Employer not liable for an employee’s practical joke on a colleague which caused hearing loss

[et_pb_section fb_built=”1″ _builder_version=”3.0.100″ background_image=”http://davidk423.sg-host.com/wp-content/uploads/2017/09/bdbf_final-stages-1-4-1.jpg” custom_padding=”|||” global_module=”2165″ saved_tabs=”all” global_colors_info=”{}”][et_pb_row _builder_version=”4.7.4″ min_height=”66.4px” custom_padding=”50px||||false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”3.25″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.7.4″ _dynamic_attributes=”content” text_font=”|700|||||||” text_font_size=”27px” background_layout=”dark” custom_margin=”0px|||” custom_padding=”0px|||” global_colors_info=”{}”]@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IiIsImFmdGVyIjoiIn19@[/et_pb_text][et_pb_text _builder_version=”4.14.7″ _dynamic_attributes=”content” _module_preset=”default” text_text_color=”#FFFFFF” global_colors_info=”{}”]@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9kYXRlIiwic2V0dGluZ3MiOnsiYmVmb3JlIjoiIiwiYWZ0ZXIiOiIiLCJkYXRlX2Zvcm1hdCI6ImRlZmF1bHQiLCJjdXN0b21fZGF0ZV9mb3JtYXQiOiIifX0=@[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section fb_built=”1″ admin_label=”section” _builder_version=”3.22.3″ global_colors_info=”{}”][et_pb_row admin_label=”row” _builder_version=”4.7.4″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”3.25″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.14.7″ text_orientation=”justified” hover_enabled=”0″ use_border_color=”off” global_colors_info=”{}” sticky_enabled=”0″]

In the recent case of Chell v Tarmac Cement and Lime, the Court of Appeal said that an employer was not liable for an employee’s practical joke which injured a contractor working at its site. The prank had not been done “in the course of employment” and nor was it realistic to expect employers to take steps to prevent horseplay in the workplace.

What happened in this case?

Mr Chell was employed by Roltec and contracted to work for Tarmac Cement and Lime Ltd (Tarmac) at one of its quarry sites. Tarmac’s employees were unhappy about the use of contractors at the site, fearing that they would be replaced by them. Tensions grew between the employees and contractors.

One of Tarmac’s employees, Mr Heath, decided to play a prank on Mr Chell. He brought two explosive pellets into work and placed them on Mr Chell’s work bench. He struck them with a hammer, causing them to explode. As a result, Mr Chell suffered a perforated eardrum, hearing loss and tinnitus.

Mr Chell brought a personal injury claim against Tarmac arguing that they were:

vicariously liable for the negligent actions of Mr Heath; and/or
negligent for breaching their own duty to take steps to prevent a reasonably foreseeable risk of injury.

The Judge dismissed the claims. Mr Chell’s appeal to the High Court was dismissed and he appealed again to the Court of Appeal.

What was decided?

The Court of Appeal dismissed the appeal.

Tarmac was not vicariously liable for Mr Heath’s prank. In order to be vicariously liable, the prank must have been done “in the course of employment”. For this to be the case, the prank would need to be closely connected to the field of activities that Mr Heath was authorised to do in his job. The Court found that this not the case. Mr Heath had brought the explosive pellets into the workplace – it was his own equipment and did not belong to Tarmac. Hitting the pellets was not a direct part of his work and nor was it in the general field of activities that he had been authorised to do.

Nor had Tarmac been negligent. The fact that there were underlying tensions in the workplace and that heavy and/or dangerous equipment was available was not enough to create a reasonably foreseeable risk of injury. There had been no threats of physical violence from Mr Heath to Mr Chell, or more generally. Even if there had been such a risk, the only relevant risk was a general risk of injury from horseplay. However, the Court said it would be unreasonable and unrealistic to expect employers to have a system in place to ensure that employees did not engage in horseplay.

What does this mean for employers?

This is a welcome decision for employers which underlines that they will not be liable for anything and everything that their employees do at work. There must be a sufficiently close connection between the wrongful act and the errant employee’s job role and activities. The fact that the employee’s job provides them with the opportunity to commit a wrongful act is not enough to establish a sufficient connection. There is a distinction between cases where the employee is misguidedly attempting to further his employer’s business interests and cases where the employee is simply “on a frolic of his own” and pursuing his own interests. An employee acting to further a personal vendetta is likely to be in the latter camp

Nevertheless, it would be sensible for employers to do their best to avoid this kind of situation arising in the first place (and spending the time and money fighting legal cases). Employers should ensure that employees understand that practical jokes are not tolerated in the workplace. Policies and training should reflect the fact that such jokes may breach health and safety rules and may also amount to bullying and harassment. Staff should understand that such behaviour could lead to dismissal.

