Elsevier Ltd v Munro  EWHC 2648 (QB)
Claimant was seeking an injunction against the Defendant to prevent him from working for a competitor for a period of 12 months in accordance with his contract of employment. Injunction granted.
The employee Defendant was a highly paid Chief Financial Officer with the Claimant with access to highly confidential information. His contract of employment specified that 12 months notice must be given by either side to terminate the contract. The Defendant was offered a more attractive job with a competitor and he decided to resign, citing constructive dismissal as the reason for not working his notice. The Claimant sought an injunction to prevent the defendant from taking up employment with the competitor for 12 months.
The court concluded: 1) The Defendant was not constructively dismissed by the Claimant; 2) The Claimant did not repudiate the Defendant's contract of employment; 3) The Defendant decided that he wanted to leave the Claimant's employment because he found the new job on offer was more attractive; 4) For the Defendant to take the job with the competitor during the period of his notice would be a breach of his contract of employment.
The issue was whether the Court should exercise its discretion to grant the remedy of an injunction to prevent such a breach. The fact that the Defendant was not presently working did not affect the Court's approach to the exercise of that discretion as was submitted on his behalf. If the Defendant worked for the competitor during his notice period the Claimant would suffer damage for which money compensation would not be an adequate remedy. That was enough to justify an injunction to prevent the Defendant working for the competitor for the duration of the notice period.
Neutral Citation Number:  EWHC 2648 (QB)
Case No: HQ14X02276
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
MR JUSTICE WARBY
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ELSEVIER LIMITED (Claimant)
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Martin Griffiths QC and David Craig (instructed by Baker & McKenzie LLP) for the Claimant
Paul Nicholls QC (instructed by Lewis Silkin LLP) for the Defendant
Hearing dates: 9-11 July, 14-16 July 2014
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Mr Justice Warby:**Introduction**
- The Claimant in this action is a company within Reed Elsevier, an Anglo-Dutch publishing and information group. The Claimant company forms part of the Elsevier Division of Reed Elsevier. The Elsevier Division is a collection of businesses operating internationally in over 20 countries generating very substantial revenues from the provision of books, journals and information services to a range of sectors including health practitioners, scientists, teachers, students, and technology professionals. The Defendant is a Chartered Accountant. After graduating in 1986 he worked for Price Waterhouse and qualified in 1990. He has worked for companies within Reed Elsevier since 1995, rising to a senior level. Since 2009 he has been employed by the Claimant, working most recently as Chief Financial Officer (CFO) of a sub-division of the Elsevier Division known as Elsevier Research, a post which he took up on 1 February 2014.
- On 11 April 2014 the Defendant gave the Claimant notice of resignation. He had received a job offer to join Cengage Learning Inc ("Cengage") as its CFO. The Defendant proposed to take up that offer after a period of transitional arrangements which he suggested, ending on 31 May 2014. The Claimant objected to that proposal, relying on the requirement of the Defendant's contract of employment that he give them 12 months' notice. After further exchanges, the Defendant ceased working for Elsevier Research at the end of May 2014, claiming that his contract was at an end.
- On 4 June 2014 the Claimant issued these proceedings, relying on the 12 month notice clause and contractual duties owed by the Defendant during the period of his employment. The principal remedy sought is injunctions to restrain the Claimant until 10 April 2015 from commencing employment with or providing services to Cengage or any other competitor and from breaching his duties of good faith, fidelity, trust and confidence. The Defendant resists the claim, asserting that he is entitled to move to Cengage as he was constructively dismissed by the Claimant, and is thus free of the contractual restraints on which it relies. Alternatively, the Defendant argues that there should be no injunction, with the Claimant left to a remedy in damages, or only a limited injunction.
- On 11 June 2014 directions were given for an expedited trial and the Defendant gave undertakings to the Court, which included an undertaking not until trial or further Order to commence employment with or provide services to Cengage or any other third party. This judgment on liability and final injunctive relief only is given after that expedited trial which started less than a month after the order for directions and took place over 6 days. The parties had reduced a mass of disclosure to 13 lever arch files of trial documentation. Evidence was given by 9 witnesses, 6 for the Claimant and 3 for the Defendant. Eight of those witnesses were cross-examined. For the Claimant, oral evidence was given by Gavin Howe, the Claimant's Executive Vice President of Human Resources; Eser Keskiner, Director of Strategy; John Danaher, President of the Education Business Unit; Katherine Lunn, UK HR Director; and Stuart Whayman, Global CFO since 12 May 2014. Evidence from Byron Lloyd-Jones of Stroz Friedburg Ltd, forensic digital analysts, was read by agreement. The Defendant gave oral evidence himself and called evidence from Fernando Bleichmar, Chief Strategy Officer of Cengage and David Lomas, currently CFO of the Elsevier division. There was no evidence from the CEO of the Elsevier Division, Ron Mobed, or from the CEO of Cengage, Michael Hansen, though hearsay evidence was given about what they – and in particular Mr Mobed - had said at various times. I have had regard to the need for caution in approaching that hearsay evidence.
- I allowed some of the evidence to be given in private, pursuant to CPR 39.2(3)(a), (c) and (g), to protect what was said to be confidential information of the Claimant. To the limited extent that this judgment needs to incorporate information that I accept is confidential it is contained in a Confidential Annex to the judgment. However, whilst the evidence explored a range of matters in fine detail, examining some parts of the history day by day or even hour by hour, the nature of the case is such that the parties need to know sooner rather than later where they stand. To meet that objective it has been necessary for me to limit the amount of detail included in this judgment, and to concentrate on the main and decisive points.
- The two broad issues that arise for decision are these:
(1) Is the Defendant still bound by his contract of employment, or has he been constructively dismissed?
(2) If the Defendant is still bound by his contract, should its terms be enforced by any, and if so what form of, injunction?
- The resolution of the first issue calls for determination of whether the Claimant acted in repudiatory breach of the contract of employment as the Defendant alleges and, if so, whether the Defendant accepted such breach. If the answers are yes, that is the end of the claim. If the contract remains in existence the second issue arises. On that issue the parties are in dispute both as to the facts and as to the applicable principles of law. The Claimant says that the Court should restrain the Defendant from breaking his contract as it has not only a contractual right to prevent but also a legitimate interest in preventing the Defendant from working for Cengage, which is a competitor. In addition or alternatively it argues that the injunctions sought are justified as a means of protecting the Claimant against misuse of its confidential information.
- The Defendant's primary case is that even if his contract remains in force an injunction is not necessary because Cengage is not a competitor or not a significant competitor of the Claimant, there is no real risk of him misusing confidential information, and the Claimant would not suffer any substantial harm if he took up the new job. The claim, says the Defendant, should be treated as an application for a "garden leave" injunction and, applying the principles established in that category of case, the injunctions sought are not required in order to prevent damage to any interest which the Claimant is entitled to protect. The Defendant argues in the alternative that any injunction would need to be strictly limited in scope or duration. It is suggested that none is needed any longer. Additionally, or in the alternative, it is said that damages would be an adequate remedy for any breach.
- The contract of employment current at the time of the events in dispute is one first entered into in 2009 by means of a document signed by the Defendant on 10 July 2009 ("the 2009 Contract"). The 2009 Contract included, among others, the following express terms (I have added the numbering, for ease of reference later in this judgment):
" JOB TITLE
[a] Your job title is Chief Financial Officer, Elsevier Health Sciences, and you will report directly to Michael Hansen, CEO Health Sciences Division.
[b] Your duties and responsibilities will be discussed with you and may include any role, task, project or function which may be reasonably required of you or assigned to you by the Company from time to time in its absolute discretion, and may be for any member of the Group.
 HOURS AND PLACE OF WORK
Except where prevented by illness, accident or holiday as provided below you will devote the whole of your time and all of your attention and skill to the affairs of the Company (or any Group Company which you are performing duties for) and use your best endeavours to promote its interests" .
[a] You are entitled to receive and required to give not less than
twelve months' written notice of termination of your employment" (emboldened text in original).
[b] During the notice period the Company shall be under no obligation to assign to or vest in you any powers, duties or functions or to provide any work for you and may at any time suspend you from the performance of any duties or exclude you from any premises of the Company provided always that the Company shall continue to pay your salary and contractual benefits whilst you remain employed by the Company.
 OUTSIDE INTERESTS
[a] You shall not during your employment with the Company (except with the prior written consent of the Company) be concerned or interested directly or indirectly in any capacity, whether as principal or agent, in any business in competition with or similar to the business of any company in the Group other than as holder for investment purposes only of securities which do not exceed 75% in nominal value of the share capital or stock of any class of any one company quoted on a recognised Stock Exchange or dealt in on the Unlisted Securities Market or the Third Market".
[b] You must not undertake any other paid employment without the prior written permission of the Company, and you must not engage in any outside activity, paid or unpaid, which might interfere with the effective discharge of your duties or adversely affect the Company in any way without the prior permission of the Company. When such permission is given, the Company reserves the right to withdraw such consent at its discretion if it deems that it is affecting your performance detrimentally."
