FW Farnsworth Ltd & Anor v Lacy & Ors [2012] EWHC 2830 (Ch)

[2012] EWHC 2830 (Ch)Case No HC12C02438IN THE HIGH COURT OF JUSTICECHANCERY DIVISIONVenue The Royal Courts of Justice, Rolls Building, 7 Rolls Building, London EC4A 1NLDate 16/10/2012
Before
THE HON. MR JUSTICE HILDYARD
Between
(1) FW FARNSWORTH LIMITEDClaimants(2) NORTHERN FOODS LIMITEDClaimant(1) PAUL LACYDefendants(2) MARIA YUSTEDefendant(3) POOLES OF WIGAN LIMITEDDefendant(4) NEIL COURT-JOHNSTONDefendant(5) BOBELLA LIMITEDDefendant(6) JOANNE KENEDYDefendant
Stuart Benzie (instructed by Freeth Cartwright LLP) for ClaimantsJames Laddie QC (instructed by Ford & Warren) for DefendantsHearing Hearing dates: 17th and 18th September 2012
Judgment
[1]These proceedings concern the alleged collation and misuse by the First and Second Defendant, whilst employed by the Claimants, of confidential information belonging to the Claimants. It is alleged that the First and Second Defendants passed some or all of that confidential information to the Third Defendant, a company said to be in competition with the Claimants, pursuant to an unlawful conspiracy between the Third, Fourth, Fifth and Sixth Defendants (and, possibly, others).[2]A particular matter in issue in those proceedings is whether the First Defendant, Mr Paul Lacy (“Mr Lacy”), is bound by contractual provisions (“the Post Termination Restrictions”) restricting what he may do in the 6 months after the termination of his employment by the Claimants. These Post Termination Restrictions would, for example, prohibit him working for a rival business and soliciting defined customers or seeking to obtain orders from them for materially similar products to those provided by the Claimants.[3]That issue is not as to the construction of the Post Termination Restrictions but as to whether Mr Lacy became bound by a contract between himself and the Second Defendant, called the 2009 Contract, which contained them, or whether he continued to be employed on the terms of an earlier contract dated 8th April 2003 (“the 2003 Contract”) which did not contain any such restrictions.[4]By an Order of Mr John Jarvis QC (sitting as a Deputy Judge of the Chancery Division) dated 6th September 2012 that issue, on which depends (the parties agree) whether an injunction should be continued against Mr Lacy preventing him from working for the Third Defendant, was directed to be heard at a separate trial, with witness statements to stand as pleadings, somewhat ad hoc arrangements for disclosure of documents, and cross-examination relevant to the issue thus segregated, with a time estimate of 2 days.[5]This judgment is intended to set in context and explain my conclusion that Mr Lacy did become bound by the terms of the 2009 Contract, so that he has been and remains bound by the Post Termination Restrictions until the expiry of 6 months after the termination of his employment.

The parties concerned and their respective witnesses

[6]Mr Lacy and the Second Defendant, Ms Maria Yuste (“Ms Yuste”) worked for the First Claimant, though Mr Lacy’s contractual relationship was with the Second Claimant. Both resigned from their employment in mid-March 2012 in order to join the Third Defendant. Both Mr Lacy and Ms Yuste had 3-month notice clauses; both were required (against their expressed wishes) to work during that notice period. Mr Lacy gave evidence (and was cross-examined); Ms Yuste did not. This aspect of the case only directly concerns Mr Lacy.[7]The Third Defendant is part-owned by the Fourth Defendant, Mr Neil Court- Johnston (“Mr Court-Johnston”). Mr Court-Johnston is Chief Executive officer of the Third Defendant. He was, prior to that, Managing Director of the First Claimant (between June 2008 and June 2010). Mr Court-Johnston also gave evidence, and was cross-examined.[8]The other Defendants played no part in this aspect of the proceedings.[9]The only witness for the Claimants was Ms Celine Doyle (“Ms Doyle”). She is (as she has been since July 2011) the HR Director of the frozen food division of 2 Sisters Food Group (“2SFG”). 2SFG acquired the Second Claimant in April 2011 and is its parent company. Prior to that acquisition (and from August 2010 to July 2011) Ms Doyle was HR Director for a division of the Second Claimant, called Green Isle Foods. Ms Doyle gave evidence on behalf of the Claimants, on which she was cross-examined.

Summary of relevant background

[10]The relevant background context may for present purposes be summarised as follows.[11]Mr Lacy was initially employed in September 2000 as a Technical Graduate. He progressed first to Quality Assurance Manager and then, in April 2009, after acting in that capacity for some months without being formally promoted, to Site Technical Manager. The latter was a grade “E” position denoting a senior management grade within the Claimants’ employment structure. That promotion took place with effect from 1 April 2009.[12]Some time after first being employed (in around April 2003) Mr Lacy had agreed to the terms of, and signed, the 2003 Contract.[13]It is common ground that after his formal promotion Mr Lacy was not sent a new contract (in fact, the 2009 Contract) until on or about 21 September 2009. It is also common ground that he never signed the 2009 Contract, nor did he return it. (All this took place, of course, before Ms Doyle was employed by the Claimants.)

