High Court success for Chattertons' Employment Team!

The Employment Team have successfully defended an appeal heard in the High Court on a legal point never before determined with binding precedence.  The case, led by Grant Shackleston, concerned whether an express confidentiality term in an ACAS COT3 Agreement could be treated as a 'condition' and thus, if allegedly breached by the employee, allow the former employer to avoid paying the settlement sum.

Our team acted for S who was unfairly dismissed by his former employer, DFKL.  A settlement of the claim was reached via ACAS and a COT3 was drawn up providing for compensation of £15,500 to S which was to be paid in 47 monthly instalments.  The COT3 also included a confidentiality clause stating that the terms of the agreement were to be treated as strictly confidential. After the ninth instalment, DFKL stopped payments.  They alleged that S had breached the confidentiality term in the COT3 and, as such, claimed that this was a repudiatory breach of the contract and they were entitled to cease all further payments. 

S brought a claim in the County Court to have the payments reinstated.  The County Court Judge found that S had breached the clause by mentioning the COT3 Agreement and its terms, to include the amount owed and the instalments, to a former colleague.  This colleague then passed the information to his manager and eventually it reached the managing director of DFKL who terminated payment of the settlement sum.

Although the Judge found that the term had been breached, it brought no commercial harm to DFKL and was not a 'condition' of the contract.  Contracts can have three types of clause – conditions, warranties or intermediate (or innominate) terms.  Which one of these a term is classed as will depend on the effect it has on the rest of the contract and any remedies available to the party not at fault if it is breached.  If a term is a condition, it is considered to be a major term and, if breached, the non-defaulting party can either repudiate the contract or affirm it.  DFKL claimed that the confidentiality clause was a condition and, once breached, the remainder of the contract ceased to have effect.  Our team argued that the confidentiality clause was in fact an intermediate term, whereby a test is applied to determine whether the party not at fault is substantially deprived of the whole benefit of the contract.  If so, the term can become a condition.  If not, the rest of the contract can remain in force and it was our case that DFKL were not substantially deprived from the benefit of the other clauses.  The County Court Judge agreed.  The breach did not go to the root of the contract and S did not intend to no longer be bound, and thus DFKL were not discharged from paying the outstanding settlement sum.  DFKL appealed to the High Court.

The appeal was heard by Mr Justice Cavanagh who upheld the decision of the County Court Judge.  The COT3 did not place significance on the confidentiality clause itself, it was not expressly stated to be a condition and was not fundamental to the agreement.  It could therefore not be treated as a condition and DFKL could not be relieved from paying the remainder of the settlement sum.  S had not intended to abandon the remaining terms of the contract and the breach was therefore not repudiatory.  No commercial damage to DFKL was evidenced and the risk of copycat claims from current DFKL employees was low. DFKL's appeal was dismissed.

Our Employment Team have a wealth of knowledge and experience and strive to achieve the very best results for our clients.  If you require any assistance or advice, please do not hesitate to contact a member of our team on 01205 351 114 or 01522 814 638.