Ms Eweida wins at ECtHR: right to manifest religion by wearing visible cross to work trumps BA’s right to project corporate image. Read judgment click here.

11KBW’s Sarah Moore for Ms Ewieda.

Recent cases have come to conflicting views about whether employees who plan to leave and set up a competing business are entitled to encourage others to leave with them. Paul Nicholls QC analyses the cases and offers a view of the correct legal position.

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In CEF Holdings Ltd & Anor –v- Mundey & Ors [2012] EWHC 1524 (QB), Silber J has added his voice to the growing judicial disquiet at the unnecessary and inappropriate use of without notice applications, and at the need for evidence in seeking  interim injunctions to restrain alleged unlawful competition by ex-employees  (cf O’Farrell –v- O’Farrell [2012] EWHC 123 (QB) and the Caterpillar litigation [2012] EWCA Civ 156, both covered in earlier posts on the 11KBW Employment Law Blog).   In a postscript to a comprehensive judgement (para 255), Silber J has stressed that (i) moving without notice is an exceptional step only to be followed in very limited circumstances “where to give notice would enable the defendant to take steps to defeat the injunction …. or where there is some exceptional urgency, which means literally there is no time to give notice”, (ii) an application without notice will need to be carefully justified by more than a “bland statement that the defendant might do something if warned ”, (iii) a witness statement on a without notice application “should contain a statement setting out the duty to give full and frank disclosure perhaps along the lines set out by Bingham and Mummery LJJ in [Siporex and Memory Corpn –v- Sidhu] and then indicating how the duty has been complied with”, and (iv) “[a]ny application for an injunction must bebased on facts and … mere suspicion is not enough”.  These were all “serious lessons” which (as the Court found) the Claimants had failed to observe or heed, it seems by some margin. They were ordered to pay indemnity costs.

Silber J dismissed the Claimants’ application for interim springboard relief against 19 individual (employee) Defendants and the new employer that they had joined, and discharged earlier injunctions made by Collins J – effectively ex parte on half a day’s notice to the Defendants.    The Claimants had resisted the discharge application on the basis that they had given some notice, that Counsel had attended on behalf of the (employee) Defendants, and that thisattenuated the full and frank disclosure obligation.   Silber J rejected this argument: the ordinary requirement to give 3 days notice was “the minimum period specified to ensure that proper legal and factual submissions of the respondent [could] be put before the Court” (para 181); if shorter notice was given, the respondent could not be expected to be fully prepared and the full and frank disclosure obligation remained engaged, unless notwithstanding the short notice the respondent said all that could be said (paras 182-183); if this was not the case, the applicant was required to “explain all legal and factual issues which were relevant to [the respondent’s] submissions …to bridge the gap between what fell within his duty of full and frank disclosure and what [the respondent] said ” (para 184).

The Court also considered the right of the employee to be sued in his own domicile under the Judgments Regulation and the UK equivalent provisions in Schedule 4 to the Civil Jurisdiction and Judgments Act 1982 (“the 1982 Act”).   In essence, the Court said that this could not be circumvented by framing claims in tort, where the employment relationship was legally relevant to those claims.   This meant that the claims against 10 of the19 employee Defendants who were domiciled in Scotland and Northern Ireland were unsustainable.

Simon Devonshire Q.C appeared for 14 of the employee Defendants (including the 10 employees domiciled outside England) at the hearing before Silber J, instructed by Gateley LLP.

Read judgement – https://www.11kbw.com/judgments/detail.php?jid=194

On the day when  Glen Mulcaire succeeded in arguing that News International should pay his legal costs under the terms of his contract with the organisation, Andy Coulson did not.

Coulson’s claim turned on the construction of a clause in a compromise agreement he signed when he left News International. The clause obliged his former employer to pay

 “[t]o the extent that it is lawfully able to do so…any reasonable professional (including …legal…) costs and expenses properly incurred by  [him] …which arise from his having to defend, or appear in, any administrative, regulatory, judicial or quasi proceedings as a result of his having been Editor of the News of the World”

It was not disputed that this covered, for example, his participation in  the  Leveson  Enquiry. But did it cover police investigations into alleged personal criminal wrongdoing by Coulson relating to payment to police officers and interception of communications?

News international said not. Supperstone J agreed. The clause protected Coulson against  proceedings into which he was drawn by virtue of his responsibilities as Editor. It did not cover alleged personal criminal misconduct.

Further Coulson had not been charged and so there were as yet no “proceedings” in any event.

The closure of the News of the World leaves its employees facing an uncertain future. It does not take News International’s own Mystic Meg to predict that that future will inevitably involve litigation. But what is the legal landscape and what claims can we expect?

The publicly reported position of News International is that it “failed to get to the bottom of repeated wrongdoing that occurred without conscience or legitimate purpose”. In a statement to NOTW staff yesterday, James Murdoch announced that the NOTW appeared to have been “sullied by behaviour that was wrong”, even “inhuman”. If the ongoing police and internal investigations confirm that there was serious wrongdoing at the NOTW, the Courts will need to decide whether the wrongdoing was so serious, substantial and systematic that the NOTW’s business as a whole was tainted.

The case-law is clear. If senior employees systematically carry on dishonest operations within what is otherwise a lawful and legitimate business, their conduct may amount to a fundamental breach of all employees’ contracts and thus give rise to claims for damages.

The starting point is the ground-breaking Malik v BCCI litigation in the late 1990s. The House of Lords found that employers owed an implied contractual obligation to their employees not to run a corrupt and dishonest business, as an aspect of their overarching obligation to foster mutual “trust and confidence” (which is a feature of all employment contracts in the UK). This opened the door for the first time to claims for “stigma damages”. If an employer did run a corrupt and dishonest business, and if it was reasonably foreseeable that innocent employees would suffer a measurable handicap in the job market as a result of the cloud of corruption and dishonesty hanging over them, those employees could seek “stigma damages” as compensation for any proven continuing financial loss.

If the allegations of widespread wrongdoing at the NOTW are proven in the inquiries, criminal and civil cases to follow, employees may assert that the NOTW has conducted a dishonest and corrupt business and claim damages if the stigma of that corruption blights their attempts to seek new employment. For NOTW’s part, it will want to head off any such claims by, amongst other things, taking steps at an early stage to mitigate any risk of stigma to former employees.  

Stigma claims are not the only legal avenue likely to be explored. If media rumours as to a “Sunday Sun” prove true some lucky staff may be redeployed and need do no more than scratch out “News of the World” on their business cards and write in the name of the new paper. If the new venture turns out to be the old paper with a new name, it raises difficult questions as to whether other staff can argue  that they become employees of the “Sunday Sun” automatically under a TUPE transfer.

Alternatively, the employees may face a period of collective redundancy consultation followed by unemployment or – if media rumours are true – a pay-out in respect of the 90 day period during which the NOTW was obliged to consult openly with its employees. It may be difficult to see how any consultation could be conducted with an open mind now that it has been announced that the NOTW will definitely close. But if employees don’t sign up to compromise agreements, and if the NOTW ignores its obligations under long-established redundancy legislation there will be some interesting legal questions. Was there an alternative to closing the paper entirely? Would it have been sufficient if senior heads had rolled? Can the NOTW say that exceptional circumstances made consultation impossible? These issues may also have an impact on the likely success of individual unfair dismissal claims.

The extraordinary circumstances which have given rise to the closure of the NOTW will provide fertile ground for lawyers. That will come as little comfort to those NOTW employees facing the prospect of imminent unemployment.

DANIEL OUDKERK QC, JULIAN WILSON, SEAN JONES, AMY ROGERS, 11KBW