was a possibility that [he] would be involved in some dance work at Warner but that that would not be the focus of [his] work for them.”’
Whilst that also alleges the advancing by Mr Cook of an account different from Mr Presencer’s, Mr Hochhauser submitted that the fact that two people advance different recollections of a conversation does not mean that either is accusing the other of lying. He submitted that the short answer to this part of the judge’s decision is that paragraph 32.6 does not plead a case that, if proved at the trial, would justify the dismissal of Mr Cook. The claimants did not submit that this interpretation of paragraph 32.6 (the ‘narrower’ interpretation) alleged facts that, if proved, could amount to a breach of the implied duty of trust and confidence.[75]In my judgment Mr Hochhauser’s submission as to the sense of paragraph 32.6 is correct. I read it as accusing Mr Cook of lyingat the disciplinary hearing as to what he had said on 18 May. It does not, however, either expressly or impliedly allege that Mr Cook was also accusing Mr Presencer of lying in advancing his different account. If witness A dishonestly advances factual case X and witness B advances the opposite case, it does not automatically follow that witness A is accusing witness B of lying. If asked whether he is doing so, he may say (dishonestly) that he believes that witness B is simply honestly mistaken in his recollection.[76]On the other hand it does appear that Mr Cook did advance a case at the disciplinary hearing to the effect that Mr Presencer had dishonestly made up his version of the exchange on 18 May, a case that Mr Holman in his decision letter of 3 August dismissed as fanciful. Equally, Mr Presencer’s case at the disciplinary hearing was that Mr Cook had lied to him. Assuming that paragraph 32.6 is to be given the wider interpretation, Mr Hochhauser submitted that it is anyway not open to Ministry to make that wider case. The bulk of the argument that we heard on paragraph 32.6 went to that question rather than to the pleading point.[77]Mr Hochhauser submitted first that at the meeting on 3 July Mr Cook had made the samepoint to Mr Presencer that he was later to make at the disciplinary hearing, namely that on 18 May he had informed him that he might be involved in some dance music at Warner. He said that, if the wider interpretation of paragraph 32.6 is available to the claimants, the point made by Mr Cook on 3 July must have carried the like assertion of dishonesty on the part of Mr Presencer. The next day Ministry welcomed Mr Cook back at work; it thereby affirmed the employment contract and so precluded itself by such affirmation from relying on that imputation of dishonesty as a ground for dismissal. It followed, said Mr Hochhauser, that Ministry cannot now rely on the same allegation based on what Mr Cook said at the disciplinary hearing of 19 July. Moreover, he submitted, given that Ministry had by 4 July affirmed the employment contract, it ought not to have embarked upon the disciplinary process at all, which was itself a breach of the implied term of trust and confidence. Ministry ought not to be allowed to try to reap a benefit from its own wrong.[78]Mr Hochhauser submitted secondly that, even if the affirmation argument just described is wrong, it is not open to Ministry to justify its dismissal of Mr Cook in reliance on a breach of his employment contract of which it was aware on 3 August, being a breach upon which it did not rely as a ground for his dismissal. He submitted that Ministry had in effect waived any right to rely on that ground as justification for the dismissal. He cited authorities, to which I do not propose to refer, which he said supported that submission. I shall refer to this as ‘the waiver point’, although I do not suggest that that is necessarily its correct characterisation.[79]Mr Croxford’s contrary argument was that Mr Hochhauser’s point based on the narrower interpretation of paragraph 32.6 was not taken before the judge, who dealt with this issue on the basis that it bore the wider interpretation, and he said that the point could not therefore be taken on the appeal. He said that at the disciplinary hearing Mr Cook advanced an account differing from all previous ones, including the assertion that he had told Mr Presencer on 18 May that he would be involved in some dance music work at Warner but that the focus was to be on the artistic development of non-dance artists. The notes of the disciplinary hearing showed that Mr Cook advanced the case that Mr Presencer was being less than frank in denying that he had told him on 18 May of his intention to work on dance music. The essence of Ministry’s case in respect of this allegation is that Mr Cook’s false assertion against his superior of lying breached the implied term of confidence and trust to which he was subject and so entitled it to dismiss him. Mr Croxford recognised that this was not a ground on which Ministry summarily dismissed Mr Cook even though it was by then well aware of the facts. But he submitted, by reference to a number of authorities to which I also do not propose to refer, that Ministry’s knowledge of this breach at the time of dismissal does not prevent it from now relying on it as a justification for the dismissal. He submitted that Mr Hochhauser’s ‘waiver point’ was mistaken.[80]I propose to deal with this issue on the assumption that paragraph 32.6 carries the wider interpretation. If Mr Hochhauser is correct that that case cannot succeed at trial, then as the claimants do not seek to maintain a case based on the narrower interpretation, paragraph 32.6 should be struck out. If, however, Mr Hochhauser is not correct, it will be necessary to address the question of whether paragraph 32.6 should be allowed to survive to trial in its present form. In dealing with the submissions, I remind myself that all that is before the court is an appeal against an order made on a defendant’s CPR Part 24 application. As regards the paragraph 32.6 issue, the question is whether the judge was wrong to conclude that the claimants have a real, as opposed to fanciful, prospect of success on that point at trial. This court, like the judge, should not forget that the facts relating to the issue have not yet been found.