Brandeaux Advisers (UK) Ltd & Ors v Chadwick

In this action the claimant companies seek an order for the delivery up of confidential information by the defendant former employee. The information in question was sent by her by e-mail to her private e-mail address and consists of a vast number of documents relating to the companies’ affairs, which she received in the course of her employment. She has not disclosed them to anyone save her solicitor, and has not made any use of them. She asserts that she is entitled to retain them because she may need them if any question arises in respect of her performance of her duties as the executive in overall charge of compliance in the claimant group, and in connection with her claims for wrongful dismissal made in the action and also her claims in the Employment Tribunal. The first claimant also has a claim against her for damages in the sum of £59,916 being her salary between the date when it is said she would have been dismissed if she had reported her wrongdoing, 22 February 2010, and the date of her actual dismissal, 22 June 2010. That claim is made on the basis that the defendant was obliged to report her wrongdoing and would then have been dismissed and so the salary would have been saved. The defendant has a claim for wrongful dismissal in the sum of £21,189, her salary between 22 June and 10 August 2010 when her employment would otherwise have ended. At the start of the trial the defendant’s position by way of open offer was that she was prepared to give up her own possession of the documents but not her solicitors’ on the basis that she could use them for the two purposes I have stated. The claimants’ position was that the defendant should give up her possession of the documents totally but might obtain documents from the claimants on reasonable request for the two purposes, any dispute to be settled by the court. I was told that the anticipated costs on each side to the end of the trial were of the order of £300,000, which means a total of some £600,000.

The three claimants are members of the Brandeaux Group of companies. Brandeaux Advisers (UK) Limited is incorporated in England and provides investment advice to Brandeaux Managers Limited. Brandeaux Managers is incorporated in the British Virgin Islands, and is the manager of the eight Brandeaux property funds. The funds are invested in student accommodation, typically halls of residence for university students, and in reversionary interests in long leases. Brandeaux Administrators Limited is incorporated in Ireland, and carries on business in Dublin as administrator of the funds. The funds have assets of over £1.7 billion in the United Kingdom. I will refer to the companies as ‘Advisers’, ‘Managers’ and ‘Administrators’. The chairman of the group is Ms Kay Brandeaux. She is the founder and is the sole shareholder in Advisers and Administrators, but she has no shareholding in Managers. The chief executive of the group is Mr Roger Boyland, who is Ms Brandeaux’s partner.

Between 4 February 2008 and 22 June 2010 when she was summarily dismissed the defendant, Ms Ruth Chadwick, was employed by Advisers as Head of Research & Business Development. Her background is in compliance, that is, in ensuring compliance by financial institutions with the requirements of their regulatory bodies, thus, in England, the FSA. Her employment prior to coming to Brandeaux had been with the Financial Services Commission of the British Virgin Islands, the regulator of Managers. Before I come to the issues I will provide a resume of the main events.

Prior to her employment commencing on 4 February 2008 it had been agreed that Ms Chadwick should be the chief executive officer of Administrators and should spend the first four days of each week in Dublin and should work in the London office on Fridays. She was provided with a flat in Dublin. She was also given overall responsibility for compliance within the group. The individual companies had separate compliance officers. Denise Whelan was compliance officer for Administrators. Following the financial difficulties of the banking world and as a result of redemption requests, on 12 December 2008 Brandeaux suspended the issue and redemption of shares in all its funds. All funds were re-opened by 30 April 2010. The senior management of Brandeaux were involved in this period in substantial extra work. Ms Chadwick received a bonus for 2008 which was less than she said she had been led to expect. She complained to Ms Brandeaux and Mr Boyland at the end of the year, and she says that her complaint was received with hostility. In June 2009 she became ill from stress and had to take time off. That stress arose from a number of matters. Those which I am able to identify were the proper pressures of her responsibilities, her having to commute each week to Dublin from London where she lived, the management style of Ms Brandeaux, the dismissal of Denise Whelan and her claim against Administrators in Dublin, and the fact that she was having major work done to her house following her making a claim under an NHBC guarantee – which required her to vacate the house for a while. The consequence was that on 8 July 2009 while still on sick leave she tendered her resignation, that is to say, gave notice orally to Mr Boyland. She returned to work on 13 July. She was later persuaded by Mr Boyland and Ms Brandeaux not to leave, and Ms Brandeaux e-mailed her on 27 July: ‘Both Roger and I are very pleased that you have decided to hang in there with us as we value your contribution and skills and we like having you as part of the Brandeaux family.’

As part of the arrangements following the withdrawal of her resignation it was agreed that Ms Chadwick should no longer spend most of her time in Dublin and should work from the London office. A new chief executive for Administrators was found, Mr Robert McNally. In August and September 2009 there was consideration of Ms Chadwick’s job description and of her directorships. ‘Brandeaux Head of Group Compliance’ was added to her job title. But despite the withdrawal of her resignation and the change as regards Dublin Ms Chadwick continued to suffer from stress-related ill health. She also had other health problems. She visited her doctor on 18 occasions between 8 July and 16 November 2009. On 15 October 2009 she had a telephone appointment with a psychological wellbeing practitioner of the West London Mental Health Psychological Therapies Service. The Service’s letter of 3 November 2009 recorded that Ms Chadwick had said she was experiencing a high level of stress due to work related issues and she did not get on with her boss: this had caused her to become depressed: she was finding it very difficult to ‘deal with the huge responsibilities’ she had at work: she wanted to find a new job, but that was extremely hard: she had lost her self-confidence: she was not sleeping properly. A course of cognitive therapy was decided on. The papers contain a number of depression screening forms completed by Ms Chadwick between 13 September and 2 November 2009, which show a substantial improvement.