The Claimants’ case on the point in issue

[14]The point in issue is thus whether Mr Lacy impliedly accepted the terms of the 2009 Contract even though he never did so in the manner contemplated and called for by the 2009 Contract (that is, by acknowledging receipt of the statement of the particulars of employment it contained and confirming his agreement by signing it at its foot) .[15]It is the Claimants’ case that following his receipt of the 2009 Contract Mr Lacy applied for and received additional benefits that were only available under and attributable to the terms of the 2009 Contract. The Claimants contend that these were benefits to which Mr Lacy was not entitled under the 2003 Contract, and that his conduct in applying for and receiving such benefits, after he had been sent a copy of the 2009 Contract, comprised acts which necessarily implied acceptance of the terms of the 2009 Contract.[16]More particularly, the Claimants rely on the following acts as denoting his acceptance of the 2009 Contract:(1) Mr Lacy’s move to the defined contribution scheme described in paragraph 10.1 of the 2009 Contract, that being a different pension scheme than that described in paragraph 10 of the 2003 Contract (which was a voluntary, contributory pension and life assurance scheme known as The Northern Foods Pension Scheme); and(2) Mr Lacy’s application for and acceptance of medical benefits for himself and his family which were not (or were not in a form such as to cover his family) available to him under the 2003 Contract but to which the 2009 Contract (by clause 12) gave an entitlement (as a taxable benefit) upon completion of a prescribed application process. The Defendants accept that Mr Lacy did apply for such benefits; but no copy of the relevant application form was in evidence.[17]As I return to briefly later, the Claimants also at one time relied on 3 other acts as denoting Mr Lacy’s acceptance of the 2009 Contract. These related to his revised salary; the provision to him of a better motor-car; and his enrolment in a profit-related incentive plan. But none of these acts was in the end relied on as being wholly referable to Mr Lacy’s acceptance of the 2009 Contract.

Mr Lacy’s case on the point in issue

[18]Mr Lacy, contends that none of the two matters which the Claimants have continued to rely upon was so unequivocally referable to the 2009 Contract as to imply Mr Lacy’s acceptance of the 2009 Contract, and that he never became bound by its terms.

Applicable legal principles

[19]There is little dispute between the parties as to the applicable legal principles. Both agreed that the burden is on the Claimants to establish that Mr Lacy was and is bound by a contract containing the restrictive covenants, and that the 2003 Contract did not contain any such restriction, but the 2009 Contract did. Both agreed that it was for the Claimants to establish that Mr Lacy had agreed to the 2009 Contract, if not expressly then impliedly or by necessary inference.[20]The Claimants did not seek to contend that Mr Lacy expressly agreed to the 2009 Contract. The answer thus turns on the issue of implied or inferred consent.[21]Both Counsel agreed that to establish such consent it is for the employer to show an “unequivocal act implying acceptance”: see per Jacobs LJ in Sallem Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA [2010] EWCA Civ. 397 (“Khatri”).[22]They also both relied in that regard on the decision of the Employment Appeal Tribunal (“EAT”) in Solectron Scotland Ltd v Roper and others [2004] IRLR 4 (which was cited and approved in Khatri), and especially on the following passage (in paragraph 30 of the judgment given by the then President of the EAT, Elias J.):
“The fundamental question is this: is the employee's conduct, by continuing to work, only referable to his having accepted the new terms imposed by the employer? That may sometimes be the case. For example, if an employer varies the contractual terms by, for example, changing the wage or perhaps altering job duties and the employees go along with that without protest, then in those circumstances it may be possible to infer that they have by their conduct after a period of time accepted the change in terms and conditions. If they reject the change they must either refuse to implement it or make it plain that by acceding to it, they are doing so without prejudice to their contractual rights. But sometimes the alleged variation does not require any response from the employee at all. In such a case if the employee does nothing, his conduct is entirely consistent with the original contract continuing; it is not only referable to his having accepted the new terms. Accordingly, he cannot be taken to have accepted the variation by conduct.”
[23]Thirdly, Counsel agreed that the intention of the parties and the fact (or not) of acceptance is thus (and in accordance with ordinary principles of contract) to be objectively ascertained (see per Clarke J. in Ignazio Messina & Co v Polskie Line Oceaniczne [1995] 2 Ll. Rep. 566 at 571, quoting Steyn LJ (as he then was) in Nazrul Islam v Ali Askar [unreported]).[24]Counsel for the Defendants also cited Attrill and others v Dresdner Kleinwort Ltd and another; Anar and others v Dresdner Kleinwort Ltd and another [2012] IRLR 553. In that case an offer of improved contractual terms was made by way of an announcement by the employer to its employees. One question that arose (in addition to others, including for example, the question whether the offer was capable of giving rise to a contract upon acceptance) was whether acceptance of the new terms was to be implied or inferred from the fact that the employees continued to work after the announcement. It was held that such an inference was not warranted: the Court could not be satisfied that the fact that the claimants continued to work and discharge their contractual obligations to their employer was only referable to, such as to imply acceptance of, the terms of the offer contained in the announcement.[25]Khatri illustrates the application of the “only referable” test in a situation where in reality the employee was not called upon to do, and had not done, anything substantively different and yet the employer contended that by continuing to work the employee should be taken to have accepted terms wholly to his disadvantage. Again, the test was not satisfied: nothing the employee had done was wholly referable to, such as to give rise to the inference of acceptance by him of, the new terms.[26]The Attrill case shows that the reluctance of the Court to infer acceptance of new or varied terms from the fact of continuing to work is not confined to cases where the variation is entirely disadvantageous to the employee. In Attrill it is recognised that the Courts will be particularly slow to infer acceptance in such a context (reference being made to what Sir John Donaldson said in this regard in Sheet Metal Components Limited v Plumridge [1974] IRLR 86).[27]However, even in the converse situation of an alteration to the advantage of the employee the “only referable” test must be satisfied. Thus, in the Attrill case the revised terms put forward by way of the announcement were not only beneficial but had in fact been offered with a view to persuading the employees concerned not to leave their employment. Nevertheless, acceptance was not established because the Court could not be satisfied that the fact that the claimants continued in the employment of the employer was only referable to the announcement of revised terms.[28]The present case concerns new terms comprising a mixture of the advantageous and the disadvantageous. Indeed the question is whether the invocation of the former necessarily connotes or is “only referable” to acceptance of the latter.[29]To answer that question it is necessary to consider the evidence as a whole and to determine whether, by their nature and/or in the context, the two acts of Mr Lacy that the Claimants rely upon are referable only to acceptance by Mr Lacy of the terms of the 2009 contract, or whether they are or may be referable to other factors or considerations.[30]In such a case, as it seems to me, the person who alleges inferred or implied acceptance must show that the benefit invoked, being the act relied on as giving rise to the inference of acceptance, was only available pursuant to the contract in question, and that the invocation of that contractual right was in unequivocal terms, such as to be referable only to acceptance of that contract.[31]As indicated above, the question is not as to Mr Lacy’s subjective intention but as to the inference to be drawn from what he did. The fact that he says he never intended to accept the new terms comprised in the 2009 Contract is not only not determinative but legally not relevant.

