J M Finn & Co Ltd v Holliday

The Claimant company is an investment manager and stockbroking firm. It has a head office at 4 Coleman Street in the City of London and regional offices in Bristol, Leeds, Bury St Edmunds, Ipswich and Cardiff. It has more than 300 staff and as at the end of December 2012, had about £6.5 billion worth of funds under management or administration.

The Defendant was employed by the Claimant in May 1999 as an investment adviser. He describes himself as an old-fashioned stockbroker. He graduated from Cambridge in 1984 and has worked in the financial sector throughout his working life. He turned to fund management in 1994, spending 5 years at Singer and Friedlander. Before his resignation in 2013, he provided investment advice to approximately 275 clients with about 650 accounts between them.

The claim arises out of the Defendant’s resignation and his desire to join a competitor, Hargreave Hale Ltd, as soon as possible. Having received his letter of resignation the Claimant exercised an express contractual right to place the Defendant on garden leave and sought to hold him to his twelve-month contractual notice period. Within a month of having been placed on garden leave the Defendant resigned summarily relying on an alleged repudiatory breach of contract by the Claimant and indicating that he regarded himself as free to commence employment with Hargreave Hale in consequence. The Claimant’s solicitors responded to that purported summary resignation seeking assurances that the Defendant would not take up employment as indicated; and in the alternative indicating that an urgent application for an injunction would be made immediately. An application and the claim in these proceedings was issued on 12th August 2013, no assurances having been proffered by the Defendant. There was a contested hearing before Michael Bowes QC (sitting as a Deputy High Court Judge) on 16th August 2013 and an interlocutory injunction was granted together with directions for an expedited trial.

Although the following issues arise for decision in this case, the parties have been unable to agree on the order in which these issues should be dealt with, accepting that this is a case in which a variety of entirely sensible but different views could be taken as to the most desirable way in which to order these issues. I propose to deal with the issues as follows:

I heard oral evidence on behalf of the Claimant from two witnesses: Mr Steven Sussman, the Claimant’s Managing Director, and Mr Mark Powell, a Senior Investment Manager who took on a small number of Mr Holliday’s charity clients. For the Defendant I heard oral evidence from Mr Tom Holliday himself. Where there was conflict I preferred the evidence of the Claimant’s witnesses to that of Mr Holliday. I found Mr Holliday to be an unreliable witness. He was very ready to make assertions with great conviction, that were not true and I cannot accept that he believed them to be true. He was overly defensive and sought to avoid answering questions wherever possible; and when pressed to do so, his evidence was inconsistent with contemporaneous documents and his explanations implausible and opportunistic. Examples are given below. I have therefore relied on the contemporaneous documents as a more accurate account of events where possible.

Mr Quinn criticised the Claimant’s choice of witnesses as peculiar. He argued that I should draw adverse inferences from the Claimant’s failure to call witnesses who were in a position to give important evidence. He maintained that Mr O’Rourke was a more appropriate witness to give evidence about what had happened to Mr Holliday’s clients in the period after his resignation; that Mr Powell had had no involvement in producing the tables relied on in relation to client activity and a more appropriate witness would have been Sue Harwood, the Claimant’s Human Resources Manager; and finally that David Barstow who was involved in distributing Mr Holliday’s clients among the remaining investment managers, would have been an important witness with evidence that would have assisted me. I have no doubt that these individuals had evidence to give that would have assisted me in resolving the issues which arise in this case. I do not however consider that their absence as witnesses should be held against the Claimant. Although this point was explored with the Claimant’s witnesses during the course of cross-examination, until cross-examination it had never previously been suggested to the Claimant by Mr Holliday that Mr Powell was a less appropriate witness than Peter O’Rourke or that Sue Harwood and David Barstow ought to have been called in preference to either him or Mr Sussman. In those circumstances, having failed to give notice to the Claimant of this point in a manner which afforded the Claimant an opportunity of addressing the position before trial, in my judgement it would be unfair and inconsistent with the overriding objective to draw any adverse inference about the choice of witnesses here.

In any event I am satisfied that whilst other witnesses could have been called, both Mr Sussman and Mr Powell had important evidence to give. Mr Powell, whilst principally acting in relation to charity clients, has 12% of his practice made up of private clients in respect of whom he has £25 million of funds under management. He is accordingly, an entirely appropriate exemplar of a senior investment manager taking on Mr Holliday’s former clients. So far as criticisms made in relation to his lack of involvement in the tables produced by him, I am satisfied that the raw data underlying the tables attached to Mr Powell’s witness statements has been disclosed. This included at least, all correspondence with these clients generated since Mr Holliday was put on garden leave - for example the initial contact letter by the newly allocated investment manager, any response from the client to that letter, and any follow-up correspondence. I am satisfied that this raw data would have enabled Mr Holliday to produce his own statistics and to assess the veracity of the statistics set out in the tables attached to Mr Powell’s witness statement. So far as Mr Sussman’s evidence is concerned, as already indicated, he is the Managing Director of the Claimant firm, knows how it operates and understands the nature of stockbroking and stockbroking relationships. Again so far as he is concerned, I am satisfied that he had relevant, reliable evidence to give.

Mr Holliday commenced employment with the Claimant in May 1999. He was provided with a statement of terms and conditions which so far as relevant provided that the notice period to terminate his contract of employment (whether by him or the employer) was one calendar month in writing during the first 6 months (probationary period) and thereafter, 3 calendar months’ notice. In addition, there was an express provision entitling the Claimant at any time after notice of termination of employment had been given to require the Defendant not to attend any place of work, not to incur any obligations whatsoever on behalf of the Claimant and otherwise to be suspended from the performance of any duties and obligations. There was also a non-solicitation and non-competition covenant for a period of 6 months following termination of employment; and a confidentiality clause in respect of the affairs concerns transactions and business with them for clients in respect of the Claimant Firm.