- The 2009 Contract also contained an express confidentiality clause. This, however, was superseded by provisions contained in a letter to the Defendant dated 12 October 2012 and signed by him on 18 October 2012, containing the terms of a Reed Elsevier Long Term Incentive Plan ("the LTIP Letter"). The LTIP Letter provided that its terms were agreed as a condition of the Defendant's participation in the 2010-2012 cycle of the LTIP "and in recognition of your importance to and sensitive position within the Elsevier Companies". The confidentiality provisions of the LTIP Letter were as follows:-
" Confidentiality You will hold all "Confidential Information" (defined in Exhibit A) in the strictest confidence. During your employment by the Company … you will not use, disclose, reveal, publish, or make available to any person or any firm, company or other entity any Confidential Information, except when acting in the scope of your duties. After your employment by the Company … you will not use, disclose, reveal, publish, or make available to any person or any firm, company or other entity any Confidential Information."
- The 2009 Contract also contained post-termination restrictions in the form of a "Restrictive Covenant" and a "Non Compete" clause, each of 12 months' duration. Like the confidentiality clause, however, these were superseded by the LTIP Letter. The Claimant is not seeking to enforce these post-termination provisions in this action, so it is unnecessary to set them out in detail. They do have some relevance, however. I therefore summarise them. They prohibited involvement in any enterprise "which competes with" defined categories of current or prospective business of "the Elsevier Companies". They prohibited solicitation of staff or customers or interference with business relationships. They each lasted for 12 months from voluntary termination or summary dismissal subject to a "tolling" clause which reduced their duration "by the amount of time during which, if at all, the Company relieves you of all your normal duties."
- It is agreed that the following well-established implied terms also formed part of the Defendant's contract of employment:
 (a) that the Defendant would serve the Claimant with good faith and fidelity, an incident of this duty being (b) that he would not assist or take up employment with a competitor of the Claimant during the currency of his employment by the Claimant;
 that neither party would without reasonable or proper cause, act in a manner that was calculated or likely to destroy or seriously to damage the relationship of trust and confidence to be expected between the parties as employer and employee.
- A memo dated 27 January 2014 from Ms Lunn of the Claimant to the Defendant confirmed that with effect from 1 February 2014 "your job title will change to CFO Research, reporting to David Lomas, CFO Elsevier" but stated that "All other terms and conditions of your employment remain unchanged." It is agreed that the Defendant took up the post of CFO Research against the background of that letter and on those terms. There is however one contentious issue as regards the terms of the contract of employment. The Defendant asserts but the Claimant disputes that "on a true construction of the contract, the Defendant was entitled to be provided with work of a type appropriate to be carried out by someone appointed CFO of Elsevier Health Sciences reporting to a CEO."
- Much of the factual picture is undisputed. The events of greatest importance took place in 2014 but it is convenient to begin in 2009, when the Defendant first joined the Elsevier Division as an employee of the Claimant. At that time the Elsevier Division comprised two market-facing sub-divisions: Health Sciences, and Science and Technology (S&T). The Defendant took up his post as CFO of the Health Sciences sub-division in May 2009. Health Sciences was a global provider of medical information, publishing over 1,500 books, reference works and journals of which the flagship products are Gray's Anatomy and The Lancet, as well as databases and online tools. Its customers included medical practitioners, researchers, hospitals, pharmaceutical companies and insurers.
- The management structure of the Elsevier Division at that time had three tiers. At the head of the organisation were the Elsevier Chief Executive Officer (CEO) and the Elsevier CFO, reporting to the CEO of Reed Elsevier. Those posts were held by Erik Engstrom and David Lomas. The Health Sciences and S&T sub-divisions each had their own CEO and CFO. At Health Sciences these were Michael Hansen and the Defendant. The Defendant reported to Mr Hansen, with a functional reporting line to Mr Lomas. At S&T the CEO was Herman van Campenhout and the CFO, reporting to him, was Andre de Klerk. The third tier of the structure comprised business units with their own Managing Directors (MDs) and Financial Directors (FDs), who reported to the CEOs and CFOs respectively of their sub-Divisions. There were 7 business units within Health Sciences, covering different customer and product groups, and different geographical regions. One of the 7 was known as Nursing and Health Professions (NHP). NHP provided services used principally by healthcare educators, faculties, and students. It had 4 main business areas: textbooks – including e-books; assessment services to help professionals to pass exams; electronic simulation products to help train medical professionals; and adaptive learning and quizzing products.
- The Elsevier Division management structure was modified in November 2009, when Mr Engstrom was promoted to become CEO of Reed Elsevier. For almost 3 years after that, until August 2012, there was no CEO of the Elsevier Division. However, the posts that had previously reported to Mr Engstrom as Elsevier Division CEO continued to report to him in his new capacity. The Defendant, in his role as Health Services CFO, continued to report to Mr Hansen as his business line manager and to Mr Lomas as his functional line manager. The only other change before August 2012 was a change of personnel in 2011 when Mr van Campenhout was replaced as CEO of S&T by Ron Mobed. The evidence was clear that this period in the Defendant's career was a stable one that he found particularly satisfying. It was Mr Hansen who had approached him with a view to his taking on the CFO role at Health Sciences. Mr Hansen had then explained that he saw the role as being his business partner and the Defendant saw it that way in practice. He was working with Mr Hansen, as he put it, "shoulder to shoulder" in the running of the Health Sciences business. Mr Engstrom's promotion in November 2009 meant that Mr Hansen, and his counterpart at S&T, had even greater influence over their sub-divisions. The Defendant's role was focused on running the business and strategic decision-making rather than being narrowly concerned with accounting and finance in the way that a Finance Director would be. He felt challenged and rewarded in this role for a number of years. By 2012, having achieved success, he was considering the next stage of his career progression.
- In August 2012 Mr Hansen resigned as CEO of Health Sciences in order to join Cengage, where he became its CEO. At that time Cengage had huge debts, some $5.75bn according to the Defendant's evidence. At about the same time there was a management restructure of the Elsevier Division. The post of CEO of the Elsevier Division was reinstated, and Mr Mobed was promoted to it. The posts of CEO of Health Sciences and CEO of S&T that had been vacated by Mr Hansen and Mr Mobed were not filled. Mr Mobed was now the CEO to whom the Defendant, as CFO of Health Sciences, and Mr de Klerk, as CFO of S&T, had reporting lines. Both CFOs also still had reporting lines to the Elsevier CFO, Mr Lomas. This new management structure was described by the Defendant in his evidence as a "unified management structure". That structure remained in place, with the same senior personnel in the same positions, for some 18 months, until early 2014. Again, there was clear and unchallenged evidence as to the Defendant's response to and feelings about these new arrangements. He found them unsatisfactory. Mr Mobed had in the order of 20 direct reports into him. The MDs of the business units which formed the Health Sciences and S&T sub-divisions were now reporting to Mr Mobed also. The Defendant's view was that he wished to work closely with a CEO in the same way that he had done with Mr Hansen, and more closely than he worked with Mr Mobed. The Defendant continued to work diligently, having trust in the organisation, but became increasingly concerned over time that his role was a diminished one.
- During 2013 a number of changes took place in Elsevier's financial management and other management processes. From February 2013 Elsevier embarked on a reorganisation of the Division's Financial Planning and Analysis (FP&A) Teams. Each of the Elsevier sub-divisions had previously had its own FP&A team, and there now was to be a centralisation with some positions being eliminated, under a new head. The way that financial reporting was done for the Health Sciences and S&T sub-divisions also changed. These and other changes resulted in the numbers reporting directly to the Defendant being reduced from 11 at the start of the year to 5 in mid-year. The organisation of the business was in transition. The Defendant's unhappiness in his role became increasingly apparent to others between late 2012 and the summer of 2013. He made it clear to Ms Lunn in about April 2013. From about that time he began to look at alternative job opportunities, both internal and external. During the spring and summer of 2013 he had discussions with the Reed Elsevier CFO, Duncan Palmer, with Mr Lomas, and Mr Howe, about the prospect of a new role. Mr Howe reassured him that he was valued. Efforts began on the part of the company to find such a role for him.
- In about September or October 2013, the Defendant approached Mr Lomas and said words to the effect that his job had changed so that he had been constructively dismissed or made redundant, and he wanted to leave. As a result Mr Lomas asked Ms Lunn to calculate what redundancy payment would be payable under the Claimant's policy, if one was to be made. She did so and the sum was some £500,000. When Mr Lomas discussed the matter with Mr Mobed, however, Mr Mobed said that the Defendant was needed and had not in his view been constructively dismissed. He tasked Mr Lomas with identifying a role for the Defendant. As a result, discussions took place during November and December involving Mr Lomas, the Defendant, Mr Mobed and Mr Howe about the prospect of the Defendant taking on the role of CFO of "Research". Research was the name given at about this time to a group of business that had mostly been under the S&T banner until then. At the core of Research were three main businesses: journal content; the technology that allows users to search and access content; and sales.