Undisputed material facts

[32]The following material facts are common ground:(1) Mr Lacy’s 2003 Contract contained no restrictive covenants. It made provision for private medical cover for the employee (upon application) but not his family (clause 9). It also entitled the employee to become a member of the Northern Foods Pension Scheme (a voluntary, contributory pension and life assurance scheme) (clause 10).(2) As mentioned previously Mr Lacy was not provided with any new contract or revised terms at the time of his promotion. It was not (expressly at any rate) suggested to him that his promotion was contingent upon him accepting the terms of a new contract or the revision of the terms of the 2003 Contract.(3) Promotion to Technical Manager did not bring a substantive change of his job duties. Mr Lacy had been doing the substantive job as Acting Technical Manager for some time before then. In terms of what was expected of him nothing really changed.(4) Mr Lacy received a pay rise prior to the provision to him (by the Second Claimant’s HR department) of the 2009 Contract. This pay rise coincided with the salary review date specified under clause 3 of the 2003 Contract (1st April each year starting April 2004). Mr Lacy did not receive any further pay rise after that awarded to him on 1 April 2012.(5) Grade E (to which he was promoted) connoted the first rung (Grades A to D being higher rungs) of senior management status.(6) The terms of the 2009 Contract entitled the employee to join (on application) the Northern Foods Employees Self Invested Pension Plan (“the defined contribution scheme”, see Clauses 10.1 to 10.3) and provided also for death in service cover (again by application) (clause 10.4). Clause 15.4 of the 2009 Contract imposed “Post Termination Restrictions” (under that heading).(7) Before Mr Lacy moved to the defined contribution scheme referred to in paragraph 10 of the 2009 Contract, and prior to his application for and acceptance of medical benefits for himself and his family under the scheme referred to in paragraph 12 of the 2009 Contract, Mr Lacy had been provided with a copy of the 2009 Contract.(8) After being provided with a copy in September 2011 Mr Lacy retained it in the drawer of his desk at work. He never signed a new contract or any revision of his old terms.(9) Mr Lacy had read the 2009 Contract before applying for the two benefits referred to above. He particularly focused on the post-termination restrictive covenants it contained (in clause 15.4); but he never expressed any objection or protest as to those restrictions or indeed any of the terms of the 2009 Contract.(10) The only manner in which the benefits he sought could be obtained was by making an application to the Claimants: the benefits were elective and not automatic, and that method of application was expressly required under the terms of the 2009 Contract. (I enquired whether any copy of either application was available. I was told that none was.)(11) On 13th February 2012, and thus not long before his resignation on 16th March 2012, Mr Lacy received from the Second Defendant an e-mail with no text but attaching a copy of the 2009 Contract.(12) Mr Lacy accepted in the course of his cross-examination that he had asked to be sent that e-mail attachment: he did so because he wanted to look again at the terms of the 2009 Contract when considering his position (and his possible legal exposure) upon leaving the Claimants’ employment and joining the Third Defendant.