[81]I was not persuaded by Mr Hochhauser that the fact of Mr Cook’s exchanges with Mr Presencer on 3 July, followed by Mr Cook’s return to work, precludes the reliance now sought to be placed on the separate allegation as to what Mr Cook subsequently said at the disciplinary hearing. Whilst I am not to be taken to be expressing any final view on this (which I regard as a matter for the trial judge), my instinct is that any affirmation of the employment contract in the knowledge of the prior alleged breach would not have prevented a dismissal in reliance on the later, separate one. Nor, I should say, was any suggestion made to us that any principle of public policy prevents the claimants from relying on what Mr Cook said at the disciplinary hearing. Nor, I should also say, was I persuaded that the institution of that hearing was itself unanswerably a breach of the implied duty of trust and confidence.[82]As for Mr Hochhauser’s waiver point, again (for like reasons) I do not propose to express a final view on it. The bulk of the argument on this was contained in written submissions following the hearing and so we have not had the benefit of oral argument on the many authorities referred to. All I propose to say is that, having considered the rival arguments, my intuitive view is that there is no reason in principle why the claimants cannot justify their dismissal of Mr Cook on a ground of which they were aware when they dismissed him, even though that ground was not advanced at the time as the basis for his dismissal. As for the authorities to which we were referred, my reading of them is that they give the claimants the better of the argument and none appeared to me to provide clear authority in support of Mr Cook’s contrary case. The arguments did not persuade me that, on those facts of which we are aware, Ministry is barred from advancing the wider paragraph 32.6 interpretation in support of its dismissal of Mr Cook.[83]That leaves the pleading point. Since, in my judgment, paragraph 32.6 does not allege the case that the judge and the claimants derive from it, what is to be done? No application for permission to amend was made at the hearing, even though the interpretation of paragraph 32.6 was there expressly in question. On the other hand, in the course of the exchange of written arguments following the hearing, the claimants did belatedly seek permission to amend paragraph 32.6 if, contrary to their submissions, the court should disagree that it bears the wider interpretation. No draft amendment was, however, provided for the court’s consideration.[84]In his reply in that round of written submissions, Mr Hochhauser protested about that application, submitting that but for the court’s request for further submissions, no such application would have been made. He said it was outside the scope of the matters on which the court had asked for submissions, its making was opportunistic, and no explanation had been offered as to why it had not been earlier (either following Mr Cook’s appellant’s notice or at the hearing). He referred to the absence of a draft amendment. He pointed out that Mr Cook is an individual facing an enormous damages claim and that the litigation is stressful for him. It was, said Mr Hochhauser, out of line with the overriding objective to allow the amendment at this stage. A party has no right to an amendment, cases are expected to be conducted expeditiously, proportionately and in a manner that ensures that the parties are on an equal footing. It would, he said, be ‘manifestly unjust’ to allow the claimed amendment now.[85]I have some sympathy with Mr Hochhauser’s controlled tirade about the application; and I express surprise as to the claimants’ omission to make it earlier, since it appears to me obvious that paragraph 32.6, as currently pleaded, does notenable the claimants to make at trial the case they want to make. The making of this case does not, however, take Mr Cook by surprise. It was raised by the judge below, although there was an issue before us as to whether it was the subject of oral argument before him. It was, however, the subject of the main debate on paragraph 32.6 before us.[86]I was not persuaded by Mr Hochhauser that, for the various reasons he advanced, it would be unjust to allow an amendment at this stage. The trial is some way off and the parties will have plenty of time to prepare for this issue. Whilst the adding of another string to the claimants’ bow will obviously be unwelcome to Mr Cook, that by itself is no ground for refusing to permit the proposed amendment. I do not accept that to allow it would be ‘manifestly unjust’. In principle, I consider that, subject to the usual costs consequences of a permitted amendment, the claimants should be allowed to amend paragraph 32.6 so as to expand it to incorporate what I have referred to as the wider interpretation. As I explained in paragraph [6] above, we had a short further hearing on the amendment application, at which a proposed amendment was produced. No objection was raised as to its form, but Mr Hochhauser repeated and developed his submissions as to why it would now be unjust to permit the amendment. The court indicated at the oral hearing to which I have referred that it would permit the requested amendment on the usual terms as to costs, its reasons being essentially those I have summarised.[87]The result is that the claimants’ paragraph 32.6 allegation survives Mr Cook’s challenge, but only in its amended form.