At the end of 2009 Ms Chadwick was told what her bonus for the year was to be, namely £25,000 on top of a salary of £160,000, which was what she had received for the previous year. She expressed dissatisfaction, which was conveyed to Ms Brandeaux and Mr Boyland. On 11 January 2010 she had a meeting with them. She did not succeed in getting it increased. Later that day or possibly the following day she went into Mr Boyland’s room to locate the draft of a document which she had copied to him but had subsequently worked on further. She looked for it among a pile of papers which were on a credenza against the wall. These were papers which Mr Boyland had taken from his brief case following his arrival from abroad that morning. She was observed by Ms Brandeaux who told Mr Boyland what she had seen. Mr Boyland saw her the next day and reprimanded her for going into his office without his permission when he was not there and looking through confidential papers. She apologised, saying that she had been told that the document was there by Mr Boyland’s newly arrived p.a. On 22 January Mr Boyland sent her an e-mail about the incident saying that it was unacceptable that she had sifted through his confidential material, that he was very surprised and disappointed, that he wished to move on from the incident and not to have to refer to it again, but he was asking that a copy of the e-mail go onto her HR file. Ms Chadwick replied immediately, apologising profusely, explaining how it had come about and saying that it would never happen again. In her evidence Ms Chadwick tried to justify what she had done, saying that she had worked with Mr Boyland in his office sitting at the keyboard at his desk while they worked on documents and suggesting that she had his implied permission to act as she did. Her recognition at the time that she had done wrong is more impressive than her explanations in the witness box.

A little later that day, 22 January, Ms Chadwick sent Mr Boyland an e-mail saying that she had noticed that she was no longer receiving routine information from Dublin regarding the funds, and that she had been told that this was because she had ‘transitioned out’ of Administrators. She said that she was still the compliance officer for Administrators (which she had become following the dismissal of Ms Whelan) until the new compliance officer started, and that she was still a director of Administrators and was a director of Managers. Mr Boyland replied on Monday 25 January, saying that he had instructed that she should be removed from the circulation list of fund management information, including daily dealing schedules produced by Dublin. This had in fact occurred towards the end of the previous month. He said that he was concerned that as she was now based in the UK her receipt of such information might prejudice the off-shore status of the funds. He said the information was not necessary for her compliance duties nor for her duties as a director. He said that he wanted to return to, and finalise, her job description, last under discussion the previous September. Ms Chadwick did not reply.

On the day before, Sunday 24 January, Ms Chadwick started a process of e-mailing to her private e-mail address at btinternet.com a huge volume of material. The process was taken further on 26 January outside normal working hours. All this company material was of a confidential nature, and some of it was highly confidential. The confidential material has been printed out and occupies 49 box files. Over the following months Ms Chadwick continued to e-mail confidential material to her own e-mail address as it arose. She did not do anything with it. At some later point she copied it to her solicitor.

On 25 January 2010 Ms Chadwick ceased to be a director of the Brandeaux special purpose investment companies. She ceased to be a director of Managers on 8 February. On 22 February 2010 Mr Boyland sent an e-mail to Ms Chadwick referring to the fact that that day Valerie Kearney had started as the new compliance officer of Administrators. He asked her to resign as a director of Administrators and as company secretary. This was done on that day.

On 22 April 2010 Ms Chadwick was informed that her role was at risk of redundancy, and there followed three redundancy consultation meetings. At the third, on 10 May, Ms Chadwick was informed that she was to be dismissed on the grounds of redundancy and she was given a letter giving her three months’ notice. On 11 May she had a meeting with Ms Brandeaux and Mr Boyland, which was friendly. They were appreciative of what she had done and said that if an opportunity arose in the future they might offer her a position. On 12 May a without prejudice meeting was held to discuss the terms on which her employment might be terminated. Advisers was represented by a director, Christopher Curry. As with the redundancy meetings, it was recorded and a transcript prepared. Ms Chadwick referred to the difficulty she would have in finding another position, saying that it had taken her 8 months to get her position with Brandeaux after leaving the British Virgin Islands. She referred to the coming departure of Mr Kippax who was the compliance officer for Advisers, and raised the question of who would replace him. She said she was concerned at the competence of any temporary replacement and ‘that may be an issue that I feel obliged to bring to the regulators’ attention if it really is somebody not suitable for the role and I will of course be protected by whistle blowing provisions if it was a regulatory matter, so I wanted to put that on the table too.’ She then went on to say that while she had been in Dublin she had been harassed and intimidated by Ms Brandeaux: she was shouted at and received hurtful e-mails. She was next asked whether she had a figure in mind for her compensation, and she replied that it was a year’s salary. With other claims that would have made a total compensation package of about £200,000. The Board of Advisers met on 13 May. It considered the passage quoted above and also a passage at the redundancy meeting on 6 May where it was suggested that she had said that if she did not get the Advisers’ compliance role on a part time basis she would have to make a report to the FSA (file C pages 333 and 302). The Board considered that a threat had been made to secure more compensation. On that day, 13 May, she received a letter putting her on garden leave.

On Friday, 14 May 2010, Ms Chadwick’s company e-mail account was examined by the company’s IT department and the transfer of material was discovered. At 4.30 pm on Monday 17 May an application was made to Irwin J., without notice, for an injunction restraining divulgence and for delivery up, which was granted. The return date was 21 May. On 18 May Mr Boyland made an affidavit in support of the injunction. In it Mr Boyland said that he could think of no legitimate reason why the transfers of 24 and 26 January had occurred. He suggested that they might be connected with the e-mail exchange of 22 and 25 January concerning the provision of certain information to Ms Chadwick. He did not suggest any misuse of the material by Ms Chadwick apart from the transfer itself. But he did say that it would be highly damaging if transferred to third parties. That remains Brandeaux’s position. On 21 May the return date hearing was adjourned to 28 May. On 28 May there was a contested hearing before His Honour Judge Seymour QC, and the injunction was continued in amended terms. Directions were given for a speedy trial.

On 13 June a disciplinary hearing was held by Advisers. The complaint was the transfer of confidential material. On 22 June Ms Chadwick was dismissed for gross misconduct. Her appeal was dismissed on 21 July following a hearing on 13 July.

Ms Chadwick has brought proceedings in the Employment Tribunal, which are stayed pending the outcome of these proceedings.