Acts especially relied on by the Claimants

[33]I turn to the particular acts especially relied on by the Claimants as giving rise to the inference that Mr Lacy accepted the terms of the 2009 Contract. Mr Lacy’s case is that none of these satisfied the “only referable” test.[34]As to his salary increase, that (as explained above) took place on the review date provided for by the 2003 Contract and appeared to be referable to that contract accordingly. It had never been suggested to Mr Lacy that his promotion was contingent upon him agreeing to the 2009 Contract and/or that promotion would be reviewed or might be withdrawn if he did not accept the terms.[35]As to his application to become a member of the defined contribution scheme (the Northern Foods Employees Self Invested Pension Plan):(1) he had eventually moved from the final salary scheme of which he had become a member pursuant to the 2003 Scheme to the defined contribution scheme described in the 2009 Contract because he was required to do so, and not out of choice nor in voluntary exercise of any entitlement under the 2009 Contract.(2) He explained in his second witness statement that in about March 2010 he was requested to attend a one-to-one meeting with Sarah Hill, an HR director employed by the Claimants, at her offices at the First Claimant’s site; that prior to attending that meeting he had heard on the grapevine that senior managers had been attending one or more Powerpoint presentations in relation to pensions (though he had not been invited to any); that at the meeting Sarah Hill told him, in terms, that he had “slipped through the net” and should have been invited to these meetings; that she had made clear to him that all E grade employees and above had to move to the contributory pension scheme, and that this was compulsory not elective.(3) Thus, he said, the move had nothing to do with the 2009 Contract, which he emphasised was not even mentioned by Sarah Hill (who no longer works for the Claimants and did not give any evidence on their behalf). Mr Court-Johnston’s evidence in his second witness statement supported this.[36]In relation to his application for Private Medical Insurance (“PMI”):(1) Mr Lacy related in his second witness statement that he had only made this after he had found out that “all of Mr Court-Johnston’s other direct reports” were receiving PMI for themselves and their family, although he was not;(2) he had not applied for the personal cover available under his 2003 Contract, which did not extend to his family: he says he had not appreciated that he was entitled to medical insurance under that contract at all; but the extended cover he says he came to understand from colleagues was available to Grade E employees was of interest to him, and he thought he should have this too;(3) he had then discussed this with Mr Court-Johnston in March 2010 who agreed he too should have the PMI as others in his position had and that (I quote from Mr Court-Johnston’s second witness statement) he “would speak to HR about it…and ensure that he had this”;(4) Christine Lord, the Claimants’ HR administrator, had subsequently contacted Mr Lacy and had confirmed that he was entitled to this “because of [his] grade”;(5) It was as a result of this conversation that he had completed the application form and in due course (in about April 2012) received PMI for himself and his family.(6) He was at no stage aware that this was an entitlement under either his 2003 Contract or the 2009 Contract: as far as he understood the position, it was a result of his grade and not due to any employment contract.(7) Mr Court-Johnston confirmed the gist of the exchanges between them in his second witness statement.(8) Counsel for the Defendants also drew my attention to the fact that the Northern Foods PMI Scheme Policy document (which appears to pre-date 1996) defines eligibility for membership of the scheme and coverage at company expense in terms of (a) employment by the Second Claimant and its subsidiary companies at (b) a specified grade (at the time Grade 3) and above. The Scheme Policy expressly states that for those entitled “Coverage under the plan is provided at company expense”. But the Scheme Policy also provides for employees at other lower grades to be entitled to single cover only at company expense and to be able “to purchase additional cover for dependants by paying the difference between single and the level of cover required, this amount to be deducted on a monthly basis from salary.”(9) Mr Lacy’s Counsel also submitted that it is striking (and corroborative of his case) that Mr Lacy did not apply for PMI upon receipt of the 2009 Contract in September 2009: he submitted that the lapse of time between his receipt of the 2009 Contract and his request for PMI, and the fact that it followed meetings with Mr Court-Johnston, is further evidence that his application for and receipt of PMI was not referable, still less “only referable”, to his acceptance of the terms of the 2009 Contract.[37]As to Mr Lacy’s company car, he stated in his second witness statement that he simply chose from those available and was never given and had never seen any list of vehicles allocating any particular models to any particular grades. Once more, Mr Court-Johnston supported this evidence in his second witness statement.[38]On behalf of the Claimants, Ms Doyle, in a witness statement dated 27 August 2012 made the following points in relation to the acts relied upon by the Claimants as referable only to, and thereby connoting acceptance by Mr Lacy of, the 2009 Contract.[39]As to Mr Lacy’s move to the defined contribution scheme Ms Doyle for the Claimants said this:(1) the final salary scheme of which prior to March 2010 Mr Lacy was a member was offered to all employees below Grade E; only after his promotion was it open to Mr Lacy to join the defined contribution scheme: under his 2003 Contract he could not have moved to the defined contribution scheme;(2) he submitted an application online to the Scheme provider to join that scheme on 7 July 2010 (though no copy was available for reasons of data protection); his move was effective as from 10 March 2010;(3) the only basis for Mr Lacy joining the defined contribution scheme was the terms of the 2009 Contract, that being “a benefit which was only available as a consequence of that contract.”.[40]As to PMI, Ms Doyle emphasised that:(1) the benefit of PMI for himself and his family was not automatic: to obtain cover an application was required;(2) Mr Lacy had completed an application form (again not in evidence, and apparently not available) and had subsequently been provided with family cover as from 1st April 2010; and that accordingly(3) the application for benefit not available under his 2003 Contract and only available under the 2009 Contract necessarily denoted acceptance of the terms of the latter.[41]As to the point about a company car, Ms Doyle’s evidence was that the model he received was only available at his new grade: but as indicated above, this was ultimately not pursued or relied upon by the Claimants.[42]For comprehensiveness, and also because Counsel for Mr Lacy submitted that the very fact of the initial inclusion in the Claimants’ case of points that were ultimately proved to be illusory or misconceived (or, at any rate, were not pursued) further confirmed both its overall frailty and more particularly, the difficulties in the Claimants’ way of demonstrating unequivocal acts uniquely referable to acceptance of the 2009 Contract, I should also mention that Ms Doyle also relied in her Witness Statement on Mr Lacy’s acceptance of a profit related incentive plan (“STIP”) which she said was generally only available to Grade E employees. Mr Lacy countered that he was expressly told that participation in the Northern Foods Bonus Scheme was non-contractual because the Claimants did not want employees to have contractual rights to a bonus, and that his entitlement arose simply from his promotion to Grade E and not in any event the 2009 Contract. He referred to an e-mail dated 24 April 2009 (before he had been sent a copy of the 2009 Contract) in support of this. That e-mail in fact makes clear that Mr Lacy was given a back-dated bonus ‘score’ to cover the period whist he was acting in place of his predecessor Mr Chris Dudley before his formal promotion, and that Mr Lacy was only to join STIP once Mr Dudley had actually left.[43]As I say, the Claimants did not ultimately pursue this; and in view of the sequence of events shown by the e-mail I think that they were correct not to do so: the attribution to Mr Lacy of a bonus entitlement was as much referable to his activities before his promotion as after it, and that attribution could hardly be said to be an act of Mr Lacy’s only referable to a contract which there is no evidence he had yet seen.[44]One further point from her evidence that I should also mention is that Ms Doyle also suggested that Mr Lacy was (or at least must have been) well aware that (so she said) all senior managers (and various others) “would have been employed subject to contracts which contained post-termination restrictive covenants.” She referred especially in this context to Mr Lacy’s receipt on 25 August 2009 (and thus 4 weeks before he was sent the 2009 Contract) of an e-mail from Fiona Clarke (then head of one of the Claimants’ HR departments, but no longer employed by the Claimants) in which she asked Mr Lacy (and others):
“Can I have the names of anyone in your area that you think will need a change of contract to restrict who they can work for if they leave Hollands and go to a competitor? There will be a restrictive covenant in their contract added.”
The terms of that e-mail tend to suggest, as it seems to me, that in fact not all E Grade employees at that time had contracts containing restrictive covenants: they were to be “added” in the case of any who did not. Ms Doyle was asked to clarify and confirm this in cross-examination: but she was not employed by the Claimants at the time and said she had no knowledge of it and could not assist.