Chell v Tarmac Cement and Lime Ltd

If you would like to discuss any issues arising out of this decision, please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.

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BDBF acts in Landmark Disability Discrimination Case

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BDBF will be in the Court of Appeal on Tuesday this week, acting for the Claimant in a disability discrimination case. Chris Milsom of Cloisters Chambers will appear as counsel.

The appeal concerns the definition of “disability” in the Equality Act 2010 and, in particular, the circumstances in which a mental health condition recurring over a number of years meets that definition. The outcome of the case will potentially be significant for employees whose mental health conditions fluctuate over time.

The Equality and Human Rights Commission has provided legal assistance for this case to be heard in the Court of Appeal.

The hearing comes shortly after World Mental Health Day and at a time of increased public discourse about the importance of mental health, particularly in the workplace.

Our client is appealing the decision of Mr Justice Choudhury in the Employment Appeal Tribunal (EAT) which held that the Employment Tribunal (ET) had not erred in concluding that the long-term requirement in the definition of disability was not met on the facts of our client’s case. According to the EAT, the ET was entitled to conclude on the evidence that, although there was a substantial adverse effect in one year which was then repeated four years later, in neither case was it likely that the adverse effect would last for 12 months or that it would recur again. According to the EAT, the ET had been correct to interpret “likely” as if it meant “could well happen”, and that it had approached the question of the likelihood of recurrence correctly. The EAT also held that the ET had not erred in deciding that the employer did not know and could not reasonably be expected to know of our client’s disability.

The arguments in our client’s appeal include that the ET set the bar too high when assessing the effect of the Claimant’s condition, and that it failed to consider the impact the mental health impairment had on our client’s professional activities which ultimately led to his dismissal

Our hope is that the Court of Appeal will provide further clarity on the extent to which historic episodes of mental health issues that take place over a period of years can be taken together to demonstrate a recurring mental health issue which is sufficient to satisfy the definition of disability for the purposes of gaining protection under the Equality Act 2010.

Company was entitled to terminate its relationship with a contractor without giving notice despite being in breach of contract itself

Employment Law News

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Company was entitled to terminate its relationship with a contractor without giving notice despite being in breach of contract itself

A recent High Court decision demonstrates that where a Company has breached the express or implied terms of the contract, if the response or reaction from the other party itself amounts to a breach, the Company may still be able to rely on the other party’s breach and terminate the contract with immediate effect.

What does the law say?

If a party to a contract commits a repudiatory breach (a breach of contract that is so serious as to go to the root of the relationship), the other party is entitled to terminate the contract immediately or “summarily” (i.e. without notice or payment in lieu of notice, if relevant).

In an employment context, this may include scenarios such as where the worker is guilty of gross misconduct or the employer does not pay the worker his or her salary.

What happened in this case?

Mr Palmeri was a self-employed investment manager at Charles Stanley (the Company), who employed his own team. His contract provided for termination by either party on three months’ notice, but there was no right for the Company to terminate the contract immediately and pay in lieu of notice (PILON). As such, the only way in which the Company was permitted to stop the contract straight away was if Mr Palmeri was in repudiatory breach of contract (e.g. guilty of gross misconduct).

Some years into the relationship, the Company proposed to change its operating model. The Company wished to take a larger amount of the revenue that Mr Palmeri generated, meaning that he would suffer a 15% reduction in income.

Negotiations on the new terms were not fruitful. Accordingly, the Company called Mr Palmeri into a meeting and adopted a “take it or leave it” approach. Mr Palmeri was told that if he did not accept the new terms, his old contract would be terminated with immediate effect and he would be paid in lieu of notice (despite the fact that the contract did not permit this).

Mr Palmeri reacted aggressively to this ultimatum. He shouted, swore and questioned the integrity and competence of senior management. Mr Palmeri had a history of aggressive outbursts and had been warned that if it occurred again, he risked termination.

Following this episode, Mr Palmeri said he would agree to the new contractual terms and work under protest. However, the Company decided that the outburst was so serious his contract should be terminated with immediate effect. Later, the Company discovered that Mr Palmeri was responsible for certain compliance and regulatory breaches, which would have been grounds for summary termination in any event.