Paragraph 32.7

[88]Paragraph 32.7 alleges that Mr Cook ‘sought to take the benefit of the [£100,000] loan in circumstances where he knew that he was no longer entitled to the benefit of the loan and/or knew that it was no longer in the interests of [Ministry] for its holding company to provide the loan.’[89]Mr Hochhauser submitted that the circumstances surrounding this episode were not such as to justify the conclusion that Mr Cook’s acceptance of the loan amounted to a breach of the implied term of trust and confidence. Since any such breach is automatically a repudiatory one, the facts said to found the existence of such a breach must be serious. The act said to constitute the breach must be one that is likely to destroy or seriously damage the relationship of trust and confidence. The loan was (as the claimants admit) offered to Mr Cook in part in respect of his past performance, Mr Cook was open about accepting it and informed the claimants he had done so within five days (19 June). The claimants reserved their position about it by their letter of 25 June. The matter was then discussed on 3 July when Mr Presencer said the loan was not one that it was open to Mr Cook to accept. Mr Cook appears to have recognised that, he abandoned any claim to take it up and paid off the balance of his bridging loan the next day. If, said Mr Hochhauser, the acceptance of the loan was a repudiatory breach, Ministry had by 4 July precluded itself from relying on it as a ground for dismissal.[90]Mr Croxford accepted that a breach of the implied term of trust and confidence requires behaviour serious enough to have a ‘pretty good chance’ that it will damage the relationship of trust and confidence (Bank of Credit and Commerce International SA v. Ali and Others (No.2) [2000] ICR 1354, paragraph 53(4), Lightman J). On a summary judgment application such as was before the judge, the claimants needed to do no more than show they had more than a fanciful chance of making this good case at trial, which is not a high hurdle. The judge accepted that it was plainly arguable that in accepting the loan in the circumstances in which he did, Mr Cook acted in breach of the relevant duty. Mr Croxford submitted that his order should not be disturbed.[91]It appeared to me that there was something to be said for the view that, as the £100,000 loan was admittedly in part by way of reward for Mr Cook’s past performance as well as (according to the letter of 10 May) by way of a ‘wish to ensure your continued employment’, Mr Cook was entitled to say that these combined purposes were one and indivisible; and that the fact that he only received the offer after he had resigned did not prevent him from accepting it on the basis that it represented his just reward for work done. Moreover, he accepted it openly; and when Ministry made a fuss about it he abandoned his claim and repaid the balance of the bridging loan. How, one might ask, can conduct of that sort be regarded as constituting a breach of Mr Cook’s implied term of trust and confidence? In his evidence in these proceedings Mr Cook says that he did accept the loan in the belief that it was money owed to him for work done (paragraph 42 of his witness statement of 12 May 2008).