By letter dated 8th May 2008 the Claimant set out revised terms and conditions of employment (“the Revised Terms”) agreed in discussion with Mr Holliday. Mr Holliday signed that letter indicating that he had read and accepted the Revised Terms, on 12th May 2008. By letter dated 13th May 2008, his solicitor, Mr I.E. Bloom of Ross & Craig solicitors, wrote:

“I am pleased to say that I have spoken with Tom about the matters raised by you in your letter and he accepts and understands the position. In these circumstances, he also accepts the offer as made and he has returned to me duly signed his new Contract of Employment.”

So far as relevant the Revised Terms were as follows:

The offer of employment to Mr Holliday was an offer of a position to work with Mike Robotham. Mr Robotham was not an employee of the Claimant, but worked as an Independent Consultant. By the time Mr Holliday was employed he had the view that Mr Robotham had become more of a passive or reactive adviser and that his role was to invigorate Mr Robotham’s client base by providing regular valuations and market commentary as well as proactive investment advice. Working with Mr Robotham was part of the attraction of the offer of employment: Mr Holliday believed he would benefit from working closely with Mr Robotham and this proved to be the case. Over the nine years that followed he became increasingly “embedded” with Mr Robotham’s clients, with both Mr Robotham’s and the Claimant’s full encouragement.

In April 2007 Mr Robotham and the Claimant came to an agreement about his retirement and the termination of his business association with the Claimant. The terms of that agreement were recorded in a letter dated 20th April 2007 which provided for payments by the Claimant to Mr Robotham amounting in total to £600,000 in consideration for which Mr Robotham sold to the Claimant his investment advisory business and agreed to be bound by a series of restrictions which are dealt with in that letter.

It is note-worthy that the Claimant paid a significant sum for the goodwill in respect of Mr Robotham’s clients; and that Mr Robotham agreed to be bound by a series of restrictive covenants prohibiting solicitation of and business dealings with clients or prospective clients as defined, for a 12 month period commencing on the termination date; and that he did so pursuant to a statement by the firm that he had gained personal knowledge of and influence over customers and clients.

In addition to establishing relationships with Mr Robotham’s clients as his assistant, Mr Holliday also established his own client relationships. When Mr Robotham retired, agreement was reached between Mr Holliday and the Claimant as reflected in a letter dated 15th May 2008. The letter recorded the fact that Mr Robotham’s payout terms would continue as previously agreed and that until those payout terms were complete, revenue from Mr Robotham’s clients would be split 20% to Mr Holliday, 20% to be offset against monies paid to Mr Robotham and 60% to the Claimant. Once the repayment of the offset of Mr Robotham’s payout was completed Mr Holliday would move to commissions of 33% on all clients. Mr Holliday would earn 33% on his own clients per annum. Significantly, so far as Mr Holliday’s clients were concerned the Claimant would pay £300,000 in total for those clients. There was provision for the staging of such payments, and paragraph 6 of the letter recorded that all clients remained clients of the Claimant.

Although by paragraph 10 of his amended defence and paragraphs 20-22 of his third witness statement, Mr Holliday asserted that he had bought the relevant client relationships and denied that the Claimant owned any relevant customer goodwill and connection in consequence, this was not a contention pursued at trial and Mr Quinn realistically accepted that these were the Claimant’s clients (as the contemporaneous documents quite clearly demonstrate). Nevertheless, he suggested that the financial transactions that took place in relation to the clients were a factor in his favour relevant to the reasonableness of a 12 month restriction: it suggests a recognition that Mr Holliday had an association with these clients that was not typical, and this undermines the reasonableness of the period. There is no contemporaneous evidence to support the assertion that Mr Holliday “bought” (in any sense) these clients; rather the evidence suggests that the Claimant in fact bought these clients. Moreover if Mr Holliday genuinely believed that by December 2012 he had bought the clients himself it is indeed surprising that he nevertheless claimed that Hargreave Hale was prepared to pay £300,000 for them ( [35] of his third statement). In my judgement these financial transactions support the Claimant’s case as to the importance of customer connections and the relationships investment managers built up with their clients.

In April 2013 the Claimant introduced a new dealing operating system called Eximius. The system was designed to replace the existing system known as WealthMaster. Mr Sussman accepted that there were teething problems when the new software was introduced. He personally received about six complaints about the new software but he rejected the suggestion that there was widespread discontent with it; or that the complaints were anything more than the normal resistance to the introduction of new technology. He accepted that there were issues with the new software for clients who wished to deal promptly but maintained that the software does not itself perform a research function. It simply holds portfolios and does the transactions allowing each broker to transact directly with the market. Once the software is operating appropriately it should allow a broker’s transactions to be effected more speedily than the previous system. His view is that the new system has been a real success and is now fully installed and running normally and his own experience with the new system is to use it in the same way as he had used the old system, albeit that he used neither for trading purposes.

Nevertheless, it is clear and I accept that Mr Holliday had a fundamental objection to this new dealing operating system and after a period of about three months, decided that he could not continue to use it, and would therefore have to seek alternative employment, which he did. Accordingly Mr Holliday accepted an offer of employment from Hargreave Hale, and looked forward to joining them as soon as possible.

On 5th July 2013 Mr Holliday tendered his resignation in writing. His letter refers to an earlier resignation along with Jim Meysey-Thompson on June 20th. He stated that the reason for his resignation was the new technology that had been introduced by the Claimant. He went on to say that as a result of its installation he had become “outdated”.

On 10th July 2013 Mr Holliday was placed on garden leave following discussions with James Edgedale (the Chairman) and Steven Sussman. He was told that he was to leave the building immediately and to hand in his security pass. His access to emails was also removed and his FCA registration was rendered inactive. Although I accept that this must have been an unpleasant and upsetting experience for Mr Holliday, I do not regard this treatment as unreasonable in the circumstances.