Ms Doyle’s evidence

[45]That was an unfortunate feature of Ms Doyle’s evidence: it was largely based on matters of which she had no first hand knowledge. No-one else was called on behalf of the Claimants. Ms Doyle did her best, was plainly truthful, and I accept what she told me. But her evidence does not much assist me in the resolution of the points really in issue.[46]Of both importance and regret, since she was the only witness for the Claimants, there was no-one with first-hand knowledge to clarify the circumstances in which Mr Lacy applied to join the new pension scheme and for PMI for himself and his family. It means that the answer to this case must turn on the admitted factual background, the documents and the evidence of Mr Lacy and Mr Court-Johnston, both of whom are of course personally interested in the result.

Mr Court-Johnston’s evidence

[47]Mr Court-Johnston struck me as controlled and persuasive, and as someone who had little regard for paperwork. He plainly regarded himself as having very broad authority as managing director, which he considered extended to ad hoc alterations of individual employee’s benefits. He confirmed that in his view Mr Lacy was a careful, intelligent person, well able to understand a relatively simple contract such as the 2009 Contract, and not likely to forget terms conferring benefits or imposing obligations once he had focused on them.[48]Beyond generalised corroboration of Mr Lacy the importance of his evidence from Mr Lacy’s point of view was the support that it apparently gave to Mr Lacy’s case that he (Mr Lacy) never regarded the 2009 Contract as the source of the benefits for which he applied.[49]As to Mr Lacy’s application to join the contributory pension scheme, Mr Court- Johnston in his witness statement confirmed Mr Lacy’s presentation that there was never a choice: the decision was made that all “white collar” employees were to be moved out of the final pension salary scheme, which was to be closed down.[50]As to Mr Lacy’s application for PMI, Mr Court-Johnston told me (and repeated unshaken when pressed) in cross-examination that it was he who had arranged for Mr Lacy to have PMI, in exercising of his (as he saw it) untrammelled power to vary contracts in his then capacity as Managing Director of the Claimants. He did so, I was told, when Mr Lacy pointed out that others at the same grade who were reporting to him enjoyed the benefit. He presented the benefits as being discretionary and within his gift to make available to all senior management (Grade E and above). It is, however, of note that this was not in either of his witness statements.[51]I can readily accept Mr Court-Johnston’s evidence, which supports Mr Lacy’s own evidence, that the move to the contributory pension scheme was mandated for all senior management: the closure of salary schemes and compulsory move to a contributory scheme has (in light of the combination of factors including longevity and poor investment returns) become an understandable common-place.[52]However, I find it much more difficult to accept Mr Court-Johnston’s evidence that it was on his say-so and pursuant to his exercise of discretionary power, rather than by reference to any contractual entitlement, that Mr Lacy became entitled to apply for PMI. Mr Court-Johnston may have facilitated Mr Lacy’s obtaining of PMI but I do not accept that his say-so was either in fact, or believed by either Mr Court-Johnston or Mr Lacy, to be the source of Mr Lacy’s entitlement to it. In his second witness statement Mr Court-Johnston did not go further than to say that he agreed that it was fair that Mr Lacy should be entitled to PMI, and he spoke to HR to ensure that he had it: that is consistent with the source of the right ultimately being contractual. I do not accept Mr Court-Johnston’s evidence so far as it went further than this in the course of his oral evidence.[53]For the avoidance of any doubt, I reject any suggestion that Mr Lacy’s application for PMI for himself and his family was referable to the exercise of discretionary power by Mr Court-Johnston, which also seems to me to be inconsistent with the principal point emphasised by Mr Lacy, which is that any entitlement was because of his grade rather than his contract (it not being his evidence that it was an entitlement simply conferred ex gratia by Mr Court-Johnston himself).