- The Defendant expressed two concerns about the prospect of becoming CFO Research. First, he was concerned not to supplant Mr de Klerk, the incumbent CFO of S&T/Research, whom he thought should have first option. Mr de Klerk, however, was suffering from health problems which meant that arrangements were under way for him to move from his then post to a more flexible and less demanding role. Secondly, the Defendant was concerned to know whether there would be a CEO of Research for him to work with. This was a matter to which he attached importance. Some discussions took place about that issue as a result. No CEO was appointed, however, nor was a promise or commitment made to the Defendant that there would be a CEO.
- On or about 12 December 2013 the Defendant orally accepted the Research CFO post. The arrangements for him to assume the role were made during December 2013 and January 2014. They included a formal announcement, a draft of which the Defendant reviewed and approved on 16 December before it was made. It recorded that reporting to him would be the Finance Directors (FDs) of 6 of the business units that made up Research but that the FD of the 7th unit, known as AGRM, was leaving. The draft announcement recorded that this role would be combined with the Defendant's role as CFO. Subsequently, before the Defendant assumed the CFO role, the FD of another Research business unit, known as AGIM, also left. That role also was to be combined with the Defendant's role as CFO Research.
- The Defendant's move was announced on 7 January 2014, Ms Lunn's memo setting out his terms was sent to him on 27 January, and he started work in the new job on 1 February 2014. Over the following weeks he spent a substantial part of his time on the AGRM and AGIM business units. During this same period, Cengage was emerging from Chapter 11 bankruptcy protection, which it eventually did with restructured and much reduced debt. The Defendant's evidence was that its debt was reduced from some $5bn to $1.75bn by the time it emerged from Chapter 11. On 25 February 2014 the Defendant had dinner with Mr Hansen, with whom he had kept in touch since his departure from the Claimant. Mr Hansen had by now been CEO of Cengage for some 16 months. Mr Hansen mentioned that he was looking for a CFO, and the prospect of the Defendant fulfilling that role was discussed at the dinner. Over the month that followed the Defendant had calls and meetings with Cengage investors and gained their approval. A formal job offer was made by Cengage on 26 March 2014. On 28 March the Defendant orally informed Mr Howe and Mr Mobed of his intention to resign. By letter of 11 April 2014 he gave notice that he intended to leave, and set out explanations for that decision, writing as follows:-
"In short, the hopes and expectations I have had of a seat at the management table of equivalent status to my previous role in Health Sciences have come to nothing and I have therefore reached the decision to leave. Accordingly, insofar as this is required, please accept this as the required written notice of my resignation."
- The letter went on to indicate a "desire to leave within a reasonably short period in order to continue my career at an appropriate level elsewhere", and enclosed a copy of a transition plan the Defendant had prepared. He wrote that he could not see that there was anything of real value he could contribute after the end of the proposed transition period, 31 May 2014, and that it was his intention to cease working after that date.
- The Defendant did stop working for the Claimant at the end of May 2014. His resignation terms were not, however, accepted by the Claimant. Over a series of meetings and exchanges of correspondence in April and May 2014 the parties set out their positions. On 17 April Ms Lunn wrote on behalf of the Claimant, referring to the Defendant's notice period and stating that his transition plan would not satisfy the company's business requirements. She said the company would need the Defendant to continue in his role until the closing of the financials for 2014, which would be in late January 2015. During that period it would "strive not to involve you in activities that we would consider to be competitive with Cengage". After that it would put the Defendant on "garden leave" until the end of his notice period on 10 April 2015 and would waive the post-employment non-compete provisions. The Defendant replied on 23 April making clear his position that the Claimant had no real interest in keeping him "tied in" for 12 months, that there was no business justification for keeping him on after 31 May, and that there was no legitimate reason for the Claimant seeking to keep him "out of play" after that date.
- On 27 May 2014, following further inconclusive discussions, Mr Howe wrote to the Defendant reiterating that the Claimant was not willing to agree to a 31 May departure date. Mr Howe's letter stated that the Claimant was "one of our most experienced and knowledgeable finance officers, and … a very valuable resource for us". It said that the 12 month notice period had been agreed "precisely to enable the Company to protect its interests with a transition period". It asserted that acceptance of the Cengage post would be a breach of the Defendant's notice period obligations and a breach of the post-employment non-compete clause. The letter re-affirmed the Claimant's proposal that the Defendant should work on closing the 2014 financials, whilst being insulated from confidential information relevant to Cengage's business, and then go on garden leave. It stated that the Claimant expected the Defendant to continue to carry out his duties and responsibilities and that any efforts to wind down by deleting emails, cleaning out files were not authorised. The letter made clear that if the Defendant did seek to leave his employment on 31 May the Claimant would take legal action.
- The next day, 28 May, the Defendant replied with a 5 page letter. Setting out the "Background" he complained that the Claimant had reneged on a number of assurances since August 2012 and referred to his frustration at the Claimant's "failure to offer [him] a suitable alternative role" since then. He said that "As set out in my resignation letter, I reached the decision that I had no alternative but to seek a suitable role elsewhere". He took issue with the company's assertion that he was needed during his notice period and maintained that the reason for the company's position was that Cengage was a company with which "although not a competitor of Elsevier" there was animosity. Under the heading "My Employment" he stated as follows:-
"In the circumstances, both in respect of the matters leading to my resignation and our subsequent dealings referred to above, I find myself now in an untenable position in respect of my continued employment with Elsevier. In the absence of any justified rationale for my continued employment, and following the completion of my proposed transition plan, I write to confirm the termination of my employment with effect from 31 May 2014. The company's actions both prior to and after my resignation are regrettable and undermine any trust and confidence that I may have had in the company."
- The letter went on to volunteer permanent and unconditional undertakings not to divulge trade secrets or confidential information of the Claimant and to deliver up any that was in the Defendant's position, as well as undertakings until 31 May 2015 not to solicit staff or customers or prospective customers of the Claimant or the group, or to interfere with their business. An additional undertaking was offered, and in due course provided to the Court, not to commence employment with Cengage pending a speedy trial of the Claimant's threatened legal action. Undertakings to similar effect were later accepted by the Court as I have indicated.
- The 31 May 2014 being a Saturday, the Claimant's last day working for the Claimant was Friday 30 May 2014. He retained his company laptop, however. This was his only computer at the time. Between Thursday 29 May and 2 June 2014 he carried out operations on the laptop which caused the deletion of some 950 user files and folders. During this process, on 2 June, he downloaded a number of documents from the computer onto a USB stick. On 4 June 2014 the claim form in this action was served on him.
- The relevant legal principles are clear and undisputed. Constructive dismissal is a colloquial label for a repudiatory breach of contract by the employer which is accepted by the employee, bringing the contract to an end. In such a case the employee is relieved of all further obligations in his contract, including any post-termination restrictions. The breach must go to the root of the contract, and the employee must act decisively. As Lord Denning MR explained in Western Excavating (ECC) Limited v Sharp  1 QB 761, 769:-
"If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave at the instant without giving any notice at all. … But the conduct must in either case be sufficiently serious to entitle him to leave at once. Moreover, he must make up his mind soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract."
- (I have omitted from this citation some words which are relevant only to constructive unfair dismissal claims). The common law requirement that the victim of a repudiatory breach of contract must promptly and clearly elect whether to accept that breach or to affirm the contract means that an employee cannot resign with notice, and later claim constructive dismissal; to give a period of notice is to affirm the contract in part: see Norwest Holst Group Administration Limited v Harrison  ICR 668, 683E to F per Sir Denis Buckley; [Cockram v Air Products Plc ]()EAT 21 May 2014,  per Simler J.
- The mutual obligation not to destroy or seriously damage trust and confidence (clause  above) is a fundamental term of all employment contracts: Malik v Bank of Credit and Commerce International SA  AC 20. Any breach of this obligation is repudiatory: Morrow v Safeway Store Plc  IRLR 9, . However as Jack J stated in [Tullet Prebon Plc v BGC Brokers LLP]()  IRLR 648, at :-
"The courts will…continue to scrutinise closely the arguments of employees (particularly highly paid individuals and teams moving to a competitor of their employer) who have already secured alternative employment prior to resigning, and who construct arguments of repudiatory breach as a means of avoiding notice periods and irksome covenants. In such cases the argument will fail: (a) often at the first hurdle whether there has been a repudiatory breach at all; or, (b) sometimes, because any such breaches have been waived."
- In scrutinising claims of constructive dismissal the Court will bear in mind that the test of repudiation is not a test of whether the employer's conduct is reasonable, or fair. There is only a breach of the obligation of trust and confidence if there is "no reasonable and proper cause" for the employer's conduct, and the conduct is calculated or likely to destroy or seriously damage the relationship lost in confidence; see Lord Steyn in Malik, at 53b to c. The test is therefore a "severe" one: Gogay v Hertfordshire County Council  IRLR 703,  per Hale LJ (as she then was). The gravity of the conduct required to satisfy that test was emphasised by Lightman J in BCCI v Ali (No. 2)  ICR 1354, :-
"(1) The misconduct on the part of the employer amounting to a breach must be serious indeed, since it must amount to constructive dismissal and as such entitle the employee to leave immediately without any notice on discovering it. The test is whether the employer's conduct is such that the employee cannot be expected to tolerate it a moment longer after he has discovered it and to walk out of his job without proper notice.