By letter of 10th July 2013 the Claimant reminded Mr Holliday that he was obliged to give 12 months’ notice of termination and indicated that in the circumstances his employment would end on 4th July 2014 and that until that date, he would be placed on garden leave with immediate effect in accordance with the Revised Terms. The letter drew his attention to the restrictions imposed on him during garden leave and continued,

“You must not initiate contact with any

• Client

• Prospective client

• Person at investment manager level or above within the firm

which fall within the scope of these provisions. In the event that any of these persons or organisations initiates contact with you, you should politely indicate that you are unable to discuss business matters while on garden leave and ask them to contact David Barstow.”

These were restrictions that fell squarely within the terms of the Revised Terms previously agreed to by Mr Holliday. Contrary to Mr Holliday’s complaint the restrictions did not extend to restricting him from social contact with clients who had become friends. By a further letter dated 11th July 2013, Sue Harwood stated that the Claimant wished to make it clear that Mr Holliday should not indicate the name of his new employer or make any comment about his future plans. This again, was a reasonable request in the circumstances.

It is clear from the contemporaneous documents that attention at the Claimant firm turned almost immediately to the question of Mr Holliday’s clients and to affording an opportunity to investment managers to defend that business. By letter dated 24th July 2013, in standard form, Mr Edgedale wrote to Mr Holliday’s clients informing them of Mr Holliday’s departure and introducing a new investment manager to them who would look after their portfolio. Mr Holliday complains about this letter: that it insinuates that he was acting selfishly and had not been motivated by the interests of his clients; that this insinuation was highly offensive; and that the Claimant in stating that he would not be working in the industry elsewhere for a year was deliberately trying to take advantage of the suggestion that he would be de-skilled by reason of an extended period of absence from the industry. I reject these complaints. In my judgment this was a reasonable letter for the Claimant to write to Mr Holliday’s clients in the circumstances, and read objectively, represented no attack of any sort on his own motivations or professional reputation, but rather, an attempt to stabilise the situation and preserve the relationships with clients.

Mr Holliday went away to Iceland in mid July – he was there for three days and travel took a day either side of that. He also travelled to Northumberland on a family holiday.

An exit interview was arranged for 29th July 2013. In advance of that meeting Mr Holliday wrote to Mr Edgedale and Mr Sussman by letter dated 26th July 2013. He asserted that with two exceptions his client base had not come from the Claimant but had come because of Mr Robotham or himself. He claimed that morally, these clients were not the Claimant’s clients; rather they were his friends and acquaintances. He stated that he had taken legal advice on the restrictive covenant on garden leave provisions of his contract and regarded those provisions as operating as an unreasonable restraint of trade. He asserted that the clauses would keep him out of the marketplace for 18 months and that it would be difficult to pick up in 2015 where he left off in mid-2013 as his clients would by then had scattered. He made proposals to resolve the position amicably, including a suggestion that Hargreave Hale would buy his client base from the Claimant; but made clear that the letter should be treated as formal notice that he would be joining Hargreave Hale and working for them with effect from 2nd September 2013.

The exit interview took place as arranged on 29th July 2013. Ms Harwood explained that the purpose of the meeting was to ensure that he understood the conditions of his garden leave. She referred him to the letters of 10th and 11th July. Mr Holliday said he was telling clients that he was on garden leave and in response to Ms Harwood stating that he should not tell clients what firm he is going to, Mr Holliday said he had accidentally let this slip, but now understood and would not do it again. Ms Harwood explained that the Claimant had received Mr Holliday’s letter of 26th July and would be taking all necessary steps to ensure that he abided by his contractual obligations. Mr Holliday said that the Claimant could file an injunction before he started work with Hargreave Hale in September but that he hoped for an amicable agreement.

So far as reasons for his resignation were concerned, Mr Holliday agreed with Ms Harwood that these were as contained in his letter and concerned the new dealing system which he regarded as disadvantageous for his clients. He said that it had made him slower and less well informed; and that the problems he had had with Eximius resulted in a lack of ability to keep on top of things.

Mr Holliday explained to Ms Harwood that at the new firm he would continue his pattern of working in London for two days a week (as he had done for the Claimant) and would spend the rest of the week in York where he would be setting up an office for his new employer. He said he had chosen York so that he would not be competing with the Claimant in Leeds but made clear that he would be transferring his clients over.

There was a discussion about training and maintaining competence during his garden leave period and it was made clear to Mr Holliday that it was important that he kept up with his CPD during garden leave. He was told about the resources available for this on the CISI (Chartered Institute of Security and Investment) website. Mr Holliday confirmed he understood this and mentioned that his CISI card was out of date. Mr Holliday was asked if he had a home email address and explained that he did and that he was happy for that address to be given to the CISI.

Following that meeting by email dated 30th July 2013 Mr Holliday indicated that he would be away in France from 3rd to 10th August 2013 and asked for a response to his offer to buy the goodwill in respect of his clients.

There were further emails passing between Mr Holliday and Mr Edgedale on 31st July 2013 and in a postscript to an email at 12.58, Mr Holliday stated that he had “asked Buckingham on Friday to forward the morning brokers notes and research” so that he could maintain his market knowledge during what he described as the “current limbo”. He said he had suggested that Buckingham seek approval from compliance but had heard nothing. He asked whether this was Mr Edgedale’s decision. By an email dated 1st August 2013 at 16.49, Mr Edgedale wrote to Mr Holliday in the following terms:

“It is very unlikely that we will release you from any obligations for some time but we’ve taken forward all your comments and will revert to you in due course.

As far as your request re Simon Buckingham is concerned, you would be totally in contravention of your contract to be taking material from JM Finn which would enable you to compete with ourselves in the future, and therefore Simon should not be sending it to you. I am sorry if I sound very strict on this but it has to be.”

By email dated 2 August 2013 at 15.17 Mr Holliday responded:

“I consider your conduct to be in repudiatory breach of my contract of employment and I have decided to accept that breach as terminating my employment with immediate effect.