Mr Palmeri brought a claim for wrongful termination of his contract. He argued that the Company breached the contract when they suggested the immediate termination and payment in lieu of notice when there was no contractual right to do this. He also argued that the Company wished to prevent the orderly transition of his clients (which would have happened had the Company allowed him to serve his three months’ notice) and this was a breach of the implied term of trust and confidence. He argued that he was entitled to substantial damages.

What was decided?

The Court held that Mr Palmeri’s conduct (including the outburst and the regulatory breaches) amounted to sufficiently serious misconduct as to amount to a fundamental breach of contract. The Court also noted that it could not ignore the history of similar incidents and the warning given to Mr Palmeri about his behaviour.

The fact that the Company had been prepared to commit a repudiatory breach of contract itself did not prevent them from relying on Mr Palmeri’s repudiatory conduct (including that which was discovered after he had left).

The Court concluded that the contract had been lawfully terminated and the Company was not liable to pay any compensation to Mr Palmeri for any losses he suffered as a result.

What are the learning points?

Just because one party to a contract has already breached the contract, it doesn’t give the other party carte blanche to behave inappropriately. They have a choice. They can either accept the outrageous behaviour as bringing the contract to an end or they can affirm the contract – i.e. keep it alive, which is what Mr Palmieri did. However, if the worker does that then s/he must abide by the terms of the contract.

Palmeri & Ors v Charles Stanley & Co Ltd

If you would like to know more or your business needs advice on how to manage a termination process please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.

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How can an employer give an opinionated reference?

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The High Court has clarified the scope of an employer’s duty when giving a reference in respect of a former employee.

The law provides that an employer must exercise reasonable skill and care to provide a reference which is true, accurate and fair. If it fails to do so, then the former employee may have a claim against the ex-employer for negligent misstatement. The High Court has ruled on how far the employer’s duty extends.

This case concerned Mr Hincks, an independent financial advisor, who was employed by CIFS but had authority to conducted FCA-regulated activities as the appointed representative for Sense Network. Following Sense Network’s internal investigation into alleged breaches of its pre-approval processes, it terminated Mr Hincks’ authority on the basis that he had committed repeat breaches and had been “malicious” in doing so. Mr Hincks’ conduct meant that Sense Network had to offer over £12,000 in compensation to its clients. Mr Hincks later sought a reference from Sense Network. The reference provided referred to the allegations, the investigation, the compensation paid to clients, and Sense Network’s conclusion that he had “knowingly and deliberately circumvented” the pre-approval process.

Mr Hincks brought a claim for negligent misstatement, arguing that Sense Network’s reference had not been true and accurate. He said that the investigation had been an “inadequate sham”, and that it had been negligent of Sense Network to report its opinions arising from the investigation without having checked that it had been procedurally fair.

The High Court held that a reference-giver relying on the findings of a previous investigation is not required to review the procedural fairness of that investigation. Instead, the inquiry should be into whether the investigation had a proper and legitimate basis; if it did, reliance upon it was reasonable. A more stringent review may only be appropriate if there was some ‘red flag’ suggesting that something had been amiss with the investigation.

Many employers tend to give factual references, but for those who do not, this case helps to demonstrate what is included within the duty of care they are under. Additionally, where the employer is under regulatory duties to provide particular information to a prospective employer, then it must do so by reference to all information and documentation available to it.

Hincks v Sense Network Ltd [2018] EWHC 533 (QB)

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Morrisons held vicariously liable for its employee’s data protection breach

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Morrisons, the supermarket chain, has been held liable for a disgruntled employee’s wilful breach of data protection legislation.

Mr Skelton was employed by Morrisons as a senior IT internal auditor. This role gave him access to sensitive personal data relating to the company’s staff. He also sold a legal slimming drug on the internet in his spare time. In summer 2013, Morrisons subjected Mr Skelton to a disciplinary procedure on the basis that his use of the company’s post room to send the slimming drug had caused alarm when fellow employees thought it was an illicit substance. Mr Skelton remained in his role despite this.

In November 2013, Mr Skelton was asked to send sensitive payroll-related employee data to KPMG (Morrisons’ external auditors). Mr Skelton downloaded the encrypted data on to his work computer before copying it on to a new USB stick for KPMG. He then made a copy for himself on a personal USB stick. In January 2014, using the files he had uploaded to his USB stick, he posted personal details of 100,000 Morrisons employees on to a file sharing website.

In March 2014, Mr Skelton was arrested and charged with fraud, computer misuse offences and data protection offences. He was convicted and sentenced to eight years’ imprisonment.