(4) The required conduct must be 'likely' to 'destroy or seriously damage' the relationship of trust and confidence with the claimant employee. The term 'likely' requires a higher degree of certainty than a reasonable prospect of indeed a 51 per cent. probability ('not unlikely') and reflects what might colloquially be termed 'a pretty good chance'; consider Taplin v C. Shippam Ltd  ICR 1068, 1074A-G. A mere possibility of destruction or serious damage may not be sufficient, as may not the likelihood of any lesser adverse impact."
- The Defendant's pleaded case and witness statement set out extensive allegations of conduct by the Claimant between the departure of Mr Hansen in August 2012 and the Defendant's assumption of the role of CFO Research in February 2014 which was said to have involved repudiatory breach of contract on two grounds. First it was said to involve breach of a contractual right of the Defendant to be provided with work of a type appropriate to the post of CFO Health Sciences (paragraph 13 above) ("the Appropriate Work Duty"). The Claimant's conduct was also said to have undermined the Defendant's trust and confidence in the Claimant. It is clear, however that the Defendant at no point treated this conduct as entitling him to leave at the instant or soon after. He did not take steps to terminate the contract. He did tell Mr Lomas that he believed that he had been constructively dismissed or made redundant, but he did not resign. He did not ask for nor was he offered termination for redundancy. He continued in his post as Health Sciences CFO, albeit unhappily, until he was offered and accepted the job of CFO Research. By doing so he affirmed the contract.
- The focus of the Defendant's case had sensibly shifted by the close of the trial, when the submission made was that the Claimant had acted in repudiatory breach of the Appropriate Work Duty and the trust and confidence obligation in connection with the Defendant's employment as CFO Research. These alleged breaches in 2014 are said however to have been the more serious because of what had gone before. I do not believe that is a legitimate way to put the case. A breach of contract cannot be relied on to support a case of repudiation, once the contract has been affirmed in the knowledge of that breach: Cook v MSHK Ltd  IRLR 838, . I shall nonetheless consider the merits of the Defendant's contentions about the earlier period.
- The first question is whether the contract under which the Defendant was employed between 2012 and 2014 incorporated the Appropriate Work Duty. That calls for examination of the contractual wording of 2009, in its factual matrix. I would accept there was an obligation to provide some work. The express words of clause 1(b) conferred a broad discretion on the company to assign roles or tasks to the Defendant. However, the Claimant could only require what was "reasonable", and I would agree that the wording of clause 1(a) appointing the Defendant as CFO Health Sciences imposed limits on what it would be reasonable for the Claimant to require of the Defendant. The company was not free to require him to work in a capacity or in ways which were wholly at odds with the role and status of a CFO. To that extent I accept the Defendant's case. I do not accept, however, the submission made on his behalf that the contract imposed a contractual duty on the Claimant to ensure that the Defendant reported to "a dedicated CEO" (meaning a CEO specific to the business of which the Defendant was CFO).
- Not only is this a submission that goes beyond the pleaded case, it seems to me extravagant. This happened to be the way the company's management structure was established at the time the contract was made in 2009 but I see no basis for concluding that it was the mutual intention of the parties to ossify that particular structure, and to hamper the company's room for manoeuvre, by making the perpetuation of the extant management structure a condition of the Defendant's contract of employment. It follows that I do not accept the Defendant's case that the changes to the Claimant's management structure that took place after Mr Hansen's departure amounted in and of themselves to a breach of the Defendant's contractual rights. To alter the Defendant's reporting line so that he reported to the CEO of the Division, Mr Mobed, rather than to Mr Hansen (or some other dedicated CEO) was not a breach of contract.
- Was the Claimant's conduct towards the Defendant in the period after Mr Hansen's departure and before the Defendant's appointment to the Research post nevertheless in breach of the Appropriate Work Duty? I accept that by the Autumn of 2013 the Defendant had come to the conclusion that his responsibilities were so changed and diminished that his job had "gone". I accept also that the nature of his work did change substantially after the departure of Mr Hansen and the 2012 reorganisation. But these changes did not mean that the Defendant's work became inconsistent with his status as a CFO, or that his job had in fact ceased to exist. As Mr Howe pointed out in his statement, the Defendant was still reporting to a CEO, in the form of Mr Mobed, and one who was more senior than Mr Hansen had been. No doubt the Defendant is right to say that this was a less intensive interaction than he had engaged in when working with Mr Hansen. That is inevitable, given the scale of Mr Mobed's responsibilities compared with those of Mr Hansen. It may have been less satisfying on that account. It did however involve meetings with Mr Mobed at least once a week and I am persuaded by the witnesses and the documentary evidence that Mr Mobed relied heavily on the Defendant for information, advice and strategic input, all of this being consistent with the Defendant's role and status as CFO.
- So far as the witnesses are concerned, Mr Howe said that "Ron Mobed was very reliant on having people of Bob's quality to cover the span of control and help him with the span of control he had". Of the task list meetings Mr Howe said "Bob was a key and probably the most important member" of a group through which Mr Mobed ran his broad portfolio. This is supported by some of the documents. The Claimant's April 2013 Organisational Talent Review for example contained assessments of the Defendant and his role informed by inputs from the Defendant and those to whom he reported. It recorded his current role as involving "Support [to] Elsevier CEO in operational management … & drive delivery of 2013 results for ex HS busineses" and the Defendant's strengths as "Effective business partner to CEO and finance leader" (emphasis added).
- The same page of that document did record this, under the heading "Career Path": that the Defendant's "Current role effectively eliminated; supporting transition to new Elsevier organisation in interim". Heavy reliance was placed on this on the Defendant's behalf. Looking at the statement in context, however, I consider it would be wrong to read those words too literally. The same page of the Talent Review recorded that the Defendant needed a new challenge "in the next 12 months", and envisaged a move to a CFO/COO role in a substantial business. A previous page of the document recorded the CFO Health Sciences role as a role "likely to go away" (emphasis added). Further, Ms Lunn's evidence was that these assessments are written "at a moment in time" and that a lot changes in 9 months. The Defendant did not himself claim that his role as CFO Health Sciences had actually gone until some 5 or 6 months later, in the Autumn of 2013. When he did, and the question of redundancy arose, Mr Howe was surprised. The response of Mr Howe and Mr Mobed was that the Defendant was not redundant and continued to be needed. On that point the evidence of Mr Howe, Ms Lunn and the Defendant's witness Mr Lomas was consistent. I accept that this assessment was not only genuine but correct. A real role remained.
- It is true that there was significant reorganisation of the management in 2013. That included a reorganisation of the FP&A function which removed some staff and responsibilities from the Defendant's area, but this was a change he supported. The impact on the Defendant of other structural changes, such as a shift to the centre of personnel concerned with M&A integration was in my view somewhat exaggerated by him. That particular change involved a single individual carrying out functions of a technical nature. The reality of this period from April 2013 to the end of that year was in my judgment that the management structures, including the finance function, were going through a period of transition. The Defendant's acknowledged skills were really needed and were used by the company to assist in that process, in a way consistent with his status.
- Nor do I consider that the Defendant is justified in claiming that the Claimant behaved during this period in a way calculated or likely to destroy his trust and confidence in the Claimant. This is not merely a question of what roles and responsibilities were conferred on or removed from the Defendant but also of what steps the Claimant took to address the Defendant's known dissatisfaction. As I have already noted, Mr Howe reassured him of his continued importance to the business. It is clear that the Claimant did not leave it at that but that in addition to the Defendant's own job searches real efforts were made by the Claimant's personnel to identify job opportunities for the Defendant that would enable him to continue and progress in his career with the company. Those involved in these efforts, to the knowledge of the Defendant, included Duncan Palmer, Reed Elsevier Group CFO, Mr Lomas, Mr Howe and Ms Lunn. For these reasons I reject the contention that the Claimant was in breach of its contractual duties towards the Defendant in the period up to the time in December 2013 at which it offered the Defendant appointment as CFO Research.
- I turn to the Defendant's case in relation to that appointment. His case as it emerged in closing submissions is similar in its overall shape to his case about the earlier period. He claims first of all that the Claimant owed him the Appropriate Work Duty and repudiated that obligation, and thereby the contract of employment as a whole. Secondly, he alleges repudiation by breach of the duty of trust and confidence.
