Factual and Procedural Background
These proceedings arise from allegations that the First and Second Defendants, while employed by the Claimants, collated and misused confidential information belonging to the Claimants, and that they passed some or all of this information to the Third Defendant, a competitor, pursuant to an unlawful conspiracy involving the Third, Fourth, Fifth, and Sixth Defendants. A central issue is whether the First Defendant is bound by post-termination contractual restrictions contained in a 2009 Contract, or whether he remained employed under an earlier 2003 Contract that lacked such restrictions.
The issue of contract binding was ordered by Deputy Judge Jarvis QC to be tried separately, focusing on whether the First Defendant became bound by the 2009 Contract, which includes post-termination restrictions preventing work for rivals or solicitation of customers for six months after employment ends. The trial was to use witness statements as pleadings, with limited disclosure and cross-examination over an estimated two days.
The First Defendant and the Second Defendant resigned in mid-March 2012 to join the Third Defendant. The First Defendant’s contractual relationship was with the Second Claimant. The Third Defendant is partly owned by the Fourth Defendant, who was formerly Managing Director of the First Claimant. The Claimants’ only witness was the HR Director of the frozen food division of the parent company of the Second Claimant. Other Defendants did not participate in this aspect of the proceedings.
The First Defendant was initially employed in 2000 and promoted to a senior management grade (Grade E) in April 2009. He signed the 2003 Contract but never signed or returned the 2009 Contract sent to him in September 2009. The Claimants contend that by applying for and receiving benefits available only under the 2009 Contract, the First Defendant impliedly accepted its terms. The First Defendant denies this, contending his conduct was not unequivocally referable to acceptance of the 2009 Contract.
Legal Issues Presented
- Whether the First Defendant became bound by the 2009 Contract containing post-termination restrictions despite never signing or expressly agreeing to it.
- Whether the First Defendant’s conduct, specifically applying for benefits under the 2009 Contract, constitutes unequivocal acceptance of its terms by necessary inference or implication.
- Whether the benefits claimed to have been accepted under the 2009 Contract were only referable to that contract or could be explained by other factors such as company policy or grade entitlement.
Arguments of the Parties
Claimants' Arguments
- The First Defendant received the 2009 Contract but did not sign it; however, by applying for and receiving benefits only available under the 2009 Contract, he impliedly accepted its terms.
- The relevant benefits include a move to a defined contribution pension scheme and medical benefits extended to his family, neither of which were available under the 2003 Contract.
- The First Defendant’s conduct in applying for these benefits was an unequivocal act implying acceptance of the 2009 Contract, satisfying the test established in Sallem Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA and Solectron Scotland Ltd v Roper.
- The Claimants relied on witness evidence that the benefits were only available as a consequence of the 2009 Contract and that the First Defendant had read and retained the contract.
First Defendant's Arguments
- The First Defendant denies that his conduct was unequivocally referable to acceptance of the 2009 Contract.
- The move to the defined contribution pension scheme was compulsory and mandated by company policy, not voluntary or elective under the 2009 Contract.
- The application for private medical insurance (PMI) was prompted by grade entitlement and managerial discretion rather than contractual right, and he was unaware that the 2009 Contract was the source of these benefits.
- He never accepted the restrictive covenants in the 2009 Contract and did not regard himself as bound by it.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Sallem Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA [2010] EWCA Civ 397 |
Established that an employer must show an "unequivocal act implying acceptance" of new contractual terms by an employee. |
The court applied the "unequivocal act" test to determine whether the First Defendant’s conduct implied acceptance of the 2009 Contract. |
| Solectron Scotland Ltd v Roper and others [2004] IRLR 4 |
Clarified the "only referable" test, requiring that the employee’s conduct be only referable to acceptance of new terms for an inference of acceptance. |
The court used this test to assess whether the First Defendant’s application for benefits was solely attributable to acceptance of the 2009 Contract. |
| Ignazio Messina & Co v Polskie Line Oceaniczne [1995] 2 Ll. Rep. 566 |
Contractual intention and acceptance are to be objectively ascertained. |
The court applied objective principles to infer acceptance from conduct rather than subjective intention. |
| Attrill and others v Dresdner Kleinwort Ltd and another [2012] IRLR 553 |
Confirmed reluctance of courts to infer acceptance of new terms solely from continued employment and emphasized the "only referable" test. |
The court considered this precedent in evaluating whether the First Defendant’s continued employment and conduct implied acceptance of the 2009 Contract. |
| Sheet Metal Components Limited v Plumridge [1974] IRLR 86 |
Noted courts’ caution in inferring acceptance of disadvantageous contractual terms from employee conduct. |
Referenced to support the cautious approach to inferring acceptance from conduct in the present case. |
Court's Reasoning and Analysis
The court began by identifying that the legal question was whether the First Defendant had impliedly accepted the 2009 Contract’s terms, including restrictive covenants, despite never signing it. The burden rested on the Claimants to establish unequivocal acceptance by conduct.
The court applied the "only referable" test from Solectron, requiring that the First Defendant’s conduct be solely attributable to acceptance of the new terms. The court examined the specific acts relied upon by the Claimants: the move to the defined contribution pension scheme and the application for private medical insurance (PMI) for himself and his family.
Regarding the pension scheme, the court found the move was compulsory and mandated by company policy, not a voluntary act implying acceptance of the 2009 Contract. Thus, this act failed the "only referable" test.
Conversely, the application for PMI was a voluntary act requiring a formal application process available only under the 2009 Contract. The First Defendant had read and retained the 2009 Contract before applying and did not protest its terms. The court found this act to be unequivocally referable only to acceptance of the 2009 Contract, satisfying the legal test.
The court rejected the First Defendant’s argument that the benefits arose solely from his grade or managerial discretion, finding that the contractual source was the most plausible explanation for the entitlement.
The court acknowledged the First Defendant’s subjective denial of acceptance but emphasized that contract acceptance is objectively determined by conduct, not intention.
Ultimately, the court concluded that by applying for PMI after reading the 2009 Contract, the First Defendant became bound by its terms, including the post-termination restrictions.
The court also expressed reservations about the procedural approach of a separate mini-trial on this issue, noting the unusual nature and potential disadvantages of such bifurcation.
Holding and Implications
The court held that the First Defendant became bound by the terms of the 2009 Contract as and from the date when he applied for private medical insurance.
This decision means that the First Defendant remains subject to the post-termination restrictions contained in the 2009 Contract for six months following the termination of his employment. The ruling directly affects the parties by upholding the enforceability of the restrictive covenants against the First Defendant. The opinion does not establish any new precedent beyond the application of existing contract law principles to the facts.