The repudiatory breach that I rely upon is the totality of your behaviour towards me over recent weeks culminating in denying the continued access to Simon Buckingham’s morning notes, as you should be aware if I am on garden leave I should have been entitled to the same benefits I enjoyed whilst employed and not on garden leave. This includes the right to receive these notes since they are a vital part of my necessary and ongoing CPD as well as ensuring that my knowledge of the market remains up-to-date. By denying me access you are removing an important tool of my trade.”

The email continued that Mr Holliday would not commence employment until Monday 19th August but when he did so he would not consider himself any longer bound by the restrictive covenants contained in his contract. He ended the email saying, “I’m sorry that you saw fit to act in this peremptory manner and that we could not resolve the terms of my departure more amicably.”

Within minutes of sending that email to the Claimant, Mr Holliday wrote to his new employer, Hargreave Hale, as follows:

“this went in a moment ago and I will await response but a week on Monday looks like my start date along with Jim and nothing to pay.”

By letter dated 6th August 2013 solicitors instructed by the Claimant, Bryan Cave, wrote to Mr Holliday seeking confirmation that he would not start up employment with his new employer as threatened, and that he would remain on garden leave as instructed, abiding fully by the terms of his employment contract (including the Revised Terms). The letter indicated that if necessary the Claimant would seek an interim injunction pending a speedy trial.

Mr Holliday responded by letter dated 8th August 2013. He asserted that Michael Robotham’s clients were his not the Claimant’s. They were his friends and the business contacts he had developed over his career. He explained his understanding of the financial transactions concerning that client base on Mr Robotham’s retirement. He asserted that the Revised Terms were presented to him as a fait accompli; that he had not paid much attention to what were to him administrative changes that did not impact on his day-to-day work; that he had not been invited or advised by anyone or the Claimant to take any legal advice on the new terms; and nor had he done so. (Neither of the latter points was in fact true – as Mr Holliday accepted in his second witness statement.) He reiterated his case in relation to the Buckingham notes and the unreasonableness of the garden leave and restrictive covenants. He made clear finally, that he was not prepared to give the assurances sought and asked to be given at least five working days’ notice of any application the Claimant should decide to make.

By an application notice dated 12th August 2013, the Claimant applied for an injunction against Mr Holliday seeking to enforce the various contractual obligations arising under the revised terms whilst he remained on garden leave. That application was opposed. Michael Bowes QC granted the Claimant the entirety of the relief sought, pending a speedy trial. In opposing that application, Mr Holliday made clear his intention to commence employment with Hargreave Hale on 19th August 2013; and further his intention to solicit some or all of the clients with whom he had dealt during his employment with the Claimant and to seek to persuade them to transfer their custom to him and Hargreave Hale.

The order made by Michael Bowes QC provided that until judgement following the conclusion of the expedited trial he was ordering the Defendant was prohibited from: –

So far as clauses a) and b) above are concerned, it is clear that they were designed to secure that Mr Holliday would not commence employment with another employer during his notice period and would both secure his loyalty and delay the transfer of that loyalty to any new employer in this period, by preventing him from assisting a rival organisation to win business of the Claimant. Clauses c) and d) mirror other express provisions applicable during garden leave as set out in the Revised Terms.

Despite this Order, by email dated 3rd September 2013 (pg. 291) Mr Holliday sought to divert a valuable business opportunity away from the Claimant to his new employer. I am quite satisfied that a fair reading of this email shows that he passed on information to Hargreave Hale concerning one of the Claimant’s clients, referred to here as AW, who had sold a majority stake in Gusborne Estates for a significant sum of money. Mr Holliday’s repeated attempts to deny any breach, on the basis that he was simply passing on information about Gusborne Estates (which was not a client) rather than AW (who was) were persistent, opportunistic and implausible. I cannot accept that this was really his view. He was, I find, volunteering information about Hargreave Hale to the Claimant’s clients and singing Hargreave Hale’s praises (pgs. 154, 155). For example, by an email dated 19th September 2013 he gave a detailed account to the agent of one of the Claimant’s clients, Aberdeen, promoting the benefits of Hargreave Hale. Mr Holliday’s attempt to justify this behaviour on the basis that the agent would know not to repeat this information to the client was both surprising and implausible. Again, I cannot accept that even he believed this is what was likely to happen. I am also satisfied that Mr Holliday was deliberately attempting to undermine the Claimant’s attempts to foster new relationships between alternative investment managers and the clients during his garden leave period. A particularly concerning example relates to a highly critical commentary (pg. 277) on Simon Temple-Pedersen’s advice (pg. 261) that he prepared as a draft for Mr Robotham to present as his own views to Client 25, and which Mr Holliday hoped subsequently to deploy in these proceedings. Mr Holliday admitted drafting letters in this way for two other clients, Charlie Perkins and Christopher Campbell (see his Disclosure statement at [9]). In another email (pg. 295) to Hargreave Hale, Mr Holliday said Mr Robotham “is being very helpful with the older clients and getting them to fend off the new advisers.”

Mr Holliday alleges that the Claimant was in breach of the implied term of trust and confidence, and this meant that he was entitled to treat his employment with the Claimant as at an end, having accepted that fundamental breach. It is trite law that there is to be implied into any contract of employment, a term that the employer shall not without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.

The test for whether conduct is repudiatory is that set out by Etherton LJ in Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, endorsed by the CA in Tullett Prebon plc v BGC Brokers LP [2011] IRLR 420 at [20]:

The question whether or not there has been a repudiatory breach of the duty of trust and confidence is a question of fact: Woods and WM car services (Peterborough) Ltd [1982] IRLR 413 at 415. It is highly context specific. Reliance may be placed on any conduct by the Claimant which, objectively considered, constituted a breach of the Claimant’s duty not seriously to damage the degree of trust and confidence which Mr Holliday was entitled to have in the Claimant.

The only conduct now relied on by Mr Holliday as a breach of the implied term of trust and confidence is the refusal to allow him to continue to receive the Buckingham morning summaries. That claim must be considered in the context of a disaffected employee who had already given notice of his intention to resign and was hoping to leave immediately to join a competitor firm with whom he had already secured alternative deployment. Those circumstances give rise at the very least, to a potential concern that the argument of repudiatory breach is deployed as a means of avoiding the notice period and garden leave.