- The allegation of breach of the Appropriate Work Duty when the Defendant was in post as CFO Research is one that for the reasons I have given above falls to be considered in isolation and in its own right, on the footing that there were no material breaches of contract beforehand. I take first the allegation that the duty was broken by not employing the Defendant as a CFO "working with a dedicated CEO". It is impossible to maintain that the Defendant had a contractual right to be employed with a dedicated CEO at this time. This is for the reasons I have already given and other reasons. The written statement of the Defendant's terms of employment contained in Ms Lunn's memo of 27 January 2014 made no reference to any CEO but, by contrast, specified that the Defendant would report to Mr Lomas, CFO of the Division. That provision replaced the wording of 2009 (clause 1(a)). There is no basis for alleging that the contract contained any collateral or additional oral term requiring the Claimant to provide a dedicated CEO for Research. No such allegation was made. The Defendant accepts that whilst the issue was discussed he was given no promise that a CEO Research would be appointed. Such an appointment was plainly not a term or condition of his acceptance of the role.
- The Defendant's further allegation of breach of the Appropriate Work Duty is that the Claimant obliged him to "spend much of his time carrying out roles of more junior employees". This is a reference to his assuming the roles of the FDs of AGRM and AGIM from February 2014 onwards. It is said to have amounted to a de facto demotion akin to what occurred in Land Securities Trillium v Thornley  IRLR 765, and is alleged to be at odds with the parties' express intention of providing the Defendant with a job commensurate with his status. In the abstract, for an employer to require a senior person appointed as the CFO of a substantial business to spend all or most of their time on work of this nature might well amount to a breach of contract for that reason, I agree, but on the evidence that is not this case.
- First, the assumption of the FD roles for AGRM and AGIM was not something foisted on the Defendant after he took up the post but something he knew of and accepted before starting. Secondly, it should not have taken up most of his time. My conclusion is that he spent rather more time on the task than ideally he should have done. I base that on my own assessment of him as a witness but also and more particularly on the consistent assessments of his performance and development areas in the company documentation over previous years. These identified as areas for development the Defendant's failure adequately to prioritise and tendencies to take on too much and not to delegate enough. Thirdly, I do not accept that the FD roles in fact took most of the Defendant's time. One of the MDs reported that he had not received enough support on financial matters from the Defendant because of the Defendant's other responsibilities as CFO and consequent "lack of bandwidth". This illustrates the fact, as I find it to be, that there was a good deal more to the job of CFO Research than filling in for two FDs.
- The other tasks for which the Defendant was responsible were, moreover, substantial tasks fit for a CFO. In the April 2013 Organisational Talent Review Mr de Klerk's role in the corresponding post with the then S&T sub-division was identified as "very attractive role with key elements of running a large unit with full P&L, M&A Activities and sizeable finance team". Mr de Klerk was not moved out of that post in late 2013 because there was nothing suitable for him to do but because of his ill-health. Research was a substantial business. According to Mr Howe it was the biggest, most important, and most profitable part of the Elsevier Division. I find that at the time of the Defendant's appointment as CFO Research the Claimant rightly saw a real need for a senior person of his skill and experience in such a post, and that the role was one suited to the Defendant's status. Mr Howe was, to use his word "gobsmacked" to learn on 28 March 2014 that the Defendant intended to leave. The reason was that he considered that the Defendant was in a significant and appropriate job with much to do and had no reason to be so profoundly dissatisfied that he would want, for that reason, to leave.
- I cannot accept the Defendant's case that the Claimant acted in breach of the implied term of trust and confidence by "placing the Defendant in a job that had been earmarked to go away (and without his knowledge)". That case was based on a statement in the April 2013 Organisational Talent Review but, as with the statements about the Defendant's role in Health Sciences, there is a danger in taking the statement literally, and out of context. For reasons I have given above my conclusion is that at the relevant times in December 2013 and in 2014 the CFO Research job was not due to go away. I attach importance in this context to the Claimant's evidence about the efforts that were being made to recruit a CEO for the Research business in late 2013 and into 2014. This was unchallenged evidence, supported by contemporary documents. Such a move would have represented a change from the "flat structure" put in place in August 2012. The explanation given by Mr Howe, which I accept, was that Mr Mobed had "developed his thinking" about the management structures required as he gained more knowledge and experience of the overall Elsevier business.
- I also place weight on the fact that the Defendant's complaints about the matters I have mentioned did not emerge until after he had received and decided to accept the job offer from Cengage. During February and March 2014 he made no complaint, for instance, that no CEO had been appointed nor did he enquire about what if anything was being done on that front. When he announced his intention to leave it was not said to be due to any repudiation by the Claimant. When he wrote an email to Mr Hansen on 28 March 2014 after he had orally announced his intended resignation, he did not make any suggestion either. He recorded that in discussions with the Claimant's management he had focused on the advantages to him of the opportunity at Cengage, that "Ron [Mobed] and Gavin [Howe] were clearly very surprised", and that Mr Howe was very concerned about transition and the Defendant's support over the coming months.
- Moreover, it is clear to me that the Defendant was well aware by 11 April 2014 of the features of his then role of which he now complains as a repudiation of the contract and yet the letter he sent that day was not one that notified immediate resignation. Rather he gave "the required" notice to terminate his employment. So far from accepting a repudiation, he thereby affirmed the contract.
- The Defendant's case that Mr Howe thereafter destroyed his trust and confidence is in my judgment ill-founded. One complaint made is that the Claimant undermined trust and confidence by failing to engage in "sensible discussions" with the Defendant about his transition, after his notice was given. One major focus of this complaint was in the end an allegation that the Claimant treated the Defendant in a way that was unjustifiably different from the way that it had treated Mr Hansen in 2012 and Mr Lomas when he resigned in April 2014. Unjustified discrimination between the way one employee and others are treated can involve a breach of the duty of trust and confidence. Thus, there will be such a breach for example if one member of a large workforce is deprived on capricious grounds of the opportunity of a new contract which is offered to all the rest:Transco plc v O'Brien  ICR 721 (CA), .
- This aspect of the Defendant's case emerged, however, late in the day. It was only pleaded by an amendment I allowed on the first day of the trial. I was not shown any case in which such a breach has been found (or alleged) on the basis of disparate approaches to the waiver of contractual notice requirements. That may be because in order to amount to a breach of the duty of trust and confidence the issue at stake must not only be one of importance, the complainant must also establish that the cases are truly similar, and that the differences are unjustified; arguments from disparity should be approached with caution: see Paul v East Surrey District Health Authority  IRLR 305, . The late emergence of this aspect of the case meant that the Claimant was hampered to some extent in dealing with it, and I take that into account in my assessment. I am not persuaded that there is sufficient comparability between the Defendant's case and those of Mr Hansen in 2012 (when he joined a Cengage which was suffering from huge debt levels, in a very different position from its present one), and Mr Lomas (who is not leaving to join a competitor) to afford a foundation for the disparity argument, or that the differences in treatment were not justified by different circumstances.
- The further complaint that by asserting in his letter of 27 May 2014 that there was still a job for the Defendant to do Mr Howe destroyed trust is unwarranted. That was a reasonable assertion for Mr Howe to make, in the circumstances. This complaint is in my judgment contrived. The closing of the accounts for 2014, which was the primary task expressly identified by the Claimant for the Defendant to carry out during his notice period, was a substantial and responsible exercise. Contrary to a suggestion made at one stage by the Defendant, the task could not be carried out by Mr Lomas, the Elsevier CFO. Quite apart from the question of whether it was reasonable to propose the transfer of this responsibility to a more senior CFO, Mr Lomas was not going to be there to do the job. Arrangements for his departure at the end of July 2014 had been completed before the Defendant gave notice on 11 April. Mr Lomas's successor, Mr Whayman, started work just over a month after that, on about 12 May 2014. It was entirely fair and reasonable for Mr Whayman to say as he did in his evidence, that closing accounts is a key requirement for a company and getting it right a key requirement for a CFO, so he wanted to make sure he had all the skills. The Defendant's own transition plan identified a range of additional tasks that were within the scope of his responsibilities that needed doing, but which he was suggesting should be done by other people. The Defendant's suggestion that planned staff reductions left enough spare capacity to make this manageable owed more to wishful thinking than analysis. Mr Whayman and the Claimant were entitled also to say, as Mr Whayman did, that the Defendant is needed for as long as it will take them to find a suitable replacement for him in his areas of expertise.
- My conclusion is that the explanation for the Defendant's letter of notice of 11 April 2014 and for his purported termination for repudiatory breach on 28 May 2014 is the same. It is not that the Claimant had behaved in a way that made it intolerable for the Defendant to continue in his job and thereby repudiated the contract. The Claimant had not done that. The explanation is that the Defendant had unexpectedly received a job offer from Cengage which he found very attractive, more attractive than continued employment with the Claimant, and for that reason wanted to move.