Although the initial order made on 17 May covered all material e-mailed by Ms Chadwick to her private address and so included e-mails which were personal to her and included no confidential information, there is now agreement as to the material in respect of which Brandeaux may be entitled to an order subject to the defence which Ms Chadwick has raised. I say ‘subject to the defence which Ms Chadwick has raised’, because I consider that whether or not Ms Chadwick acted in breach of contract in transferring the material, it remains material which is confidential to Brandeaux and, subject to any defence, Brandeaux is entitled to its return. For it is surely incontrovertible that, subject to special circumstances, where an employee takes confidential information the employer is entitled to its return and to any further orders required to protect his position. I must, however, consider whether the transfers themselves were in breach of contract.

Clause 21 of Ms Chadwick’s employment contract with Advisers provided in part:

“21.2

You shall not (except in the proper course of your duties) during or at any time after the period of your employment under this agreement divulge to any person whatever or otherwise make use of (and shall use your best endeavours to prevent the publication or disclosure of) any confidential information… .’

.3 All notes, memoranda, documents and Confidential Information, whether on paper or other media in any form, concerning the business of the Company or …. which shall be acquired received or made by you in the course of your employment shall remain the property of the Company and shall be surrendered by you to the Company at the termination of your employment or at the request of the Company at any time during the course of your employment.

.4 You acknowledge that you owe a duty of care in the protection of sensitive and confidential information relating to the Company and that violation of such duty of care will constitute a breach of this Agreement as well as possible civil or criminal penalties.”

Brandeaux also relies on the duty of fidelity: ‘It is another implied term in a contract of employment that the employee will serve the employer with fidelity and in good faith’ – Chitty on Contract 30^th edition, volume 2, paragraph 39-057, citing first Robb v Green [1895] 2QB 315.

Byzantine arguments can be advanced whether or not what Ms Chadwick did in e-mailing the confidential documents was in breach of the obligations not to ‘divulge to any person whatever or otherwise make use of’ any confidential information. It is, however perfectly clear that the transfers were not for her employer’s purposes but for her own purposes. They were, therefore, in breach of the duty of good faith unless she can justify as she has sought to do and to which I will come shortly. Further, since the transfers were discovered she has refused to ‘surrender’ the material in breach of clause 21.3.

Ms Chadwick’s case set out in paragraph 14 of her amended defence is that there were terms implied into her contract ‘as a matter of law and/or as a matter of reasonable necessity’ that she was entitled to use confidential information or to disclose it to third parties where the use or disclosure was fairly required for her legitimate interests or to protect her legal rights or to defend herself; that she was so entitled where the use or disclosure was in the public interest including use or disclosure in relation to financial regulators; and that she would not be required to deliver up confidential information relevant to legal or disciplinary proceedings brought or threatened against her by Brandeaux.

I find it difficult to determine what was actually in Ms Chadwick’s mind when she decided on a Sunday to start the e-mailing process. It may be that she was not thinking very clearly. If she had thought clearly for a moment, she would have realised what a great risk she was taking whatever her own view as to her rights. It must be that by double deleting the e-mails she was sending she thought she was sufficiently protected. It is worth considering what would have happened if she had told Mr Boyland, or any other director, what she had done and that she was entitled to do it. I accept without question that she did not intend to use the material for a nefarious purpose: that allegation has not been made. I think that her purpose was to arm herself for the future in any disputes with Brandeaux or with the regulators which might arise. As to the former she was by then seeing that her further time with the company might well be limited and she was very concerned as to the difficulty she might have in getting another job. She foresaw the possibility of a dispute with the company over compensation. As to the latter, there were not then any problems with the regulators, nor have any arisen since. Nor could Ms Chadwick in her evidence provide any convincing grounds for thinking that they might arise. Nonetheless she appears to have become concerned that they might.

In support of the implication of the terms which I have set out Mr Adam Tolley referred to two cases. The first was the well-known banking case of Tournier v National Provincial & Union Bank [1924] 1 KB 461. Bankes LJ there held at page 473 that the qualifications to a bank’s duty not to disclose to another information concerning its customer could be classified under four heads:

The second case was Ali Shipping Corp v Shipyard Trogir [1998] 2 All ER 136. This case was concerned with the exceptions to the rule that proceedings in arbitration were confidential. At page 147 Potter LJ stated:

“However, on the analogy of the implied obligation of secrecy between banker and customer, leave will be given in respect of (iv) disclosure, when, and to the extent to which, it is reasonably necessary for the protection of the legitimate interests of an arbitrating party. In this context, that means reasonably necessary for the establishment or protection of an arbitrating party’s rights vis-à-vis a third party in order to found a cause of action against that third party or to defend a claim (or counterclaim) brought by the third Party (see the Hassneh case).”

The first point to be made here is that Ms Chadwick simply e-mailed to herself a vast quantity of material stored in certain files on her company computer regardless of whether its content might be relevant to any dispute with Brandeaux or any problem between Brandeaux and a regulator. Her explanation is that she had no time to be particular. I accept that to have sorted the material would have been a large task. But that emphasises the further difficulty which she faces. There was no problem with a regulator. Nor was she involved in any whistle blowing exercise: I am not concerned with a situation where Part IVA of the Employment Rights Act 1996 as inserted by the Public Interest Disclosure Act 1998 has become applicable. In the event of a dispute with her employer or in the event of a dispute between Brandeaux and a regulator a comparatively small number of documents would have been required. Further, although a substantial number of pages have been copied for the purpose of these proceedings, the number which it has been necessary to refer to has been small. I have not had to look at any financial information of a kind such that disclosure might injure Brandeaux. No attempt has been made to limit the number of documents which Ms Chadwick still seeks to retain.

Mr Tolley relied on the decision of Scott J In re a Company’s Application [1989] 1 Ch 477. That case too involved a compliance officer. His employment was terminated and he continued as a consultant. A conversation took place which the company interpreted as blackmail and which he said was merely an indication of an intention to seek compensation for wrongful dismissal. The company sought an injunction to prevent him disclosing any confidential information to the regulatory body or to the revenue. It was held that the employee should not be prevented from disclosing his employer’s confidential information to a regulator: if the allegations were baseless, no harm would be done, provided that there was no further disclosure: likewise with fiscal matters: an injunction was refused. But here Ms Chadwick does not seek to disclose any matter to any regulator, and Brandeaux do not seek an injunction to prevent that – Brandeaux seeks the return of its confidential documents.