Mr Lacy’s evidence

[54]I shall return to a particular and important aspect of Mr Lacy’s evidence of his exchanges with Ms Christine Lord later. But I should record first my views as to Mr Lacy’s evidence and cross-examination.[55]In this regard, Counsel were disagreed on an important point of approach. On behalf of the Claimants Mr Benzie of Counsel sought to set any assessment of Mr Lacy’s credibility in the broader context of the case as a whole, which is to the effect that Mr Lacy conspired with others to copy surreptitiously large quantities of confidential documents to pass to the Third Defendant to assist it in its rival business, knowing that to be dishonest. Mr Laddie for Mr Lacy, on the other hand, urged me to assess Mr Lacy’s evidence without regard to those matters, which will require adjudication (absent settlement) on another occasion.[56]As I mentioned when the matter first came before me I felt uncomfortable with both approaches. Plainly it would be wrong to assess credibility on matters not properly tested: the present application relates only to a discrete issue (or what was presented to me as being a discrete issue), and issues as to the purpose and propriety of the matters said to reveal an unlawful conspiracy are not before me. But plainly also the assessment of credibility is a holistic process, so that excluding entirely any consideration of alleged impropriety is not only difficult but potentially unsafe.[57]I asked Counsel for Mr Lacy whether he wished to tell me what honest justification would be advanced for the copying: but he preferred to keep his powder dry and declined to answer. I think I am entitled to proceed on the basis that no actual justification is advanced and no theoretical justification has been suggested; but I do not think that further entitles me to draw any conclusion than that I should approach Mr Lacy’s evidence with especial care, but reminding myself that there is no basis for an inference that he is unreliable in one context simply because he has as yet provided no justification for behaviour which does call for an explanation in another.[58]In giving his evidence on the points now at issue, Mr Lacy struck me as intelligent, calm and deliberate. The fact that certain matters were put to him as signifying that his evidence was untrue which (to my mind at least) fell far short of demonstrating any such thing tended to lend plausibility to his account.[59]An example is the Claimants’ suggestion that he had lied in his resignation letter dated 16th March 2012. As it is written that read as follows: “Dear Kevin Please accept this letter of resignation from my role at Holland Pies, 2SFG. I have been given the opportunity to pursue a new role outside of business [sic], which I have decided to take. My time in Northern Foods and now 2SFG has given me invaluable opportunities and experience. However after 12 years with the company I feel now is the right time for me move on [sic]. Yours sincerely, etc., Yours sincerely, etc.,[60]The Claimants chose to present this (and in particular the phrase “pursue a new role outside of business”) as comprising a lie to the effect that Mr Lacy was retiring and no longer pursuing any business, presumably in order to disguise the fact that he was moving to a rival. Mr Lacy countered that this was not so, and the omission of the definite article before the word “business” was a typographical error in a letter typed in some haste and lack of care at home. He pointed out the obvious typographical error in the last line in support. His explanation was tested in cross-examination: in my judgment, it came across plausibly. Further, the fact that he was moving to the Third Defendant was not disguised: it is not disputed that he openly acknowledged it soon afterwards in a conversation with Mr Mark Higgins, who had become Managing Director in place of Mr Court-Johnston.[61]Another aspect of the Claimants’ case of (as it appeared to me) such frailty or contrivance as to tend to add credence to Mr Lacy’s version of events, was their reliance on a paragraph (paragraph 5.2) in an Order made by Henderson J (continuing injunctive relief) on 9 July 2012. That paragraph was in these terms: 5.2 The First Defendant agrees to be bound by the terms of clause 15.4.1 of his employment contract dated 21 September 2009.”[62]That wording, which I take it was drafted by lawyers, was suggested on behalf of the Claimants to signify Mr Lacy’s acceptance that the 2009 Contract was indeed “his” employment contract. This seems to me to be hopeless.[63]However, whilst these facets of the Claimants’ case tended, in my view, more to undermined confidence in it than add any legitimate support, I have had to be careful not to leap from that to the conclusion that what Mr Lacy actually says is given credence. Indeed I found Mr Lacy’s insistence that none of his applications for benefits had anything to do with the 2009 Contract difficult to accept.