- I do not find that the dominant motivation for the Defendant was money, as was suggested on behalf of the Claimant. The Cengage job offer was undoubtedly a financially attractive one. According to a remuneration and share benefit summary prepared by the Defendant at the time of negotiations with Cengage his then job with the Claimant involved salary and bonus (in dollar equivalents) of $342,000 and $171,000 gross/pre-tax. The job on offer from Cengage had a base salary of $500,000 and bonus at target of $300,000. Each job also had share incentives. Compensation of these is not so straight forward but the potential rewards from the Cengage deal appear to be very substantial. I have no doubt that financial rewards were a significant factor for the Defendant, which would be only natural. To say that it was not about money, as he did, does not mean that the money was unimportant. However, as the Defendant pointed out, there were uncertainties in the Cengage share incentive values, the Cengage job would involve a move to the US, and that would prejudice his wife's presently substantial earning power – she being in a very specialist role in the UK. In his email to Mr Hansen of 28 March 2014 the Defendant described the Cengage job offer as a "unique opportunity to take the lead finance role". In his witness statement for this action he said of the prospective role that he "would be playing a fundamental part in leading Cengage's new era post-bankruptcy, working as a genuine partner heavily involved in running the business." In my judgment what was most attractive to the Defendant about the job offer was the chance to work again with Michael Hansen and, above all, the career development opportunities afforded.
- The Defendant is presently in breach of the obligation under clause 2 of his contract of employment, above, to devote his time and attention to the Claimant's affairs whilst employed by the company. But it is trite law that the Court will not grant specific performance of any positive obligation to work. What the Claimant seeks is an injunction to prevent breaches by the Defendant of the negative obligations contained in clause 4 and implied term 6(b) above. There is no issue as to the validity of those obligations. Covenants restraining an employee from working for a competitor during his employment are not subject to the doctrine of restraint of trade, and do not need pass any test of reasonableness in order to be enforceable: [J M Finn & Co Ltd v Holliday ]() IRLR 102,  per Simler J. There is no doubt that the Court has power, if there is evidence of a threat to break such a negative obligation, to grant an injunction to prevent this: Thomas Marshall (Exports) Ltd v Guinle  1 Ch. 227, 243. The issue in such a case is whether the Court should exercise its discretion to enforce the contractual prohibition by injunction, rather than by an award of damages.
- It is well settled that the Court will not exercise its discretion to enforce a contractual prohibition on working for another employer during a notice period if this would be tantamount to granting specific performance of the contract of service. That would be so if the employee's only choice was to work for the current employer or face starvation. The cases which established that proposition were cases where the employer was offering no pay to the employee whilst away from the employer's business: see, eg, Rely-A-Bell Burglar and Fire Alarm Co Ltd v Eisler  Ch 609. That is not the position here, as the Defendant is being paid and will be paid whether or not he continues to work for the Claimant. It is submitted on the Defendant's behalf, however, that enforcement of his notice period obligations in the way that is sought would compel him either to work for the Claimant or to "face idleness" and that in these circumstances the Court's discretion should be exercised in the light of principles developed in cases concerned with the interaction between an employee's legitimate concern to work and the use of "garden leave" clauses. A garden leave clause is one which confers on the employer an express contractual right not to provide any work to the employee during the period of notice. The argument, in summary, is that it is not enough for the Defendant to be paid, he also has a legitimate concern to work; if he does not work for the Claimant and the injunction is granted as sought he cannot work for anybody else; he does not wish to work for the Claimant and cannot be forced to do so; hence, the practical effect of the grant of the injunction would be to compel idleness for the remainder of the notice period.
- In my judgment this argument is ill-founded. The authorities relied on, which include the decisions of the Court of Appeal in Provident Financial Group v Hayward  ICR 160, 165E, 168C to D per Dillon LJ and William Hill Organisation Ltd v Tucker  ICR 291, 301H-302A, as well as GFI Group v Eaglestone  IRLR 119 and JM Finn and Co Ltd v Holliday (above), acknowledge the potential for abuse that is inherent in the exercise of the employer's rights under a garden leave provision. As Simler J explained in JM Finn and Co, :
"…the Court will be astute to recognise that the practice of long periods of garden leave is obviously capable of abuse. It is a weapon in the hands of the employer that might be used to ensure that an ambitious employee will not give notice if he is going to be unable to work at all for anyone else for a long period of notice…"
Thus, where an employer puts an employee on garden leave and then seeks an injunction to restrain them from working for another, public policy considerations compel the Court to approach the exercise of its discretion in the light of the doctrine of restraint of trade; the result may be that the Court grants no injunction, or one more limited in scope than the contractual provision: JM Finn & Co Ltd , .
- The reason the law has developed in this way is, however, that in such cases the employer is exercising its contractual rights in such a way as to force the employee to be "idle" or, to put it more simply, not to work. There is a public policy against the compulsory sterilisation and potential atrophy of skills. Here, the Defendant's contract includes a garden leave provision: clause 3(b) above. But the Claimant has not so far exercised its rights under that provision. On the contrary, it has asked the Defendant to continue working until January 2015. The reason the Defendant is not working at the present time is that he has chosen to stop working for the Claimant. It does not lie in the Defendant's mouth to complain of "idleness" which he has chosen, in breach of his contract of employment. I am not sure this is because to do so is to rely on his own wrong, as was submitted on behalf of the Claimant. It seems to me, rather, that the point is that the underlying public policy is not engaged in a case where the employer is not depriving the employee of an opportunity to work. I dare say that the Court should be alive to the risk of an employer merely putting on a show of willingness to have an employee carry on working, but that is not the position in this case. I do not accept the argument advanced on the Defendant's behalf that the Claimant is somehow responsible for this choice, even though it has not repudiated the contract of employment. Indeed, I found the evidence of the Claimant's witnesses convincing when they spoke of their trust in the Defendant. The fact that the Court will not compel the Defendant to work is nothing to the point for this purpose. He is absent by choice and without leave.
- I accept that the principles developed in the garden leave cases are or would be applicable to this extent: the Claimant's proposal was to place the Defendant on garden leave once the 2014 financials are closed, from about January to April 2015. It could not be said, however, that such a short period of enforced leisure would engage the policy considerations that underlie the garden leave cases. As Taylor LJ observed in Provident at 170:
"The defendant's skills as an accountant or financial director are unlikely to atrophy in a period of three months. Nor is he likely to suffer severe withdrawal symptoms for loss of job satisfaction over that period."
- The present case is therefore akin to Evening Standard Co. Limited v Henderson  ICR 588 (CA), where the plaintiffs sought to restrain their production manager from taking up employment with another company in breach of a one year notice provision. The other company was a rival of the plaintiffs. The plaintiffs undertook to continue paying the defendant's salary, and were ready and willing for him to continue working for them. The injunction was granted. Lawton LJ said this, at 594:
"the injunction must not force the defendant to work for the Plaintiffs and it must not reduce him, certainly, to a condition of starvation or to a condition of idleness, whatever that may mean on the authorities on this topic. But all that, in my judgement, is overcome by the fact that the Plaintiffs have made the offer they have. The Defendant can go back to work for them. If he elects not to go back (and it will be a matter entirely for his election: there will be nothing in the judgment which forces an election on him) he can receive his salary and full contractual benefits under his contract until such time as his notice would have expired had it been for the proper period."
The Evening Standard case was distinguished by the Court of Appeal in Provident on this specific ground. Dillon LJ said this at 166B-E
"It was a case, therefore, in which, as a result of the undertaking given to the court by the employers, he was not going to be deprived of work and left on "garden leave".
In the present case, no such undertaking is offered …
- In Evening Standard v Henderson the issue was whether an interim injunction should be granted. It was granted on the basis that this was what was favoured by the balance of convenience, to "prevent the employee doing the very thing which his contract was intended to stop him doing, namely working for someone else during the period of the contract": Lawton LJ at 594 B – C. After a trial, the applicable principles are different. An employer seeking to enforce an obligation not to work for another during employment will need to show that an injunction is appropriate and that an award of damages would not be an adequate remedy. If, however, an employee seeks in breach of contract to move to another business which is being operated in competition with that of the current employer and the breach of contract will cause unquantifiable damage then it appears to me that on ordinary principles a final injunction may be granted. Even in garden leave cases injunctions have been granted on this basis, against the background of the strong public interest in employees being held to contracts which they have freely entered into for substantial remuneration: Tullet Prebon Plc, [222-223]. An employer would probably not be granted an injunction to prevent an employee working for another during his notice period if the other business had nothing whatever to do with that of the claimant employer: Provident, per Dillon LJ, 168. However, although merely helping a competitor could not be restrained after the termination of a contract of employment, an employee may in an appropriate case be restrained from fostering the profitability of a rival during the continuation of his employment. As Dillon LJ said in Provident at 169:
"Of course, additionally, the defendant will, by his activities, be helping Asda which is in competition, to put its business on a sound administrative basis. He may thereby make it a better run business. Now, merely helping a competitor in that sort of way could not be restrained after the termination of the service agreement. On the other hand, for an employee to foster the profitability of a rival during the continuation of his employment could well, in appropriate circumstances, be restrained either under a clause in the contract like those in the defendant's contract, or as a breach of the duty of good faith. I can well see that, if the notice under a contract for employment is not for an excessive period after the employee is no longer required to work his notice, it may yet be said forcibly and correctly for the employers that the risk of his going to a rival and fostering the rival's business before the expiration of his notice is one against which the employers are entitled to be protected because of the damage that it will do them."