In my judgment the two cases relied upon fall a long way short of establishing that Ms Chadwick was entitled to act as she did. I should not get drawn into any wide statements of principle which are unnecessary to my decision. I am doubtful if the possibility of litigation with an employer could ever justify an employee in transferring or copying specific confidential documents for his own retention, which might be relevant to such a dispute. If such a dispute arises, in the ordinary course the employee must rely on the court’s disclosure processes to provide the relevant documents: even if the employee is distrustful whether the employer will willingly meet its disclosure obligations, he must rely on the court to ensure that the employer does. But on any view there can be no justification for the exercise which Ms Chadwick carried out here. Nor, in the absence of a specific issue, was Ms Chadwick entitled to transfer documents to protect her own position in case a regulatory dispute might arise. If she wished to use confidential information to make a report to the regulator, a situation which has not arisen, she would not be prevented from using confidential information for that purpose: but whether that would entitle her to copy documents onto her private computer would be doubtful.

I conclude that Ms Chadwick was not entitled to do what she did and that her conduct was in breach of her contract.

Mr Tolley submitted that when the injunction was first obtained on 17 May there had been failures of disclosure to Irwin J and that this should be reflected in the order which the court would make, not by refusing any order but by making an order in the form Ms Chadwick wants rather than in the form that Brandeaux wants. The relevant history after 17 May is that on 21 May the matter was back before the court but was simply put over to 28 May. On the day before, 27 May, Ms Chadwick’s solicitors wrote a letter setting out their complaints as to the hearing on 17 May. On 28 May there was a contested hearing before HHJ Seymour. At that hearing Mr Tolley stated that he did not intend to argue the points raised in the letter on that occasion but reserved them for the future. Mr Adam Solomon for Brandeaux submitted that he must either make the points or abandon them. There the matter rested. Mr Coad who was the author of the 27 May letter made a witness statement dated 10 November dealing with these issues.

Non-disclosure issues have most often arisen in connection with applications for freezing orders, which are normally of temporary application, and such issues are usually determined at an early state. The present position is very different. I did not hear any reasoned argument on the point, but I do not think that failure to argue the points at an early stage is an absolute bar to raising them later. However, where, as here, a remedy is sought reflecting the rights to property, or quasi-property as confidential information can be regarded to be, it will be more difficult for the defendant to persuade the court that the order which it would otherwise make reflecting the rights of the parties should be affected.

The main complaints made by Mr Tolley as to how the matter had been presented to Irwin J on 17 May are as follows:

In summary therefore I conclude that there were failures of substance in the way the matter was put before Irwin J. They arose because the application was made with unnecessary haste. There was no intent to mislead. With the exception of the personal e-mails they did not affect the outcome of the application. Ms Chadwick had the opportunity to argue that the interim relief to be given to Brandeaux should be modified to take account of what had happened, but did not do so. I do not think that in the circumstances what has happened before Irwin J requires me to modify the order which I would otherwise make in respect of Brandeaux’s established right. In the context of this case it has become water under the bridge.

At one point Mr Tolley seemed to advance an argument that Brandeaux had suffered no damage and so had no cause of action. That cannot be right. If A wrongly takes B’s confidential information, A is entitled to have it back regardless of whether he can show loss.

It is not, of course, a case where physical documents have been removed. The material will have passed onto the relevant BT server and may or may not have all found its way onto the hard drive of Ms Chadwick’s laptop. What has actually happened as part of the e-mail process is that the documents have been copied electronically and the copies transferred. The order has to be in a form which is appropriate to the electronic nature of the retention of the material. There is not, I think, any real difficulty over this. The only way in which the material can be removed from the hard drive of Ms Chadwick’s laptop is by the destruction of the hard drive. As the material is irretrievably on the hard drive, Brandeaux requires possession of the hard drive. But the court should exercise its discretion only to make an order for the delivery up on terms. The terms would be that an independent IT expert would transfer to a new hard drive everything on the existing hard drive which is personal to Ms Chadwick, and that new hard drive would be given to her and the old destroyed. Brandeaux accepts this. With regard to the material on the BT server Ms Chadwick should be required to cooperate in whatever steps may be required to protect Brandeaux’s position. I believe these matters to be non-controversial, but, if needs be, I will hear counsel further.

I have held that Ms Chadwick’s conduct was in breach of her contract. The question then arises whether her conduct was so serious that Brandeaux was entitled to dismiss her summarily. But it was submitted for Ms Chadwick by Mr Tolley that Advisers was in repudiatory breach of contract itself at the time of Ms Chadwick’s breaches and so in any event was not entitled to dismiss her. He relied in particular on paragraph 140 of the decision of Mr Bernard Livesey QC sitting as a judge of the High Court in RDF Media Group plc v Clements [2007] EWHC 2892 (QB) where it was stated:

“140.

In these circumstances I am inclined to accept the formulation of Mr Croxford who argues, on the basis of the authority of Bremer Vulcan Schiffbau Und Maschinenfabrik v South India Shipping Cory [1981] AC 909 at 986B-D, 987G, Paal Wilson v Partenreederei Hannah Blumenthal [1983] 1 AC 854 at 909C-D, that where as here the defendant is himself in repudiatory breach of a mutual obligation he is not entitled to accept any repudiation by RDF by reason of his own breaches.”

I had to consider this question in Tullett Prebon plc v BGC Brokers LP [2010] EWHC 484 (QB). I stated:

“83.