[92]The problem with that argument, and with Mr Cook’s adoption of it in his witness statement, is however that it bears no relation to how Mr Cook appears to have viewed the matter at the time. When Mr Presencer put to him on 3 July 2007 that the loan was ‘a long-term incentive, that’s how the Trust sees it’, he did not respond with the claim it was a bonus due to him for work done. His defence of the ‘loan allegation’ at the disciplinary hearing was that, having withdrawn his threat of a constructive dismissal claim, his employment by Ministry was assured until 18 November 2007; and, if he decided not to go to Warner after all, he assumed that Ministry would make an offer to keep him on in which event his employment with it would continue. He said the loan offer did not define the timescales of ‘continued employment’ and that he was advised that he could properly accept it. Mr Holman, who conducted the disciplinary hearing, was unimpressed by that argument and found that it was advanced dishonestly. There was no suggestion by Mr Cook that the reason he accepted the loan was because it was a reward due to him that he was entitled to accept. One inference is that Mr Cook only grasped that perception of the position after his lawyers had got at him. That does not, of course, mean that the perception was not correct. Whilst M. Jourdain did not realise it at the time, he had always been speaking prose.[93]The judge had regard to Mr Cook’s original defence of the loan allegation in coming to his conclusion on this part of the application. My mind has wavered on this part of the case, but I have concluded that the judge’s decision should be upheld. The claimants’ case is that it was obvious that the loan was only offered as an incentive to achieve continued employment. At the time, Mr Cook appears also to have so regarded it and to have advanced at the disciplinary hearing what were found to be disingenuous reasons for being entitled to accept it. Take those reasons away, as Mr Holman did, and it is arguable that Mr Cook himself recognised at the time that he should not have accepted the loan and that in doing otherwise he was doing something morally reprehensible. The claimants’ case is that he was doing just that. In my judgment, it is not for this court on an appeal on a summary judgment application to descend into the arena and endeavour to decide the merits of an essentially factual dispute that the judge decided should go to trial. The judge concluded that it was ‘plainly arguable’ that Mr Cook breached his duty. I would not take a different view. I am also not satisfied that, by admitting Mr Cook back to work on 4 July, Ministry elected to affirm the employment contract in the full knowledge of this alleged repudiatory breach. Again, I do not decide that issue one way or the other: it will be a matter for the trial judge. But as Ministry expressly reserved their position in relation to the loan matter in the letter of 25 June, it has a good arguable case that it made no such election. I would dismiss Mr Cook’s appeal on this ground.

Disposition

[94]I would refuse permission to the claimants to appeal. On Mr Cook’s appeal, I would vary paragraph 1 of the judge’s order to include a reference to paragraph 32.1 of the Particulars of Claim. The court has already indicated that it will permit the claimants to amend paragraph 32.6 in the form of the draft amendment that has been produced, and so it follows that I would otherwise dismiss Mr Cook’s appeal. In so far as Mr Cook asks us to strike out any part of the damages claim, I would not do so. There remains all to play for on that claim in respect of the post-3 August 2007 period. As for the prior period, it is more questionable, but this court cannot be satisfied that no loss can be proved. The claimants’ case in this respect is (in part) that Mr Cook’s absence on sickness leave was the direct consequence of being confronted with his lies perpetrated in breach of his duties of fidelity to Ministry.

Lord Justice Wilson :

[95]I agree.

Lady Justice Smith :

[96]I also agree.

Cited in 10 later judgments

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