Mr Holliday had not had access to the Buckingham notes since 10th July 2013. The first complaint he made about this was on 31st July. Whilst it is correct that he had a short period of holiday in Iceland during this period (I reject his evidence that he was on holiday for most of this time), it is surprising that he waited as long as he did to make this complaint (and did so as a postscript to his email) if these notes were as important as he now maintains. Of course I accept that during this period he did not wish to rock the boat and was hoping to reach an amicable agreement with the Claimant as to his departure, but I cannot see how requesting the Buckingham notes would have been regarded as rocking the boat.

I am satisfied that the Buckingham notes contained a convenient digest of information available from a variety of sources including the financial press, the Internet (and corporate websites) and publications produced by other organisations, including selling broker publications (for example Winterflood) engaged to publicise companies and provide information about those companies to attract increased sales. I am also satisfied that these notes reflect a summary of broker opinions and other market information that is likely to be helpful to the hard-pressed, busy broker who does not have time to carry out extensive research himself.

The real value of these summaries, sent out early each morning, is speed as both Mr Sussman and Mr Powell made clear and as Mr Holliday himself says at paragraph 43: “I cannot over emphasise the time that I would otherwise spend trawling through a wide variety of sources to keep up-to-date… if I’m deprived of this daily information source”. They provide readily digestible information that can enable a busy broker to make a quick decision about what stock to buy or to sell that day. They have value or potential value for immediate trading.

That need for speed was not one that applied or could apply during garden leave. Mr Holliday would have far more time than normal to carry out research whilst on garden leave and would not be having to make time pressured investment decisions. His reluctance to accept that he would have much more time to keep abreast of the markets and to maintain his knowledge whilst on garden leave was surprising.

Mr Holliday maintained that in addition to speed the other value of these notes is editorial and he pointed to the information concerning Michelmersh bricks (page 68) by way of example; information he described as a nugget that would be extremely useful to him in advising on stocks in his day-to-day work. I accept that this may be so, but, it is clear (on a quick survey of the Buckingham notes of 22nd July 2013 contained in the bundle) that much of this information is likely to become stale within a relatively short period, and its utility where immediate trading is not possible is highly doubtful.

Mr Holliday’s contemporaneous reaction to what is asserted to be a fundamental breach is helpful in assessing its objective seriousness. I have already noted the fact that he went without the Buckingham notes for three weeks without raising this. He did not even mention the Buckingham notes during the course of the exit interview on 29th July, despite a discussion about CPD and the resources that were available to him in order to keep up with his CPD.

Moreover it is apparent from the terms of his email of 2nd August that he felt the need to exaggerate the significance of the Buckingham notes by claiming that that they were a vital part of his necessary and ongoing CPD. Having accepted that reading the Buckingham notes could not be relied on for CPD purposes, Mr Holliday sought to explain his assertion that the Buckingham notes were a vital part of CPD as a reference in the broadest sense to continuing professional development and the need to have those notes to maintain his knowledge of the market. But his email demonstrates that he knew the difference between market knowledge and CPD requirements and indeed he drew that distinction in his own email. I am satisfied that he was overstating the importance of those notes in order to engineer a constructive dismissal. I am fortified in reaching that conclusion by three features: first, the fact that Mr Holliday resigned immediately without any attempt to query or challenge the decision in relation to the Buckingham notes or to explain to his employer how vital he regarded those notes to be; secondly, the fact that Mr Holliday felt it necessary to rely on the withdrawal of the notes as a last straw and the culmination of a period of mistreatment, none of which is any longer relied on; thirdly, the fact that within minutes Mr Holliday had forwarded his email to his prospective new employer making it clear that he would be free to start work without any need for payment in respect of the client base.

Looked at objectively, the absence of the Buckingham notes, whilst inconvenient, cannot be said to be something which would deprive Mr Holliday of his skills or constitute a breach of the implied term of trust and confidence. The withdrawal of these notes was not conduct that seriously damaged the relationship of trust and confidence or demonstrated an intention by the Claimant to abandon and altogether refuse to perform the contract. I am satisfied that the Claimant had reasonable and proper cause for withdrawing those notes. In circumstances where Mr Holliday was on garden leave and had no need to contact clients and was not permitted to advise on, or sell or buy stocks in the course of business, his FCA registration having been suspended, there was no reasonable need for him to have those notes.

Accordingly, I reject the claim that the Claimant repudiated Mr Holliday’s contract of employment.

I turn to consider the proper approach to the garden leave clause and the question whether the order made by Michael Bowes QC should be continued for any period and if so what period.

The parties diverge in their approach to this broad issue. Mr Quinn identifies four questions that he says I must answer: first, I must consider what the Claimant actually did in this case and not what it could have done. The conduct relevant to this question he says is imposing a period of 12 months garden leave. Secondly, I must consider whether that act was in restraint of trade, and he contends that the answer to that question is plainly yes. Thirdly, that being the case he contends that the party seeking to impose the restraint of trade must have the burden of satisfying the court that the restraint was reasonable in the sense of being no more than was necessary to protect its legitimate business interest. Fourthly, the question whether it is open to the court to whittle down the period and impose a lesser period must be considered, and if so what is the appropriate period of any injunction in this case.