[64]As I have said, Mr Lacy struck me as an intelligent man with a firm grasp of what was required to establish his case. It seemed to me that his appreciation of the importance to his case of demonstrating that the applications he made for benefits not previously available to him under the 2003 Contract were not prompted (or not exclusively prompted) by the fact that such benefits were expressly provided for in the 2009 Contract, caused Mr Lacy to become rather too anxious increasingly, and in some instances (as it seemed to me) implausibly, to downplay the significance of his having read and kept a copy of the 2009 Contract prior to making those applications.[65]More especially:(1) In the course of his cross-examination he told me that he had only “skim read” the 2009 Contract when finally it was sent to him and had really only focused on the Post Termination restriction (which he found objectionable). However, in his first witness statement (at paragraph 16), made before the Claimants’ case was clear, he had said that he recalled that he “read the contract and was unhappy with some of the terms and decided that I would not sign it.”(2) Furthermore, even if he had only “skim-read” the (fairly short) document, I consider it more probable than not that his skim-reading was sufficient to bring home to him, or at least confirm to him, the availability of new benefits as well as the provision for new restraints (which of themselves I would have expected to raise the question in his mind as to what he was getting by way of advantage in return).(3) Whilst I accept Mr Lacy’s evidence to the effect that having read the 2009 Contract and decided he would not sign it he put it away in a drawer and forgot about it, the fact is that he must have been aware that the terms of his employment were being re-defined.(4) I find it difficult to accept that his memory was not re-awakened when according to his own evidence he found out that other Grade E employees had PMI for themselves and their families, or at least shortly after that when he completed the prescribed application to obtain the benefit.(5) Nor do I accept that his memory was erased so completely that he forgot even that he had been provided with a new contract, appropriate for Grade E, which provided enhanced benefits, albeit at the price of new post-employment restraints.(6) In consequence (and also because I think it inherently unlikely in any event) I do not accept that Mr Lacy at all times assumed that the benefits he applied for were in right of being a Grade E employee but had nothing to do with his employment contract.(7) More generally, I do not accept Mr Lacy’s line that he assumed that he was entitled to benefits quite apart from his contract. Although Mr Laddie QC (for Mr Lacy) was reluctant to accept this, and objected that the point had not been fairly put to Mr Lacy, it is the fact that the frontispiece of the 2009 Contract refers to Grade E. It seems to me implausible that Mr Lacy assumed that the new contract he had been provided with (albeit late) was not the source of the enhanced benefits that he later applied for; and the more so if (as his first version of his evidence confirmed) he had read its terms when it was first provided to him.[66]I also consider that it is permissible and appropriate for me to take into account (though I would have reached the same conclusion without it) the undisputed evidence that shortly before his resignation he had called for and been sent by e-mail (without any covering explanation or message) a copy of the 2009 Contract. The point was made by Ms Doyle in her witness statement by way of a question:
“…if, as Mr Lacy states in his witness statement dated 20 July 2012 (paragraph 16), he had put the 2009 Contract in a drawer and forgotten about it: why did he request the Second Defendant to email it to him shortly before he resigned?”
[67]Mr Lacy did not address, still less plausibly answer, this question in his second witness statement in response to Ms Doyle. He sought, in the course of his cross-examination, to explain his request away on the basis that, in anticipation of his resignation, all he was doing was checking to see what a senior manager’s contract would make provision for; he also accepted that he did so in part to assess his legal position and exposure. This evidence does not answer the question posed as to what prompted him suddenly to remember what he claims he had entirely forgotten; it does not dispel the obvious inference that he did know that there was a document extant by which he (at least) might be bound; and it raises the further question why he thought he might have legal exposure under such a document at all if (as is his case) he had never accepted it.[68]Lastly under this heading I need to address a potentially important point of detail in Mr Lacy’s 2nd witness statement: that is his evidence to the effect that his application for PMI for himself and his family was made as a result of expressly being told by Ms Christine Lord that “this was a result of my grade” (the quote is from paragraph 19 of Mr Lacy’s 2nd Witness Statement). As previously indicated, Ms Lord did not give evidence, and was not there to clarify or contradict the words thus attributed to her. Even so, I consider it highly improbable that she said anything more than that the benefit was attributable to Mr Lacy’s new Grade E: if Mr Lacy is suggesting (as on one, but not every, reading of the words he may be) that she expressly said that the benefit was not due under any employment contract I find that implausible and reject it.