A group claim was brought against Morrisons by a number of the workers whose personal data had been shared online by Mr Skelton. They argued that not only was Morrisons liable itself for the data breach, but it was also vicariously liable for Mr Skelton’s breaches in its capacity as his employer.

The High Court held that Morrisons was not liable itself for breaches of data protection legislation, as it had not been the controller of the data once it left its servers. However, it held that Morrisons was vicariously liable for Mr Skelton’s breaches despite his actions seemingly having been deliberate and motivated by spite. There was held to be a sufficient connection between Mr Skelton’s actions and his employment with Morrisons, given that his access to the data was obtained through his job – indeed, Morrisons had entrusted him with the data as part of his role, and in doing so, it took the risk that he would misuse it. It was Mr Skelton’s duty to disclose the data and he did so, albeit in an unauthorised way. Mr Skelton’s motive was not relevant to the finding of vicarious liability.

This judgment appears to be heavily motivated by the policy consideration of ensuring that victims of data protection breaches have a means of redress. Indeed, the High Court acknowledged that Morrisons had a number of appropriate measures in place to protect the data on its servers from misuse, but held it liable in any event.

Various claimants v WM Morrisons Supermarket plc [2017] EWHC 3113

Employer given £2 in damages for misuse of confidential information

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Employer given £2 in damages for misuse of confidential information

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An employer who had sought £15 million in damages for misuse of its confidential information has been awarded only £2 for its former employees’ breaches of their confidentiality duties.

Marathon Asset Management LLP is an asset management firm and one of its founders, Mr Seddon, left to set up a competing business, taking with him a number of Marathon’s staff. Among those staff was Mr Bridgeman. Marathon brought a claim in the High Court against Mr Seddon and Mr Bridgeman alleging that they had taken its confidential information before they left the firm.

Mr Bridgeman admitted that he had copied a large number of Marathon’s confidential documents on to a USB stick before he left, and that he retained them for some time. He conceded that, in doing so, he was in breach of contract. Some of the documents Mr Bridgeman had downloaded to his USB stick were accessible to him because Mr Seddon had previously moved them to a shared drive.

All parties agreed that Mr Seddon had not used any confidential information. Mr Bridgeman had used a small number of documents, but that use had not caused Marathon any significant loss.

Marathon argued that it should be entitled to damages of £15 million, representing the value of the confidential information taken. Marathon assessed that this sum would have been a reasonable charge for releasing the ex-employees from their duties of confidentiality.

The High Court recognised that both Mr Seddon and Mr Bridgeman had been in breach of their duties of confidentiality and their contracts. However, those breaches had not caused Marathon any loss, and there was nothing to show that either Mr Seddon or Mr Bridgeman had made any gain. Therefore, the High Court held that there was no justification for anything more than nominal damages of £2. This equated to £1 per defendant.

This case illustrates that it is not the risk of loss which matters, but the actual loss suffered. An inability to quantify the amount of loss is not necessarily a problem, but being unable to show any loss at all most likely will be.

Marathon Asset Management LLP and another v Seddon and another [2017] EWHC 300 (Comm)

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Southern Rail fails to obtain injunction to prevent strike

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Southern Rail fails to obtain injunction to prevent strike

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Southern Rail’s parent company has failed in an attempt to obtain an injunction preventing strikes led by ASLEF by relying on breaches of freedom of movement principles under the Treaty for the Functioning of the EU (TFEU).

Govia GTR Railway is the franchise-holder for Southern Rail. ASLEF has disputed Govia’s plans to extend the use of driver-only operated trains, arguing that the new system for closing doors is less safe and more stressful for drivers. As a result, ASLEF announced a series of strikes in December 2016 and January 2017.

Govia applied to the High Court seeking an injunction to prevent the strikes from going ahead. Govia argued that the planned industrial action was unlawful on the basis that it interfered with the rights to freedom of establishment and freedom to provide services under the TFEU.

The Court of Appeal upheld the High Court’s decision to reject the application for an injunction. The Court did not accept Govia’s argument that the strikes were a deterrent to the freedom of establishment – whilst industrial action may discourage Govia’s French investors from doing further business, the law is not there to protect against that. Any strike, even if legal, could arguably have the same effect.

The Court also found that Govia was “free-wheeling in the slip stream of their passengers” in arguing that the strike impeded passengers’ freedom to give and receive services through Gatwick Airport and therefore breached TFEU rights. It was not possible in advance of the strike action to say that passengers’ ability to travel to and from the EU would be impeded. Even if there were such an impediment, relying on such an argument could undermine the right to strike. Previous EU authorities that found industrial action unlawful because they interfere with freedom of movement principles did so on the basis that this was the purpose or intention of the action, rather than a by-product.