- It is not necessary for this purpose to demonstrate that the employee would misuse confidential information of his employer if permitted to work for the rival. In the Evening Standard case the Court of Appeal granted an injunction although there was no confidential information which the Defendant had acquired: (see 592 D - F). See also Hivac Ltd v Park Royal Scientific Instruments Limited  1 Ch 169, 179. If, however, it can be shown that the employee has obtained and may misuse confidential information of the Claimant employer, that can afford a separate ground supporting the grant of an injunction: Provident, 169 C - D.
Is Cengage a competitor of the Claimant?
- The Defendant accepted that Cengage and NHP operate in "the same commercial space" but was unwilling to concede that they do so on anything but a limited basis. There was however persuasive evidence from the Claimant's witnesses, especially Mr Danaher and Mr Keskiner, as well as documentary evidence that Cengage is one of the Claimant's primary competitors in the NHP business. Mr Danaher identified Cengage as a significant competitor of the NHP business unit in the sale of hard copy and electronic publications, in recruiting authors, and in the adaptive learning field. The primary market for the Claimant's books and electronic solutions is in the United States, and Cengage's business is primarily US based, (although both businesses operate worldwide and I accept Mr Danaher's evidence that they compete with each other worldwide). The point was made by the Defendant that the part of Cengage's business said to compete with that of the Claimant represents only 4 percent of Cengage's business. However the Defendant accepted that the Cengage healthcare business generates net revenues of $70,000,000. Although this is considerably less than the NHP business turnover of $350,000.000 it is nonetheless a substantial figure. The evidence of Mr Danaher, who runs the NHP businesses was that "I lose many millions of dollars to them each week. They are considered extremely credible."
- The contemporary documents make plain that at least from the middle of 2013 Cengage was regarded by the Claimant as a significant competitor of the NHP businesses. An internal NHP review dated 26 June 2013 contained an overview of the revenue share in the US education market of the Claimant's NHP business and its major competitors. The figures are contained in the Confidential Annex to this judgment. Cengage was shown as one of five major competitors of the Claimant in this field, and the third largest of those. A similar picture emerged from an overview in the same document of the NHP US education market content brand share. The figures are contained in the Confidential Annex to this judgment. Again Cengage was shown as the third largest competitor at these times, this time with an increasing share of the market. The two major competitors were shown as having a declining market share. The same report contained "Key competitor head-to-head comparisons" by market sector, which identified Cengage as a threat. Cengage was also identified as a competitor in a June 2013 report entitled "Responding to Kirtsaeng vs. Wiley". This contained recommendations for actions to be taken by the Claimant in the light of a US Supreme Court judgment which held that the import and resale in the US of books purchased outside that country was lawful. The 2014 NHP strategy review of 24 February 2014 identified Cengage as a market leader amongst competitors of the Claimant in two market sectors. Other passages in that same report identified reasons for believing that Cengage represented a competitive threat in connection with adaptive learning products. Similarly, the Claimant's February 2014 Strategy Deck – a separate document – identified Cengage as a "primary competitor" in one area and a "growing threat" in another.
- These are instances of documents demonstrating a clear perception within the Claimant that Cengage was competing significantly in certain areas in which the NHP businesses were operating. I am satisfied that Cengage was in fact competing in those areas. There are two further matters of significance in this respect. The first is that Cengage already employs the former CEO of the Claimant's Health Scientist business (Mr Hansen), the former Chief Technology Officer for that business, (Mr George Moore) the former Head of Strategy for that business (Mr Bliechmar), and the former MD of the Global Clinical Reference Unit within Health Sciences. Secondly it is apparent that Mr Hansen has a keen interest in the NHP business, as evidenced by an approach he made to Mr Danaher in November 2013. Mr Danaher's unchallenged evidence was that at a dinner in New York at which George Moore was also present Mr Hansen expressed an interest in acquiring the NHP business from the Claimant, saying he thought there were great synergies between existing Cengage assets and those of the NHP business units. These matters clearly lend support to the conclusion that Cengage has the Claimant's NHP business in its sights.
- I have no doubt that the Defendant is an individual of skill, drive, energy and determination who would be a great asset to Cengage. He would be able to build up the business of Cengage if he moved, regardless of any question of him misusing confidential information. It is impossible, and unnecessary, to be precise about the manner in which the acquisition of the Defendant's services would advance the business of Cengage to the detriment of that of the Claimant. It is enough if there is a likelihood, as I consider there is, that a provision of the Defendant's services to Cengage during the period of his notice would "foster" Cengage's business in areas which compete with the Claimant and thereby cause substantial damage. I do not see how damages could be a sufficient remedy for injury of that nature. As so often in cases of this kind the assessment of damages would present grave problems of proof and quantification. Those conclusions are enough to justify the grant of an injunction to enforce the Defendant's express and implied obligations not to compete whilst employed by the Claiamant. I should go on, however, to consider the Claimant's case based on an alleged risk of misuse of its confidential information.
- There is no dispute that the Defendant has had access to extensive quantities of confidential information in his capacity as an employee of the Claimant. He admits that he has had access to confidential information in the following categories: strategic reviews including the 2013 NHP Strategic Review; information as to pricing strategy; the profitability of key business areas; customer contracts; marketing strategies; business plans aimed at competitors; parallel trade strategies following the decision in Kirtsaeng; M & A updates; information regarding employees and top talent of the Claimant. The issue is whether the Defendant may misuse such information if he moves to Cengage or cause or allow it to be misused.
- This is not a case in which the Defendant is said to have taken away confidential documents, as is sometimes the case with disputes of this kind. His conduct in deleting documents from his company laptop over the weekend of 29 May to 2 June 2014 and his downloading of documents from the laptop to a memory stick could appear at first blush to indicate a readiness to keep and misuse information to which he had no right and to cover up. The fact that he engaged in that behaviour within days of an express written warning that "efforts to wind down by, for example, deleting emails, cleaning out files, etc, are not authorised" could seem to add powerfully to grounds for suspicion. But the Defendant's evidence that his behaviour in this regard, however suspicious it might seem, was a foolish but innocent mistake is evidence that I accept. The documents that were deleted fell into three categories. The first was documents relating to the Claimant's business which the Defendant erased by using the delete function from the laptop and then emptying the Recycle bin. Those were documents that he had saved to the laptop in order to work on them, before emailing them back to the company whilst he was away from the office. His evidence that he believed the company would retain copies of those documents was in my judgment truthful. There was no evidence that he kept copies.
- Secondly, there were documents which the Defendant opened using a browser. Doing that would create a temporary internet file that would then be automatically deleted when the document was closed, and would show up on the system as a deletion. Relatively few such documents were identified by Mr Lloyd-Jones' expert examination of the laptop. They included some Health Sciences CFO Reports from 2010. Although the Defendant was unable to account for having opened these documents, I accept his evidence that he would not have done so in order to retrieve what would be stale information about the NHP business with a view to using it in the course of his employment by Cengage. The third category of deletions was a set of documents personal and private to the Defendant and irrelevant to this dispute. This category included matters such as tax records and vouchers and matters of that kind, and privileged documents. Documents in this category were copied to the memory stick and then deleted from the laptop. The Defendant's purpose was to remove private material from his laptop so that others could not have access to it, whilst ensuring that he had all the personal and private documents that he required. For these reasons, the Defendant's behaviour in removing and deleting documents that were on his company laptop does not in the end assist in the resolution of the issues before me.
- There being no evidence that the Defendant has removed confidential documents belonging to the Claimant, the real issues on this part of the case are whether there is shown to be a real risk that (a) the Defendant has retained in his memory some of the confidential information that he obtained in the course of his work for the Claimant and (b) that such information could and would be misused if the Defendant was employed by Cengage during his notice period. The Defendant's evidence was that the quantity of such information that he received on a daily, weekly or monthly basis was so vast and the detail of it so copious that he cannot remember any more than the broad strokes. He said it was absurd to suggest that he could retain in his memory information of any utility to Cengage.
- The Defendant asserted, also, that the confidential information which he did see in the course of his work was out of date already. He emphasised that he had not been involved with Health Sciences including NHP since the end of January 2014, a period of almost six months. He had not read the 2014 NHP Strategy Review, although it had been sent to him, as it was no longer his area of concern. He had not needed to make use of NHP or Health Sciences information during his period in post as CFO Research. He had consciously avoided referring to confidential information in the course of his preparations for trial. It was suggested that the Defendant would not be involved in business decisions relating to any part of Cengage that was in competition with the Claimant's business. It was pointed out on his behalf, in addition, that the Claimant's witnesses had said that they trusted the Defendant, and that in his letter of 28 May 2014 he had given unqualified undertakings not to misuse confidential information in future.