In these circumstances have the Claimants satisfied the Solectron test?

[69]At the end of this recital of the facts and my impressions of the evidence I return to consider the two related issues on which this aspect of the case seems to me to turn:(1) as a matter of legal analysis were the benefits for which Mr Lacy applied necessarily referable to the 2009 contract?(2) have the Claimants, in all these circumstances, demonstrated to my satisfaction any unequivocal act uniquely referable to acceptance by Mr Lacy of the 2009 Contract, such as to satisfy the Solectron test?[70]As to (1), I do not accept Mr Laddie’s submission on behalf of Mr Lacy, which was really his fundamental point, that the benefits that Mr Lacy invoked were benefits which did not have, or did not necessarily have, their source in the 2009 Contract. In my view, the fact that the benefit is available to all Grade E employees, and associated with that Grade, does not assist in determining the legal source and basis of the benefit. To my mind, Grade E employees enjoyed that benefit because Grade E contracts provided for it: its source was necessarily contractual. Put another way, each employees’ relationship with his employer is necessarily defined by contract; a term may be implied from custom and practice; but the source of benefits is contractual.[71]In point of fact, I consider that Mr Lacy must have appreciated this. Upon a step change of grade (such as is promotion to Grade E, the first rung of senior management) an employee’s relationship with his employer obviously and materially changes. Such a change is ultimately defined in legal terms by a new contract. Mr Lacy was provided (albeit late) with a new contract, redefining his relationship with his employer. I consider that at least after being provided with that contract, and especially after he had read it, Mr Lacy must have appreciated that any new benefits to which he was entitled would have their source ultimately in that contract. At the very least, his reading would have alerted him to some redefinition of his relationship in legal terms.[72]In any event, in proceeding, without any form of protest, or reservation, voluntarily to apply for new benefits not previously available to him Mr Lacy must, in my judgment, be taken to have accepted the legal incidents of this new definition of his relationship.[73]As to (2) and to the first of the two acts eventually relied on by the Claimants, I would accept, that looked at singly, Mr Lacy’s joinder of the scheme in fact provided for by the 2009 Contract was not voluntary and would not be sufficiently clearly and uniquely referable to acceptance of the terms of the 2009 Contract to satisfy the Solectron test. The circumstances I have described in paragraph 46 above seem to me to demonstrate, rather, that this act was at least in part, and probably in causative part, referable not to the exercise of a contractual entitlement but to a mandatory policy.[74]By contrast, in my judgment, Mr Lacy’s application for PMI in the form mandated by the 2009 Contract, after he had read its terms (however speedily), and without expressing any protest or reservation, is properly to be characterised as an unequivocal act referable only to his having accepted all the terms of the 2009 Contract as and from the date of that application (in March/April 2010).[75]Even if, contrary to my view on the balance of probabilities, Mr Lacy himself thought that the benefits he made application for were benefits available as a result of his new grade, the legal analysis that the benefits were contractual, taken together with the fact that they were expressly provided for by the 2009 Contract, means that their invocation by Mr Lacy, voluntarily and without protest, was necessarily referable to the 2009 contract and suffices to satisfy the Solectron test.

Conclusion

[76]Accordingly, in my judgment, Mr Lacy became bound by the terms of the 2009 Contract as and from the date when he applied for PMI. I invite counsel to agree a form of order to reflect this conclusion.

Postscript

[77]I would add one final point. As indicated to counsel, and as may already be apparent from this Judgment (for example, from paragraphs 55 to 57 above), I have had serious misgivings about the procedure agreed and directed for a trial of this issue before a second trial of the overall dispute.[78]Such a course is certainly unusual; and there is obvious potential disadvantage in having two trials when(a) one should suffice(b) interlocutory matters (such as whether there should be interlocutory restraint) can be dealt with in the usual way(c) there is potential danger in adjudicating an issue of mixed fact and law before pleadings and full disclosure and without the advantage of being able to assess all aspects of the case in the round and(d) unless adjudication early of the issue selected is likely to and does lead to settlement, there is likely to be significant additional cost and usage of court time.[79]Indeed, I was initially minded to adjourn this matter to a full trial, and only agreed to proceed because both Counsel were agreed, directions had already been given, court time (in the vacation) had already been already reserved, and no doubt substantial costs had already been expended. I took into account also that the particular issue in this case directly concerned only the Claimants and Mr Lacy.[80]However, I think the course adopted is unusual for good reason. Preliminary issues can often prove to be an apparent short cut to what turns out to be a much longer journey in the end: but where the issue is not even properly characterised as a preliminary issue, is not determinative of the proceedings, and requires cross-examination and documentary disclosure, it can, in my view, seldom be wise to determine it at a separate mini-trial.

Cited in 14 later judgments

and 5 more of the most senior