Lasting Powers of Attorney: recent key developments
ICAP Management Services Limited v (1) Berry and (2) BGC Services (Holdings) LLP
Inter-dealer brokers are regular and enthusiastic litigators who have done much to develop the law on the enforcement of employment contracts, as demonstrated yet again by this case which addresses a number of interesting matters including the potential application of TUPE to share sales, the basis of enforcement of garden leave and the law relating to inducement of breach of contract.
Mr Berry was CEO of Global E-Commerce, which was part of ICAP’s global broking business. In November 2015, ICAP and Tullett Prebon plc entered into an agreement for Tullett Prebon to acquire the global broking business. The mechanism for this was for ICAP to separate this business from its other businesses so that it was wholly-owned by ICAP Global Broking Holdings Limited, the holding company of ICAP Management Services Limited, which employed Mr Berry. This transaction was completed in December 2016 when Tullett Prebon acquired the shares in ICAP Global Broking Holdings Limited and changed its name from Tullett Prebon plc to TP ICAP Plc (“TP ICAP”).
Meanwhile, on 22 July 2016, Mr Berry gave 12 months’ notice of termination of his employment in order to take up a role with BGC, one of TP ICAP’s competitors, and was immediately placed on garden leave. In October 2016, he informed ICAP that he considered that Tullett Prebon’s acquisition of the global broking business amounted to a business transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) and that he objected to the transfer under Regulation 4(7). If this was correct the transfer would operate to terminate his employment under Regulation 4(8).
In February 2017, Mr Berry informed TP ICAP that he considered that the TUPE transfer had by then taken place and that his employment had been terminated by the transfer with effect from 7 February 2017, but that he would not take up any new employment for 10 days. TP ICAP obtained an interim injunction pending a speedy trial against both Mr Berry prohibiting him from working for BGC and against BGC restraining it from inducing a breach of Mr Berry’s contract by employing him. The speedy trial then took place between 28 April and 4 May and the judgment was handed down on 6 June 2017, some six and a half weeks before Mr Berry’s garden leave was due to end.
The Court rejected the argument that there had been a TUPE transfer. This was always going to be an uphill struggle bearing in mind that Mr Berry was employed by ICAP Management Services Limited before the alleged transfer and remained in the employment of that company throughout. The court said that while a share transfer could theoretically constitute a TUPE transfer, this would only be the case if the purchaser stepped into the shoes of the seller. This might be the case if, for example, having acquired the shares in an operating company the parent terminated its directors and replaced them with its own officers and in other ways took over direct control of the business. However, this was not the case here since the broking businesses of ICAP and Tullett Prebon were still being run separately on a day to day basis, as the court established by visiting the trading floors in both buildings. As there was no TUPE transfer to which Mr Berry could object his employment continued despite the acquisition by Tullett Prebon of the global broking business.
The court gave useful guidance on the difference between the enforcement of garden leave and post-termination restrictions. In the case of post-termination restrictions, the enforceability of the covenant is judged at the time it was entered into. If it was enforceable at that time then, subject to issues such as waiver, an injunction would be granted.
Garden leave is different because the court looks at the situation at the time the injunction is sought. The court will look primarily at what is required for the reasonable protection of the employer’s legitimate business interests. If the court considers that the employer is entitled to protection for a period shorter than the full notice period, it will only enforce garden leave for that shorter period and will then refuse to enforce any post-termination restriction as the employer will already have had the benefit of all the protection to which it is entitled.
In considering garden leave, the court will be alert to employers abusing long periods of garden leave by using them to deter employees from giving notice due to fear that they will then be unable to work at all for anyone else for a long period of time.
TP ICAP put forward three business interests which they argued required the protection of a long period of garden leave: client relationships, a stable workforce and confidential information. On the facts the court found that Mr Berry did not hold any client relationships and that there was no evidence that his working elsewhere would damage the stability of the workforce. The court did, however, accept that Mr Berry had confidential information which would be of use to a competitor and so continued the injunction against Mr Berry to the end of the 12 month period of garden leave.
TP ICAP’s claim against BGC for inducing a breach of Mr Berry’s contract failed even though BGC knew the terms of Mr Berry’s contract and intended Mr Berry to start work before his 12 months’ notice had expired. TP ICAP argued that BGC could not rely on the TUPE argument because it did not have a reasonable belief that the argument was sound. The court, however, accepted that BGC had received legal advice on TUPE and on the basis of that advice took a commercial view of the application of TUPE. One might think that this was rather generous to BGC as it refused to waive privilege on the advice it had received so, for all the court knew, BGC might have been advised that the TUPE argument was hopeless.
It followed from this that the court also refused the continuation of an injunction against BGC since there was no reason to fear that BGC would continue to rely on the TUPE argument which the court had rejected in order to induce Mr Berry to start work before his notice period ended some six and a half weeks later.
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