It was tentatively suggested in RDF Media Group Plc v Clements [2008] IRLR 207 at paragraph 140 that where an employee was himself in repudiatory breach of his contract of employment he could not accept a breach by his employer to bring the contract to end, citing Bremer Vulcan Schiffbau Und Maschinenfabrik v South India Shipping Corp [1981] AC 909 and Paal Wilson v Partenreederei Hannah Blumenthal [1983] 1 AC 854. Those cases were concerned with the very different and difficult situation which arises where no progress has been made in an arbitration for many years. I do not think that they are helpful in an employment situation. The ordinary position is that, if there is a breach of a contract by one party which entitles the other to terminate the contract but he does not do so, then the contract both remains in being and may be terminated by the first party if the second party has himself committed a repudiatory breach of the contract. I refer to Chitty on Contracts, 30^th Edition, Volume 1, paragraph 24-015, citing State Trading Corporation of India v Golodetz Ltd [1989] 2 Lloyd's Rep 277 at 286 per Kerr LJ.

84.

An alternative approach as to how the employee's own misconduct should be taken into account was suggested, and perhaps preferred, by Mr Bernard Livesey QC, the judge in RDF, namely that the employee's conduct may have so damaged the mutual relationship of trust and confidence that the employer's conduct is of little effect. I refer to paragraphs 120 and 141 of the judgment. But I think that this breaks down on analysis. I accept that the relationship is a mutual one, but that means only that the employer is entitled to have trust and confidence in his employee, and the employee is entitled to have trust and confidence in his employer. If the one is damaged it does not follow that the other is damaged. Nor does damage to the one party's trust and confidence in the other entitle him to damage the other's trust and confidence in him.

85.

In my judgment the conduct of the employee may be relevant in this way. Whether the employer's conduct has sufficiently damaged the trust and confidence which the employee has in him objectively judged, is to be judged in all the circumstances. The circumstances will include the employee's own conduct to the extent that it is relevant to that question. There may in practice be little difference with the approach suggested by Mr Livesey.’

I have reconsidered these paragraphs and do not wish to change them. So even if as at 24 January 2010 Brandeaux were in breach of the mutual obligation of trust and confidence, that would not bar Brandeaux from dismissing Ms Chadwick for good cause. For the relationship was continuing, and for that purpose an unaccepted repudiation ‘is a thing writ in water’. However, the seriousness of what Ms Chadwick did is to be judged in the context of her employer’s conduct towards her in so far as relevant. To take a straightforward example, the seriousness of an employee’s conduct in swearing at his superior may be affected by the fact that it was in response to the superior himself swearing at the employee. I would like to emphasise ‘so far as is relevant’. Conduct by the employer which does not impact or explain the conduct of the employee will not usually be relevant. A court should not permit an employee to trawl through the whole of the employment relationship to find matters in respect of which the employer can be criticised. With the benefit of hindsight I am conscious that I have not sufficiently followed that in this case.

The conduct relied on by Ms Chadwick covered the whole of her employment, and much of it had clearly been waived by January 2010, in particular by the withdrawal of her resignation in July 2009. But Mr Tolley submitted that it was nonetheless relevant as part of the background. Mr Solomon submitted that most of the allegations were irrelevant to the position in January 2010. The matters relied upon were set out in paragraph 22 of the amended defence.

The first allegation is that after Ms Chadwick complained about her bonus for 2008 Ms Brandeaux became hostile and abusive to her, repeatedly and unjustly criticised her performance orally and in writing, used immoderate language and shouted. I am not satisfied that Ms Brandeaux became hostile to Ms Chadwick following her complaint about her bonus. She did criticise her when she made mistakes and did so in terms which were unnecessarily demeaning. Mr Boyland accepted that Ms Brandeaux was very forthright, and that if a mistake was made she would reprimand the employee in a very curt conversation or e-mail. He said that if the mistake was very serious, she could be more harsh. He said also that she was generous with her praise. He accepted she raised her voice but did not shout. Ms Laura Letchford was recruited as the first HR director appointment for Brandeaux and joined in February 2008. She had considerable prior experience. She resigned late that year leaving at the end of January 2009. It is significant that Brandeaux has had five human resources managers in 2 and a half years, and 70% of staff stay less than 3 years. In her witness statement Ms Letchford was highly critical of the management style of both Ms Brandeaux and Mr Boyland. She described Ms Brandeaux as bullying and aggressive, with a lack of empathy for her employees. She said that while criticism might be justified the language and ferocity of delivery were not. Ms Brandeaux generated a climate of fear among her staff. I accept Ms Letchford’s evidence.

Ms Chadwick relied on a number of e-mails. One from Ms Brandeaux to Ms Chadwick dated 6 April 2009, subject Transact Sales Information, complains generally about the Dublin staff in strong terms. It contains the phrases ‘Well, too bad! I don’t forget this kind of attitude’ and ‘It’s really pitiful’. I have no means of concluding whether the underlying complaint was justified. On 4 June 2009 Ms Chadwick received from a substantial investor a request for evidence that 75% of shareholders in the student accommodation fund had elected to transfer to a new share class with the result that remaining shares were compulsorily transferred. This was a request which required sensitive handling because the making of the request showed doubt as to whether 75% had agreed, contrary to what Brandeaux had said. Ms Chadwick drafted a reply which stated that without the specific consent of each shareholder she could not provide the documentary evidence requested. That was because that would have revealed who the shareholders were and the amount of their holding. The draft elicited a 35 line e-mail from Ms Brandeaux beginning: ‘I was frankly horrified to see the draft of your proposed letter to …. It was like a red flag in a bull’s face! Whatever were you thinking, or not thinking, to propose such a letter? If you had sent that letter I would have expected a full redemption request of however much they hold….. . We cannot have that kind of arrogant letter going out to anyone.’ She complained that Ms Chadwick had little understanding of the culture of the investor base. In contrast Mr Boyland’s e-mail began: ‘This reply will not be satisfactory.’ He put forward a solution to the problem in the form of an auditing accountants’ certificate. As well as showing Ms Brandeaux’s style this incident is an example of the difficulty which I find Ms Chadwick had in moving from a compliance post to a more commercial post where she had to deal directly with the market: she was not sufficiently street-wise. On 13 June 2009 Ms Brandeaux sent Ms Chadwick an aggressive e-mail questioning why it was necessary to hire a ‘temp’ to replace someone who had been dismissed. In fact there was a straightforward reason: she was needed as a receptionist because there was no one else who could perform that task. There were other e-mails which Ms Chadwick relied upon one of which, dated 2 November 2009, was between July 2009 and January 2010. Ms Chadwick also relied on some after January 2010, but those are irrelevant. I think that after the withdrawal of Ms Chadwick’s resignation and she was no longer mainly in Dublin, she was less harassed by Ms Brandeaux: I have referred above to her complaint at the meeting on 12 May 2010 that while in Dublin she had been harassed and intimidated by Ms Brandeaux.