Govia has announced that it will be appealing to the Supreme Court.

Govia GTR Railway Ltd v The Associated Society of Locomotive Engineers and Firemen [2016] EWCA Civ 1309

Is an employer liable for an assault at the Christmas after-party?

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Is an employer liable for an assault at the Christmas after-party?

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An employer was found not to be liable for an employee’s serious injury caused by an assault during drinks held after the office Christmas party.

Mr Major was the managing director of Northampton Recruitment Limited. He hired Mr Bellman, who was a childhood friend of his, as a sales manager. Northampton’s office Christmas party in 2011 was held at a golf club. After that, Mr Major, Mr Bellman and around half of the guests went back to the hotel in which some people were staying. Northampton paid for the taxi fares from the golf club to the hotel.

Many of the group at the hotel continued drinking into the early hours of the morning. Conversation turned to work-related matters at around 2:00am including, in particular, a controversial issue about which Mr Major lost his temper. Mr Bellman challenged him in a non-aggressive way. Nonetheless, Mr Major swore at Mr Bellman and punched him twice, despite the efforts of another colleague to restrain Mr Major.

The second punch caused Mr Bellman to fall and hit his head on the floor. He fractured his skull and fell unconscious. It later emerged that Mr Bellman had been severely brain damaged and would not be able to work again.

Mr Bellman brought a personal injury claim against Northampton, alleging that the company was vicariously liable for Mr Major’s actions.

The High Court dismissed Mr Bellman’s claim, holding that Northampton was not liable for the assault. It took into account that Mr Major ran the company with a wide remit, and it was ultimately at his discretion that Northampton paid for the party, drinks, taxis and accommodation. However, the Court held that the drinks at the hotel were ‘impromptu’ and not part of the Christmas party and Mr Major could not be said to be on duty at the time of the assault. The mere fact that the drinkers were colleagues and were talking about work at the time did not create enough of a connection to Mr Major’s employment to render Northampton liable.

This case is one of many which discuss the circumstances in which an employer will be vicariously liable for the harm caused by its employees’ wrongdoing. Whilst at first blush this may look like a very employer-friendly case, this decision does not mean that employers will never be liable for harm caused at an ‘after-party’, as each case will depend on its own facts.

Bellman v Northampton Recruitment Ltd [2016] EWHC 3104

Confidential information on defendants’ computers ordered to be destroyed

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Confidential information on defendants’ computers ordered to be destroyed

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A court has ordered that confidential information used by a company despite belonging to a competitor must be destroyed.

Mr Skriptchenko worked for Arthur J Gallagher, insurance brokers, until his dismissal in July 2014. Around February 2015, he began working for Portsoken, who were also in the insurance brokerage industry. A few months later, Gallagher suspected that Mr Skriptchenko may have taken its confidential information with him to Portsoken. Gallagher brought claims against Mr Skriptchenko and Portsoken for breach of confidence. Mr Skriptchenko admitted taking a client list from Gallagher and Portsoken admitted to using it to contact over 300 of Gallagher’s clients.

Gallagher obtained a court order requiring that Mr Skriptchenko deliver up all of his electronic devices for inspection and that Portsoken’s systems be analysed by a forensic IT expert to look for confidential information. As a result, 4,000 documents were disclosed which showed that several other members of staff at Portsoken, including some senior directors, had misused Gallagher’s confidential information. Internal emails made clear that those using the information knew it was a breach of confidence to do so, such as one which read:

“I don’t think you can formally put these in any presentation as we would obviously be breaching confidentiality but would suggest that we keep in our back pocket to show on a nudge nudge wink wink basis to interested parties”.

Gallagher sought an injunction requiring that: (i) all of the defendants’ computers be inspected and imaged; and (ii) any confidential information found on them which belonged to Gallagher be deleted.

The High Court granted the injunction. It considered that there were no less intrusive ways to protect Gallagher’s information given that the defendants had knowingly misused the confidential information and showed a “high degree of subterfuge” in doing so. As the evidence showed that the defendants could not be trusted to delete the material themselves, the interim order should require it. The court held that there was a “high degree of assurance” that Gallagher would succeed at trial in any event.

Injunctions like this are rare but, as this case shows, will be granted when it is appropriate to do so.