Mr Tatton-Brown contends that there is a distinction to be drawn between on the one hand, a contractual requirement that a minimum period of notice of termination be given and an express garden leave clause entitling the employer to place the employee on garden leave once notice has been given, and on the other hand, the issue of whether as a matter of discretion a garden leave injunction ought to be granted. He maintains that the requirement to give a particular period of notice is not a provision in restraint of trade or if it is it is not one the courts have required an employer to justify under the restraint of trade doctrine. Similarly, where there is express entitlement in a contract permitting an employer to place an employee on garden leave, he submits that there is no requirement to justify such a contractual provision. The restraint of trade doctrine comes in, if at all, according to Mr Tatton-Brown, at the stage at which the court is concerned whether as a matter of discretion to enforce such a garden leave clause and if so to what extent. However, in a case concerned with the grant (or otherwise) of a final injunction after a speedy trial (as opposed to an interim injunction preserving the status quo) Mr Tatton-Brown submits that a different approach applies on the authority of Dyson Technology Ltd v Ben Strutt [2005] EWHC 2814 (Ch) paras 1.68 to 1.71. In summary: once the Claimant has established that a restraint sought to be imposed by a negative covenant is enforceable, the court has discretion whether to grant an injunction to restrain its breach. That discretion must be exercised in accordance with established principles that an express or implied negative covenant will in general be enforced by injunction without proof of damage. Although the absence of damage to the Claimant is not in general a bar to such relief, there may be exceptional cases where the grant of an injunction would be so prejudicial to a Defendant or cause him such hardship that it ought to be refused absent proof of damage. The primacy of holding an employee to his bargain is apparent in this approach and the doctrine of restraint of trade does not feature.

I accept that express provisions regarding minimum periods of notice and an entitlement to place an employee on garden leave during a period of notice are commonplace in employment contracts. Indeed it is well known that garden leave provisions have become a standard feature of senior employment contracts: see observations to this effect in SG & R Valuation Service Co LLC v Boudrais [2008] IRLR 770 14 (Cranston J). The reason for this is that in a case involving a senior employee with a right to work under his contract, an employer will, generally speaking, need an express provision entitling him to send his employee on garden leave so as to absolve him from what would otherwise be a breach of contract.

There is a distinction between post-termination restraints (self-evidently operating after the contract has been terminated) and garden leave provisions operating during the currency of the employment relationship.

During the currency of the employment relationship, when an express negative covenant or the implied duty of good faith apply to prevent an employee working for another employer, the doctrine of restraint of trade will not apply to such a restraint; nor is there a need to justify an express contractual garden leave provision by reference to this doctrine. However in circumstances where an employer has put an employee on garden leave and then seeks an injunction to restrain the unwilling employee from joining a competitor before the expiry of his notice period, an injunction to enforce or aid that period of garden leave must be considered in light of the restraint of trade doctrine. The fact that the employee agreed to the contractual provisions may be a factor in the court’s consideration but it is not the only or primary factor. The scope for abuse by an employer of a garden leave provision is well recognised and I agree with Mr Quinn, that public policy considerations compel consideration of the restraint of trade doctrine in this context.

In my judgement, the proper approach even at the final (rather than interim) stage is that identified by Jack J in the Tullett Prebon case at paragraphs 219 to 226, in particular at paragraphs 221 to 224:

“[221] “Where the enforcement of the garden leave provision differs from the enforcement of the covenant is that the enforceability of the covenant is to be judged at the time that it was entered into. If, on that basis, it is unenforceable, that is the end of the matter. If it is enforceable, then prima facie an injunction will follow. But there may be situations where the court will nonetheless hold that, because of what has actually happened an injunction is inappropriate, or is inappropriate for the whole period of the covenant. The enforcement of the garden leave provision may come in at this stage as a reason for declining to enforce the covenant in whole or part.

[222]Where the issue is garden leave, the court looks at the situation at the time enforcement is sought. The court will look primarily at what is required for the reasonable protection of the protectable interest, here trade connection. It will also take account of the situation of the employee. That brings in here the facts that the brokers are on garden leave as a result of their having walked out from their employment in reliance on their indemnity from BGC without, as I have held, having grounds to do so; that they are suffering no financial loss because they are receiving salary from Tullett and will be indemnified for bonus by BGC and are in fact better off as a result of what has happened by reason of their signing payments from BGC. The court will also have in mind the strong public interest in employees being held to contracts which they have freely entered into for substantial remuneration. That interest pulls in the opposite direction to the public interest in employees being freely able to exercise their skills in work by transferring from one employer to another. It is also a fact that the brokers will take time to get back up to speed once they begin work again. It is also ironic that under their contracts with BGC they will have rather less freedom of future movement than under their contracts with Tullett. These are all factors which are subsidiary to the main issue as to the time required for the reasonable protection of the employer’s protectable interests.

[224] Where the court considers that the period for which the employer is entitled to protection ends during the time for which the employee may be on garden leave, it will enforce the garden leave provision for that period, and will decline to enforce any enforceable post termination restriction. It will decline the latter because the employer will have already got all the protection he is entitled to, and the court has discretion not to enforce an enforceable post termination restriction or covenant where the circumstances are such that it should not.”

Mr Quinn sought to persuade me that the court has no discretion to whittle down the terms of a garden leave clause or its period. I cannot accept that submission. When dealing with restrictive covenants the court is bound by the terms of the contract. The restrictive covenant contained in the contract is either enforceable so as to justify the grant of an injunction enforcing it, or is unenforceable and no injunction will be granted. Where a garden leave clause is concerned the court is enforcing a negative covenant to aid or support the enforcement of the garden leave clause rather than enforcing the garden leave clause itself. As a result any injunction obtained might be for a shorter period than that envisaged by the garden leave clause itself. The distinction is illustrated by Mont (JA) UK Ltd v Mills [1993] IRLR 172, CA and the court’s different approach is exemplified in GFI Group Inc v Eaglestone [1994] IRLR 119 where, in relation to a notice period of 20 weeks, an injunction was granted for only 13 weeks on the particular facts.

I accept however that in exercising that wide discretion both as to the period of the injunction to enforce garden leave and as to its scope, 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: Provident Group plc v. Heywood [1989] ICR 160 at 165 (Dillon LJ).

Accordingly, an injunction sought to aid or enforce a garden leave clause must be justified on similar grounds as a restrictive covenant. This means that the Claimant must demonstrate a legitimate interest to protect and must show that the injunction sought extends no further than is reasonably necessary to protect that legitimate interest. The grant of an injunction is a discretionary remedy, and may be refused if in fact the Claimant will suffer no damage (or because of delay). Finally, there is greater flexibility in cutting down the terms of the restriction when dealing with garden leave than when dealing with the terms of a restrictive covenant. The court accordingly has the flexibility to grant an injunction for less than the full notice period if that is the extent of the period in respect of which it can be justified.