The second matter pleaded was that Ms Brandeaux and Mr Boyland reacted disproportionately to any perceived weakness on the part of employees managed by Ms Chadwick. The dismissals of Denise Whelan and Caroline O’Brien are referred to. I think that Ms Brandeaux did on occasions react disproportionately, but on the evidence I heard the dismissals of Ms Whelan and Ms O’Brien were justified.

The third matter is that Ms Chadwick was blamed for delays in getting approval from the BVI regulator because Ms Chadwick had worked for the regulator. Any such blame would have been so obviously unjustified that it cannot have been intended seriously.

The fourth is that at the meeting on 11 January 2010 to discuss Ms Chadwick’s bonus, Ms Brandeaux and Mr Boyland unfairly criticised her in respect of a number of matters. Ms Chadwick was suggesting that her bonus should be higher because she had done well in the year. It may well be that in response they raised matters where they considered she had not done well. They were entitled to do that. I am not satisfied that they went beyond proper limits.

The fifth matter is the manner in which Mr Boyland handled Ms Chadwick’s search of papers in his office in his absence and without his permission. I find nothing wrong in what he did.

The sixth and last pleaded is the stopping at the end of 2009 of the supply to Ms Chadwick of in particular the daily fund subscription and redemption reports. I accept that this was a matter of concern to Ms Chadwick but I think that this was more because it indicated her diminishing role than a real need to see the reports she complained about. She did not raise the matter until 22 January, and she did not reply to Mr Boyland’s explanation of 25 January. By then she had started the transfer of material. The case that she needed this information to be able to carry out her duties in relation to compliance was not made out on the evidence.

Those were the matters which are pleaded. A good deal of time was taken up with an allegation which was not pleaded. I could therefore simply ignore it, but I think that in the circumstances I should deal with it as briefly as I may. This was that on 11 September 2009 Mr Boyland had in effect told her to lie in preparing a response to the wide-ranging allegations which Ms Whelan had made in her disciplinary proceeding, and that at the end he had said to her words to the effect ‘this conversation has never happened’. Ms Whelan’s allegations concerned Ms Brandeaux’s management style, its effect on Ms Chadwick, and the adoption of Ms Brandeaux’s style by Ms Chadwick towards Ms Whelan. In her witness statement Ms Chadwick alleged that what Mr Boyland had said related to her answering Ms Whelan’s affidavit in the proceedings which Ms Whelan had brought against Administrators in the High Court in Dublin. She had to withdraw that. For she had answered those allegations in her own affidavit sworn on 29 July 2009, a month and a half before. In paragraphs 26 to 30 of that affidavit she had disputed the relevant allegations by Ms Whelan.

In an e-mail to a friend dated 14 September 2009 Ms Chadwick wrote: ‘Anyway, I’m at home today and tomorrow writing my defence for the court case. I was taken to one side on Friday and asked by Roger to basically lie. I cannot do that and so it is likely that when I submit my document I will be fired.’ Although she may have had another affidavit to prepare for the court case, Ms Chadwick’s task at this point was to go through the transcript of the disciplinary proceedings and set out her responses as appropriate. It may be some indication of her state of mind that she made the error of referring to the court case. She spent 3 days going through the transcript of the disciplinary proceedings inserting her responses as appropriate. The evidence of Mrs Whybrow, Ms Chadwick’s sister, based on what Ms Chadwick had told her at the time was that Mr Boyland had told her that she should ‘say whatever needed to be said’ and had ended the conversation by telling her ‘this conversation never happened’. Mr Boyland strongly denied that he had put any pressure on Ms Chadwick, and that he had said anything to the effect that ‘this conversation never happened’. I think the explanation of what occurred is to be found in the fact that Mr Boyland is strongly protective of Ms Brandeaux. I think he used words to the effect that he expected to see the allegations against her rebutted. It is likely that he said that thinking that they were to at least to an extent untrue. He was putting pressure on Ms Chadwick, and he should not have been: she should have been left to provide her own answers. He did say words to the effect that the conversation never happened, but that was in relation to Ms Brandeaux: she was not to know that Mr Boyland had been trying to protect her. I refer to page 526 of the trial transcript. Ms Chadwick prepared her responses to Ms Whelan’s allegations in the disciplinary proceedings in the way I have said. Before either Mr Boyland or Ms Brandeaux had time to read properly what she had written, Ms Whelan had been found to have lied and her proceedings collapsed.

How far is any of the above relevant to the transfer of confidential material in 2010? Put more plainly, does it make the transfer any less serious as a breach of contract? I consider that the only matter which could go to it directly is the matter of supply of information, which I have covered in paragraph 40. I have, however there held that the case that she was not supplied with information necessary for the performance of her duties was not made out. I do not consider that Ms Brandeaux’s aggressive style is relevant. It played no part in Ms Chadwick’s decision. Ms Chadwick’s main complaints in that direction related to her time in Dublin.

As to the test to be applied to determine whether Ms Chadwick’s breaches of contract justified her dismissal, Mr Tolley referred me to the judgment of Etherton LJ in Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, where he stated:

“62

……So far as concerns repudiatory conduct, the legal test is simply stated, or, as Lord Wilberforce put it, "perspicuous". It is whether, looking at all the circumstances objectively, that is from the perspective of a reasonable person in the position of the innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contract.

63.

Secondly, whether or not there has been a repudiatory breach is highly fact sensitive. That is why comparison with other cases is of limited value. The innocent and obvious mistake of Mr Jones in the present case has no comparison whatever with, for example, the cynical and manipulative conduct of the ship owners in The Nanfri.