Arthur J. Gallagher (UK) Ltd v Skriptchenko [2016] EWHC 603

Leak to The Sun newspaper did not breach Naval Commander’s privacy

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Leak to The Sun newspaper did not breach Naval Commander’s privacy

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The former Commanding Officer of a Navy frigate has lost his misuse of private information claim against the Ministry of Justice.

David Axon was the Commanding Officer of a Royal Navy warship, the HMS Somerset. In 2014, he alleged that someone from the Ministry of Justice must have leaked information surrounding his removal from office for bullying junior officers, leading The Sun newspaper to print three stories about it. He argued that the disclosure amounted to a breach of his rights to privacy and confidentiality.

The High Court dismissed Mr Axon’s claim. It held that he could not have a reasonable expectation of privacy regarding the circumstances of his dismissal, for a number of reasons. Mr Axon’s role was discharging a very public function and his gross misconduct had been found by the Navy to have “undermined the fighting effectiveness of his ship”. It held that, whilst the equal opportunities investigation was conducted in private, the unusual and grave nature of the case meant that it was bound to become a matter of public knowledge. The fact that the informant, an MoD employee, had acted wrongfully and received £5,000 for her story was relevant, but was outweighed by other factors.

This case could suggest that those who are: (i) particularly senior; (ii) in roles of national importance; and (iii) have been found guilty of gross misconduct could have a harder time establishing that they have a reasonable expectation of privacy. This could feasibly include CEOs of banks or national companies.

Axon v Ministry of Defence and News Group Newspapers [2016] EWHC 787 (QB)

When can employers get “negotiation damages” from a former employee?

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When can employers get “negotiation damages” from a former employee?

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The Courts have indicated that where an employee has breached restrictions relating to their conduct after they leave their employer, an appropriate remedy will quite often be the price employees would have had to have paid in negotiation to buy their way out of the contractual obligations.

Karen Morris-Garner became a director at One Step having sold her own supported living business to it. Ms Morris-Garner owned 50% of the shares in One Step, the other 50% belonging to Mr and Mrs Costelloe. The relationship between Ms Morris-Garner and the Costelloes deteriorated and, in 2006, Ms Morris-Garner and her civil partner incorporated their own company. Later, Ms Morris-Garner resigned as a director of One Step and sold her 50% shareholding in it to Mr Costelloe. The contractual documents surrounding the sale contained non-competition and non-solicitation covenants binding Ms Morris-Garner and her civil partner. Some months later, Ms Morris-Garner’s competing company began to trade.

The High Court found that Ms Morris-Garner and her civil partner were in breach of the restrictive covenants which bound them after the share sale was completed. As a result, it awarded to One Step negotiation damages, being the price which the parties would have agreed in return for One Step releasing Ms Morris-Garner and her civil partner from their restrictions.

The Court of Appeal upheld the High Court’s decision. It held that the award of negotiation damages is appropriate where it is a just response to a situation where it is very difficult (but not necessarily impossible) for the old employer to identify the loss it has suffered due to the breach. The case need not be exceptional in order for those factors to be present.

Negotiation damages were just in the present case considering that: (i) Ms Morris-Garner was the public face of the company and had the strongest client relationships; (ii) competition by Ms Morris-Garner could be very damaging to One Step; (iii) Ms Morris-Garner had been paid a substantial amount of money in consideration for signing up to the restrictive covenants; and (iv) Ms Morris-Garner and her civil partner had secretly and deliberately breached their restrictions.

Employers concerned about employee competition should take solace from this case. It is now clear that these damages may be available when it is difficult to quantify loss (or where there is no loss).

Morris-Garner and another v One Step (Support) Ltd [2016] EWCA Civ 180

When can a contract be varied orally?

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When can a contract be varied orally?

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Parties are at liberty to agree new terms orally or by conduct even where a prior contract contained a clause providing that all future variations must be in writing.

A commercial contract between two companies contained a term stating that their agreement “can only be amended by a written document which (i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both parties”.

In subsequent litigation concerning the contract, it was argued that this clause prevented the parties from varying the terms between them orally or by conduct.

The Court of Appeal, which determined another matter arising from the case, made some observations about the validity of that argument. It stated that the existence of the above term in the contract did not prevent the terms being varied by oral agreement or conduct, by virtue of the parties’ freedom to agree whatever terms they wish.

The Court noted that it may be more difficult to prove an agreement where it took place orally, but it would still be possible in some cases. In the present case, the evidence of the “open, obvious and consistent” dealings between the parties sufficed to show a variation by conduct had taken place.

Globe Motors, Inc & Ors v TRW Lucas Varity Electric Steering Ltd & Anor [2016] EWCA Civ 396