The recent case of Sadaque v Bluebay Asset Management (Services) Ltd (“Bluebay”) cycled through a number of interest points relating to contracts of employment, compromise agreements and contract law generally. However, the most interesting part of this case (we are compromise agreement solicitors, after all) was that Mr Sadaque (the Claimant) was attempting to pursue his employer for breach of contract after Bluebay had alleged repudiatory breach of contract on his part and refused to pay out certain (substantial) sums due under the compromise agreement.

The facts in Sadaque v Bluebay Asset Management (Services) Ltd

Mr Sadque was a highly paid senior employee at Bluebay (an asset management firm). He was paid £100,000 in basic salary in 2010 and was also entitled to receive an annual bonus and share entitlements, bringing his final salary to an alleged £2.45 million. He was contacted in early 2011 by persons who were looking to start up an asset management firm in competition with Bluebay – Goldbridge Capital Partners LLP (“Goldbridge”). Mr Sadaque agreed to join Goldbridge and gave his notice of termination to Bluebay in June 2011, to take effect in January 2012. However, during this period other members of staff made complaints about Mr Sadaque, including allegations of sexual harassment and bullying. Mr Sadaque therefore entered into a compromise agreement with Bluebay under which his notice would still take effect in January but he would be entitled to £1.7 million-worth of share options which would vest in early 2013. Mr Sadaque did in fact leave his employment on 31 December 2011.

Bluebay, however, later discovered that Mr Sadaque had swiftly joined a competitor. They also learned that Mr Sadaque may have enticed Mr Nixon, a colleague and friend at Bluebay, to join him at Goldbridge. Bluebay therefore refused to pay the share options under the compromise agreement to Mr Sadaque, alleging that he was in repudiatory breach of contract by his joining a competitor and his enticing a colleague away. Mr Sadaque therefore issued a claim for breach of contract in October 2012. The High Court dismissed the breach of contract claim, stating that Mr Sadaque was clearly in repudiatory breach of contract through his breach of the express and implied terms of his contract of employment and, further, that he was in breach of express terms of his compromise agreement. Mr Sadaque had exhibited conduct which demonstrated that he no longer intended to be bound by the terms of either contract.

What lessons can be learned from Sadaque v Bluebay Asset Management (Services) Ltd

Lessons for employees

Employees should be careful that they do not act in repudiatory breach of contract – examples of such conduct normally include violence, dishonesty and (as in this example) setting up in competition with your employer (although simply making preparations to set up in competition may not constitute breach of contract).

Lessons for employers

Employers should regularly review their contracts of employment to ensure that they are fit for purpose. Further, employers should also carefully word compromise agreements and may wish to monitor the actions of employees after they leave their employment to ensure compliance with the terms of the agreement.

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