In this case, the legitimate interest sought to be protected is customer or client connection. It is common ground that Mr Holliday built up strong relationships whilst employed by and paid by the Claimant with those clients with whom he dealt. His success as a broker depended largely upon establishing and maintaining those relationships with clients. That customer or client connection is undoubtedly an asset or interest that the Claimant is legitimately entitled to protect. The “Key Statistics” document (page 80) given to Mr Holliday during the course of his employment, shows that the total funds under management (FUMA) represented by his clients, was £200 million. This is top quartile for the firm’s investment managers. Although the revenue yield (and the profit to the firm) produced by Mr Holliday in respect of these clients was not as high as it could have been, these clients were potentially profitable and had real value for the Claimant.

In Beckett Investment Management group Ltd v. Hall [2007] IRLR 793 Maurice Kay LJ said the following:

“Any financial services company relies on employees to attract and retain a client base. If those employees who deal directly with clients leave the company and set up on their own account or go to work for a rival company, it is not unnatural that, one way or another, sooner or later, the clients will follow them. Although they have been the clients of the company rather than of its employees, from the client’s point of view it may well be the personal relationship with an individual adviser in which they have particular trust and confidence. A tension therefore arises between the interest of the company in protecting its client base in the event that one or more of its employees depart and the interest of such employees who wish for the freedom to develop their careers elsewhere. The clients are not captive. In this situation, it is inevitable that employers include in contracts of employment clauses which seek to limit the ability of employees to take the client base with them.”

These points are equally applicable in the instant case. The Beckett case (at the level of the Court of Appeal) concerned the enforceability of a 12 month non-dealing covenant. Such a covenant had been held to be unenforceable by the trial judge, who held that a three-month restriction was all that was necessary. In reaching this conclusion the judge held that the 12 month period was purely arbitrary and too wide on that account. All that was necessary was a period long enough to enable an alternative adviser to make contact with the client and thereafter to have an adequate opportunity if the client was not immediately persuaded, to seek to change his mind. On that basis three months would have been adequate for that purpose. Similar points are made by Mr Holliday in this case, albeit that the period he contends for is four months.

In allowing an appeal against that decision and holding that the 12 month period was enforceable the Court of Appeal continued:

“In my judgement, the judge adopted an unrealistic and erroneous approach to the question of duration. He considered the period of 12 months to be purely arbitrary but it was only arbitrary in the sense that any fixed duration bears an element of arbitrariness. His three-month rationale is to my mind simplistic in so far as it addresses the relationship between the Claimant’s and the clients but is deficient in having no regard to what BIMG and BFS would need to do to persuade clients to remain loyal. Mr Hall and Mr Yadev were not run-of-the-mill expendable employees. They were of enormous importance to the success of the Leicester office. To have any prospect of retaining the clientele, BIMG and BFS would need to recruit, organise, train and project suitable replacements. On any basis, this was an important aspect of the reasonable protection of their legitimate business interests. However, it was ignored by the judge who chose instead to attach significance to the fact that a non-dealing clause would prevent a client from doing business with someone in whom he had confidence for a period which the judge considered to be too long. It is apparent from the solicitor cases that a non-dealing clause may be valid notwithstanding the potential interference with the client’s choice as to whom to instruct and the degree of confidence which exists between client and solicitor….During the period of restriction, the client is not compelled to remain with the covenantee. If he cannot await the expiration of the period of restriction, he can in the meantime seek the advice of any service provider with which the covenanter is unconnected. For these reasons, I consider that the confinement of reasonableness to a period of three months was wrong. Whilst I do not consider the period in excess of 12 months would have been reasonable in respect of either Mr Hall or Mr Yadev, I am prepared to hold the 12 months was a reasonable period in both cases.” ….

As with the Beckett case, I have no doubt that to have any prospect of retaining Mr Holliday’s client base (that had been “cemented” over many years) the Claimant would need a reasonable period in which to establish or attempt to establish relationships between his clients and new investment managers. This is an important aspect of the reasonable protection of the Claimant’s legitimate business interests. The real question is what period of restraint, if any, is the minimum necessary for legitimate purposes.

There is no evidence before me of any industry norm in relation to garden leave clauses and I do not regard Mr Sussman’s evidence about two recent recruits who had come to the Claimant from a competitor having served a 12 month garden leave period, as establishing any industry norm.

Mr Powell gave largely unchallenged evidence that in his experience it takes a long time to lay and entrench the foundations of a relationship between a new investment manager and his or her clients. This is particularly so when dealing with discretionary portfolio clients. This is because formal contact with such clients only occurs a few times a year. Valuation letters are sent out to such clients twice annually or sometimes quarterly but otherwise contact is typically made at some time between the beginning of the New Year and April when the new tax year starts. These occasions are the best opportunity, according to Mr Powell, for an investment manager to win and maintain a relationship with a discretionary client. It is important not to force a client to meet at a time not of their choosing or when they are reluctant to do so. Otherwise the investment manager appears to be too pushy and to be conducting a hard sell. For this reason, Mr Powell explains that if early attempts at arranging meetings are unsuccessful, it is best to allow the client some space before seeking to rearrange an initial meeting to make arrangements for a follow-up meeting. Even if the first meeting has been held, followed up by sending a confirmatory email which sets out next steps to be followed, Mr Powell explains that it is important to try to cement the relationship with further emails. Most clients would expect some reason for a further meeting or review. For example, a change in market conditions may warrant a change in stock selection and so provide an effective basis for approaching the client for a meeting. Such a change that might trigger a justifiable basis for arranging a meeting or review with the client is unpredictable and cannot reliably be expected to take place in any particular period, whether a six-month or a 12 month period. For that reason, in relation to those clients who do not immediately decide either to stay or leave the Claimant following the departure of an investment manager who has previously dealt with them a reasonably substantial period of time is necessary to seek to establish a new relationship with a new investment manager. Mr Powell explains that this process would prove virtually impossible if Mr Holliday, who had the obvious advantage of an established relationship with the clients, was simultaneously soliciting such clients on behalf of a new employer or taking steps to undermine the efforts made by the newly appointed investment managers.