64

Thirdly, all the circumstances must be taken into account insofar as they bear on an objective assessment of the intention of the contract breaker. This means that motive, while irrelevant if relied upon solely to show the subjective intention of the contract breaker, may be relevant if it is something or it reflects something of which the innocent party was, or a reasonable person in his or her position would have been, aware and throws light on the way the alleged repudiatory act would be viewed by such a reasonable person. So, Lord Wilberforce in Woodar (at p. 281D) expressed himself in qualified terms on motive, not by saying it will always be irrelevant, but that it is not, of itself, decisive.”

The case was concerned with a very different situation to that here, but the judgment is helpful. The Court of Appeal was concerned with employment in Briscoe v Lubricol Ltd [2002] EWCA Civ 508, where Ward LJ stated:

“108.

To draw a distinction between gross misconduct and repudiatory conduct evincing an intention no longer to be bound by the contract is in my judgment to make a distinction without a real difference. It may be more common in employment cases to deal with gross misconduct, but that is essentially a form of repudiatory conduct. The two propositions appear to have been so treated by Lord Jauncey of Tullichettle in Neary and Neary v Dean of Westminster [1999] IRLR 288 when he said at paragraph 20:-

“The question of whether there has been a repudiatory breach of that duty justifying instant dismissal must now be addressed. Whether misconduct justifies summary dismissal of a servant is a question of fact.”

109.

The question turns upon what degree of misconduct justifies summary dismissal or amounts to repudiation. Laws v London Chronicle (Indicator Newspapers) Ltd. [1959] 1 W.L.R. 698, 700/1Lord Evershed M.R. analysed the authorities and stated that the proper conclusion to be drawn from them was this:-

“... since a contract of service is but an example of contracts in general, so that the general law of contract would be applicable, it follows that the question must be – if summary dismissal is claimed to be justifiable – whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service. It is, no doubt, therefore generally true that wilful disobedience of an order will justify summary dismissal, since wilful disobedience of a lawful and reasonable order shows a disregard – a complete disregard – of a condition essential to the contract of service, namely, the condition that the servant must obey the proper orders of the masters, and that unless he does so the relationship is, so to speak, struck at fundamentally.

...

I think it is not right to say that one act of disobedience, to justify dismissal, must be of a grave and serious nature. I do, however, think ... that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one or its essential conditions; and for that reason, therefore, I think that you find in the passages I have read that disobedience must at least have the quality that it is “wilful”: it does (in other words) connote a deliberate flouting of the essential contractual conditions.”

Lord Jauncey also analysed the authorities and concluded at paragraph 22:-

“There are no doubt other cases which could be cited on the matter, but the above four cases demonstrate clearly that conduct amounting to gross misconduct justifying dismissal must so undermine the trust and confidence which is inherent in the particular contract of employment that the master should no longer be required to retain the servant in his employment.”

I take that to be the test.

A subsidiary question arose in the course of the argument: must the conduct be considered subjectively from the point of view of the employee or objectively? That question is answered by Mapleflock Co. Ltd. v Universal Furniture Products (Wembley) Ltd. [1934] 1 K.B. 148, 155 ….

Devlin J. put it succinctly in Universal Cargo Carriers Corp. v Citati [1957] 2 Q.B. 401, 436:-

“The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating was acting in such a way as to lead a reasonable person to conclude that he does not intend to fulfil his part of the contract.”

111.

What then would a reasonable person conclude from the claimant’s conduct?”

The motive of Ms Chadwick for acting as she did is most important. Had she taken the information to use it in another business, there would be no doubt that its removal justified her summary dismissal. I have set out my findings as to her motives in paragraph 18. She effected a wholesale transfer of information to her private e-mail address to arm herself for any future dispute she might have with Brandeaux. There may also have been an element of protecting herself if there were problems with a regulator, but there was no reason to anticipate any specific problem. The quantity of confidential information transferred was vast. If it had been made public, Brandeaux would have been in great difficulties with its investors, because the investors expect the details of their investments to be kept private. Mr Boyland said that publication might have brought down the group. It would certainly have damaged its reputation badly. It is important that there was no attempt to limit the information transferred to such documents as Ms Chadwick thought she actually needed. It is important that what was done was done secretly, out of hours. I conclude that Ms Chadwick knew that Brandeaux would have objected very strongly if what she was doing was known. I consider also that she cannot have thought that she was entitled to act as she did. The justifications which have been advanced are lawyers’ justifications; no better or no worse for that, but they were not in her mind at the time. This was therefore an important breach of the trust which should exist between the employee and the employer, capable in the event, perhaps unlikely, that things went wrong, of doing the company great harm. I conclude that Ms Chadwick’s misconduct was such as to show that she could not be relied on to perform an important part of her duty, namely her duty as to confidential material, and the company was entitled to dismiss her.

There are three steps to this claim. The first is that Ms Chadwick was bound to inform Brandeaux of what she had done with the confidential information, in respect of which she was a fiduciary. The second is that she would then have been dismissed. The third is that Brandeaux have suffered loss in the amount of the salary paid to her thereafter. It was agreed that the claim was a novel one: no report of a case in which such a claim had succeeded had been found.

A number of authorities were cited as to the fiduciary aspect. I would not have found it an easy question, in particular the application of the relevant parts of the speeches of Lord Atkin and Lord Thankerton in Bell v Lever Bros Ltd [1932] AC 161, and the ambit of the fiduciary concept in the present circumstances. But in a decision which is binding on me the authorities were comprehensively analysed. I refer to the judgment of Arden LJ in Item Software (UK) Ltd v Fassihi [2005] ICR 450, with which the other members of the court agreed. It was there held that a director was under a duty as a fiduciary to inform the company of a breach by him of his fiduciary duty. That breach was there the setting up of a new company and negotiating in competition with his employer to obtain a contract for his company. The judgment was phrased in terms of a fundamental duty of loyalty requiring the director to act in what he in good faith considered to be in the best interests of the company. At first instance the primary ground of decision was that the director had been in breach of his contractual duty as the executive in charge of sales, the sales director, to inform the managing director of what was going on: see [2003] BCC 858 at paragraph 52. That might be described as an application of the principles applied by the Court of Appeal in Sybron Corp v. Rochem Ltd [1984] Ch 112, a case decided on a contractual rather than fiduciary basis. So it might be said that it was unnecessary in Item Software for the Court of Appeal to have developed the law as it did. The decision in Item Software has not been without its critics – for example, Palmer’s Company Law, paragraph 8.2617 : “The controversial finding …”. But it is binding on me.