- I recognise that some of this has force. It does seem to me that the Claimant's case as it stood at the start of the trial was an exaggerated one. Having seen the documents relied on by the Claimant as containing the confidential information they fear may be misused by the Defendant and Cengage, it is perfectly obvious that they contain a vast amount of detail which would not be retained by any human being for days, let alone for weeks or months after the event. It is also fair to say that a good deal of the operational information which the Claimant would have come to know in the course of his role as CFO Health Sciences would, whilst confidential at the time he acquired it, be out of date well before the end of his 12 month notice period. That however is not the end of the matter. The Claimant placed heavy reliance on internal evaluations and assessments of the Defendant which paid tribute to his prodigious ability to absorb and recall detail of significance. As Mr Whayman pointed out, although a person could not keep the entirety of a strategy document in their head, at a senior level one has to be able to mine data and to retain the salient and important points. The Defendant acknowledged in cross-examination his ability to fillet documents for information that was of real importance. He conceded that he retained information that a person who had never seen the document would not have. As an analytical individual the information he retained would naturally consist of the more important points and not the unimportant detail.
- It is clear to me that the confidential information with which the Defendant became familiar in the course of his work for the Claimant dealing at a senior level with the Health Sciences businesses included strategic and other information, the key elements of which are likely to have been retained in the Defendant's memory and remain confidential and of value to a competitor such as Cengage. The Strategy Reviews are in my judgment of particular significance. They are produced annually, but set out medium term planning goals. The planning cycle is one of three years. Accordingly, the 2013 NHP strategy document which was seen and used by the Defendant is a document which set out the company's strategy in that respect until 2016. Although strategy will inevitably evolve, so that the three year plan set out in 2014 may differ from that established the year before, the Claimant's business is relatively stable and substantial elements of previous years' strategy plan are likely to be memorable and to remain current for some considerable time.
- A second category of confidential information obtained by the Defendant that I consider would be retained by him and of potential use to Cengage is pricing information relating to NHP contracts which the Defendant personally reviewed in his role as Health Sciences CFO. One of the main markets for the Health Sciences businesses is the "for profit" education sector. Mr Danaher explained convincingly that in this sector purchasing decisions are made centrally and largely on price. As he put it, customers will often say "We know you have the best content but that doesn't mean we can buy the Cadillac". Many of these customers enter into multi-year deals and most of those would be worth over USD 1.5 million over the lifetime of the contract. The Claimant's rules required the Defendant to have oversight of all such contracts, and it was common ground that he reviewed 5 of them (Mr Danaher suggested it could have been more). It would be rash to suggest that the Defendant would remember all the numbers for these contracts, but I am persuaded that he would recall the magnitude of the discounts offered and other terms and conditions arrived at after what was, naturally enough, hard negotiation with the customer.
- The Claimant's Kirtsaeng strategy is a third aspect of the confidential information obtained by the Defendant during the period he worked for the Claimant which I consider he will have retained in his memory and which has real potential value to Cengage. Details are set out in the Confidential Annex to this judgment. This was a subtle and sophisticated strategy developed over a period of many months by a team in which the Defendant played a leading role. He was involved in the development of the company's strategic pricing policy in the light of Kirstaeng for over a year, from March 2013 to April 2014. It is information of a memorable nature which is likely to be of considerable use to a competitor. I was not persuaded by the Defendant's suggestion that Cengage would have no interest in knowing about the Claimant's strategy in this regard. Even if it were true that Cengage was unlikely to adopt the strategy developed by the Claimant, or some variant of it, the knowledge that this was the Claimant's strategy would inevitably be valuable to Cengage.
- Those being my conclusions as regards the possession of confidential information by the Defendant I ask myself whether there is a real risk that the information would be misused by him and by extension Cengage, if he were to move to be employed by Cengage during the period of his notice. I do not believe that the Defendant is an individual who would deliberately misuse information that he retained from his reading and use of these documents. However, it is all too easy for someone who has possession of information of this kind to make use of it without even appreciating they are doing so. As Lord Greene MR observed in the Hivac case at  – , one has to be practical in these matters, and from a practical point of view it is unreal to suggest that an individual can make a clear division in their minds between what is confidential and what is not. The Defendant's intended role in Cengage's business would see him heavily involved in the running of that business, subject to direction from Mr Hansen. I find that there is a real risk that the Defendant would even unconsciously use confidential information obtained by him in the course of his employment by the Claimant.
- The Defendant has given an undertaking to the Court on 11 June 2014 "not to misuse or divulge any Trade Secrets or Confidential Information belonging to the company or any group company". Does that undertaking provide the Claimant with sufficient protection against the risk that I have identified? In all the circumstances I do not believe it does. A covenant or injunction to prevent an employee from working for a competitor is often the only practical way in which to provide effective protection for an employer's right to safeguard financial information: Littlewoods Organisation Ltd v Harris  1 WLR 1472,  per Lord Denning MR.
- In the present case clause 4(a) of the Defendant's contract of employment contains an express prohibition on involvement in a business competing with the Claimant. The risk of misuse of confidential information provides an additional justification for the grant of an injunction to support that contractual prohibition. I do not consider that damages would be an adequate remedy in this regard. The misuse of confidential information can be and often is insidious and hard to prove and the difficulties of establishing causation are considerable. Nor do I consider it practicable to limit the scope of any injunction to one that prohibits the Defendant from working for Cengage in ways that compete with the business of the Claimant. Since any injunction must be clear and precise in its terms, leaving the parties and the Court in no doubt as to its scope, it is hard to see how a satisfactory form could be arrived at to give effect to the submissions. None was put forward on the Defendant's behalf. The Defendant plans to play a central role in Cengage's business and it is hard to see how a clear rule could be framed to exclude him from activities relating to that part of it which competes with the Claimant's NHP businesses. For similar reasons, it seems to me that this proposal would create grave difficulties of enforcement similar to those I have already discussed above.
- Having reached these conclusions, I would have granted an injunction even if I had accepted the Defendant's submission that the present case should be treated as a garden leave case. The submission made was that it was necessary in such a case to engage in a three stage analysis: (a) to consider the detriment which the Claimant would suffer if the injunction were not granted; (b) to decide what was the minimum relief which should be granted to avoid that detriment; (c) to grant relief no wider than a reasonably drawn post termination restraint would be. I am prepared to accept (a) and (b) but not point (c). As I read the authorities the true position is not that the restraint of trade doctrine applies with its full force in relation to contractual obligations that apply during the period of employment. Rather, the doctrine will guide the exercise of the Court's discretion. It may therefore be permissible to restrain an employee from competing during the period of his employment, even though that would not be legitimate post-employment. The reasoning of Dillon LJ in Provident at 169 (above) acknowledges this.
- Applying this approach I would have granted an injunction on the following basis. The Claimant has a legitimate interest to protect by preventing the fostering of competition by Cengage which risks causing unquantifiable damage. There is also a real and substantial risk of the misuse of confidential information in the categories I have identified above by the Defendant in the course of employment at a very senior level by Cengage. This would present a threat of substantial damage to the Claimant. The risk is not merely short term. The information in question includes strategic planning in respect of the year after next. I would not consider injunctive relief lasting until April 2015 as more than the minimum required to protect against the threat. In the context of this case I would not regard a restraint on competition of that duration as an unreasonable one. I bear in mind of course that this is a case where the Defendant has not had a customer-facing role. He is however an individual with nearly five years' experience at a very senior level within the Elsevier Division who is familiar with confidential information as to the strategic planning and pricing of the Health Services businesses in the areas I have identified above. For the reasons given above, however, the conclusions I have just expressed are not necessary to my decision.
- In summary, my main conclusions are these. The Defendant was not constructively dismissed by the Claimant. The Claimant did not repudiate the Defendant's contract of employment. The Defendant decided that he wanted to leave the Claimant's employment because he found the Cengage job on offer was more attractive. For the Defendant to take the job with Cengage during the period of his notice would be a breach of his contract of employment. The issue is whether the Court should exercise its discretion to grant the remedy of an injunction to prevent such a breach. The fact that the Defendant is not presently working does not affect the Court's approach to the exercise of that discretion as was submitted on his behalf. His idleness is chosen by him not imposed by the Claimant, nor is it caused by any wrongful conduct of the Claimant.
- The Defendant's contract prohibits him from working for a competitor of the Claimant during his employment. Cengage is a competitor of the Claimant, in respect of the Claimant's NHP businesses. If the Defendant worked for Cengage during his notice period the Claimant would suffer damage for which money compensation would not be an adequate remedy. That is enough to justify an injunction to prevent the Defendant working for Cengage for the duration of the notice period. An additional justification is provided by the fact that the Defendant retains in his memory confidential information learned by him whilst working for the Claimant which is relevant to and of value to Cengage and the risk that such information would, during the notice period, be misused by Cengage to the detriment of the Claimant. The Defendant has not taken away confidential documents and I do not find that he would deliberately misuse the information he retains, but the risk of misuse and consequent damage are present and substantial.
- I agree with the Defendant's submission that the Claimant's claim for an injunction to restrain a breach of the duty of good faith is unsound, because the wording is too vague and uncertain. However I will grant an injunction to enforce the prohibition on working for a competitor, in the form of Cengage, until the end of the contractual notice period on 10 April 2015.
Published: 04/08/2014 12:48