The second reason Mr Powell gives to justify the need for a long time to lay and entrench the foundations of the relationship with a new investment manager is that it usually takes significantly longer than six months to make any meaningful assessment of the success of any adjustments to the portfolio that may have been recommended by the investment manager and consequently, it takes longer than six months for the client to make an assessment of the performance of the new manager. There are some clients for whom no adjustment is needed to their portfolio and in such a case it is difficult to assess performance in the absence of any positive activity. Moreover the fact that valuations are only sent out every six months, combined with potential volatility in the market, means that it takes at least a year for the client to see an accurate picture of the success of their portfolio and of the investment manager responsible for it. Mr Powell indicates that this latter point is supported by communications the Claimant has received from some of Mr Holliday’s former clients, who have given the Claimant 12 months to demonstrate a good performance before they decide whether to leave with Mr Holliday or to remain on the Claimant’s books. Others have stated that they do not wish to move stockbroking firms too often and will remain with the Claimant so long as their portfolio performs well over the next 12 months.

In light of this unchallenged evidence which I accept, it is clear that there are a number of factors that will be relevant to whether a relationship is established between the new investment manager and the client. Some of those factors, such as personal chemistry, are immediate. However others, such as demonstrating integrity, reliability and good performance, invariably take time. Moreover a new investment manager cannot artificially speed up the process of forging the new relationship, for example by having lots of meetings or sending lots of letters within a short period, without running the risk of acting counter-productively. The timing of meetings is to a significant extent dictated by external factors, such as the timing of half yearly valuations or the end of the tax year. Any initial busy period of wooing as described by Mr Holliday at paragraph 22 of his third witness statement, will in practice have to be conducted over a longer period than the four months he identifies.

Although in Mr Powell’s case, he had secured four of the five charity clients he inherited from Mr Holliday within four months, I accept as realistic his evidence that a significant proportion of Mr Holliday’s other clients remain undecided and that there is everything to “ play for” in terms of their retention. Even in relation to those who have at the moment been persuaded to remain at the Claimant, there has been little time to cement the relationship or demonstrate good performance by an alternative investment manager. There remains a strong risk in relation to these clients that they will succumb to Mr Holliday’s efforts to woo them back if he is permitted to do so in the immediate or short-term future.

I have taken account of the fact that Mr Holliday agreed to a 12 month notice period and that this 12 month notice provision was mutual. In agreeing to that provision Mr Holliday had the opportunity to seek legal advice and availed himself of that opportunity, thereafter agreeing to the clause without any attempt to argue for a shorter period of notice. Moreover, this variation in relation to his notice period was part of the Revised Terms that included a tripling of Mr Holliday’s salary. The fact that Mr Robotham also agreed to a 12 month restriction is relevant to these considerations.

I have also taken into account as an important factor in my consideration of this question, whether the grant of an injunction for 12 months would cause disproportionate harm to Mr Holliday. There is no evidence that Mr Holliday will suffer financial loss – he will be paid his full salary and benefits during his notice period. Nor has it been suggested that his contract of employment with Hargreave Hale will be withdrawn if he cannot join quickly. The fact that he will be unable to advise clients or carry out transactions for clients for the balance of his notice period if that is the period ordered, seen in the context of a working life building up and using such skills, does not mean that his skills will atrophy, or that he will lose his ability once the relevant period expires. He will have ample time and opportunity during garden leave to keep up with the market and to maintain his market knowledge through publicly available sources and the resources available through the CISI website.

For all the above reasons, I am satisfied that the Claimant has demonstrated a legitimate interest to protect; and that there is evidence that 12 months is the minimum period required to protect the Claimant from sustaining the damage identified. An injunction to aid enforcement of Mr Holliday’s notice and garden leave period is no more than is reasonably necessary to protect the Claimant’s legitimate interest in this case.

I am quite satisfied that damages would not be an adequate remedy in this case. If Mr Holliday is permitted to leave immediately and join Hargreave Hale, there is a real prospect of the Claimant sustaining loss that will not readily be quantifiable in terms of damages. Any assessment of damages would, of necessity, be based on hypothetical events and is likely to be a complex and speculative exercise. For example, even with the best record keeping exercise in respect of transferring clients such an exercise will not capture loss reflected in (i) loss to the Claimant of potential new clients that would or might have been won had the transferred client stayed with the Claimant; and (ii) the loss reflected in the departure of existing clients who are persuaded to leave to join Hargreave Hale by transferring clients.

Nor do I accept Mr Quinn’s other arguments against the continuation of any injunction. Mr Holliday suggests that the client’s own interests in having the stockbroker of their choice, the fact that these clients are likely to be lost to the Claimant in any event, and the damage to his reputation caused by the grant or continuation of the injunction means that I ought not to make this order. So far as these points are concerned, there is no evidence before me from clients regarding any disadvantage to them as a result of continuing the injunction until July 2014; but in any event I am quite satisfied that there are other stockbrokers they can use in the interim before transferring to Mr Holliday as soon as the period of restraint expires. So far as likely loss of clients is concerned, the fact that Mr Holliday strongly believes that his clients will remain loyal to him is a compelling reason why the injunction ought to be granted in order to give the Claimant an opportunity to retain these clients. Finally, I cannot accept that being put on garden leave causes any reputational damage as asserted. Garden leave clauses are common and there is general acceptance and understanding of the reasons for such garden leave being imposed, none of which reflects negatively on the affected individual.

For all these and the other reasons given above, the order made by Michael Bowes QC will be continued until the expiry of the 12 month notice period on 4th July 2014.