Ms Chadwick was never a director of Advisers. She was a director of Managers and Administrators until 8 and 22 February 2010 respectively. The case against her is that, if she had disclosed to the board of Managers & Administrators that she had taken their confidential information, she would have been dismissed by Advisers. The division of confidential information between the companies was not referred to, but it was not challenged that she took information which was confidential to Managers and Administrators. No doubt much of the information was common to more than one company if not to all three. I find that it was Ms Chadwick’s fiduciary obligation to report what she had done.

I accept that if Ms Chadwick had reported what she had done she would have been dismissed.

The third step, the claim for loss by way of salary paid, seeks to enter new territory.

In Healey v Societe Anonyme Francaise Rubastic [1917] 1 KB 946 the claimant sought damages for wrongful dismissal, commission and arrears of salary. It was found that the company had been entitled to dismiss the employee, the managing director, summarily for providing false reports to the board. Avory J stated at page 947:

“The plaintiff’s employment under the contract was for fifteen years at a salary of 2500l. per annum payable monthly, and it was paid at the end of each month up to May 31, 1915. In my opinion the contract was divisible and the salary became due and the right to it vested at the end of each month; but the defendants contended that it was a condition precedent to the right of payment of the salary that the plaintiff should truly and faithfully serve his employers and that as he had failed in the performance of this condition he was not entitled to recover. The misconduct relied on at the trial took place prior to May, 1915, and although suspected to some extent, was not made the grounds of dismissal when the contract was determined in October, 1915; but the defendants contended that the misconduct was continuing from April to October in the sense that the plaintiff was continuing to mislead and deceive his employers. I cannot accept the view that the omission to confess or disclose his own misdoing was in itself a breach of the contract on the part of the plaintiff, and I think the answer to the defendants’ contention is that the contract of employment was in fact existing up to the time of dismissal, and that the right to determine it by reason of antecedent misconduct subsequently discovered does not entitle the defendants to treat it as determined from any earlier date, and that the plaintiff is therefore entitled to recover his salary for the months that he actually served.”

In Ramsden v Sharratt & Sons, Ltd (1930) 35 Com Cas 314 the claim was for commission. The claimant had connived in the managing director abstracting monies from the company. The House of Lords held that the claimant was entitled to the monies he had earned, and the company’s remedy for his misconduct was a claim for breach of duty. Lord Warrington stated at page 318:

“First they say - and this if substantiated would be an answer to the appellant’s entire claim - the appellant is an unfaithful and dishonest servant and as such has forfeited all right to recover any remuneration. It is true that if a servant is rightly dismissed before a periodical payment of salary is due he cannot recover that payment, but the reason is that the employment having been rightly determined before the salary is payable, the servant has not completed the task for which the salary was to be paid, and he is not entitled to a quantum meruit. But this principle does not apply to arrears of salary due when the employment is terminated. As to these I think he is entitled to recover, and any liability for breach of his contract can only be established by an action or counterclaim for damages. There is express authority for this in Healey v. Société Anonyme Francaise Rubastic (1), and I think it is inherent in the judgments of the Court of Appeal in Boston Deep Sea Fishing and Ice Company v. Ansell (2). In that case a question arose whether a certain salary was payable annually or quarterly; if the former, there was nothing due at the time of dismissal. The Court after an elaborate discussion determined that the salary was payable annually and therefore nothing was due. It is true they did not expressly decide that if it had been payable quarterly there would have been a right to recover payments in arrear, but I think it is fairly obvious how that question would have been decided had it been necessary; especially as they awarded the dismissed servant certain commissions actually earned, notwithstanding his misconduct. On the whole then I think this particular plea on the part of the respondent fails.”

In Bell v Lever Brothers Limited [1932] AC 161 at 228 and 231 Lord Atkin and Lord Thankerton each stated that Healey was rightly decided.

In Horcal v Gatland [1984] IRLR 288 the managing director of a building company appropriated a contract for his own benefit. An agreement had been earlier made to terminate his employment at a future date and to pay him compensation for the termination. When the misappropriation was discovered, the company sued to recover the compensation and salary paid after the date of the termination. It was held by the Court of Appeal that there was no breach of duty until after the termination agreement because a future intention to act contrary to the interests of the company was not itself a breach of duty to the company. The salary was not recoverable because the contract under which it was paid was then a binding contract in the sense that it had not then been terminated.

In Item Software Mr Fassihi had a counterclaim for his salary up to his dismissal. This failed before the judge because of a question relating to the application of the Apportionment Act 1870. Mr Fassihi succeeded on that in the Court of Appeal, and he recovered his salary. The point that he would have been dismissed and his salary avoided was not run. The reason may well have been perceived weight of authority discouraging such a claim, or the fact that Item had continued to receive Mr Fassihi’s services which, subject to any counterclaim for breach of duty, might be assumed to be worth what they had agreed to pay him for them. Or, perhaps, a combination of the two.

As I have said, I accept that if Ms Chadwick had told Managers and Administrators what she had done, steps would have been taken by Advisers to dismiss her. I can assume that they would have been the same steps as were in fact taken between 14 May and 22 June 2010. She had been put on garden leave on 13 May. So, if she had said on Monday 25 January what she had done the day before, the disciplinary process would have then been commenced and she would have been put on garden leave. Setting off the actual and hypothetical periods of garden leave – the disciplinary period, the difference between the two situations is that between 25 January and 13 May Ms Chadwick was working in Advisers’ offices earning her salary. I do not consider that any loss has been shown. The company was seeking to make her redundant, but the effect on what she was doing was not explored. The company had the benefit of her work, and I should take its value as the salary the company had agreed to pay.

Advisers’ claim to recover salary paid to Ms Chadwick fails, as does her claim for damages for wrongful dismissal.