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Palmeri v Charles Stanley and Co Limited: Can Unacceptable Conduct Justify the Summary Termination of a Contract?

In Palmeri v Charles Stanley and Co Limited, the High Court held that a company was entitled to rely on a stockbroker's repudiatory conduct to justify the summary termination of his contract, despite the company itself being in repudiatory breach.

Background

The Claimant, Mr Palmeri, was a self-employed investment manager contracted to Charles Stanley & Co Ltd, with a three-month notice period and no PILON clause. In April 2017, the Respondent opted to restructure and to cut the Claimant’s pay by 15%. The Claimant was offered an ultimatum: sign the new terms there and then, or leave immediately with pay in lieu of notice. In response to the ultimatum, the Claimant lost his temper, raised his voice, disparaged the competence of the Respondent and its management using strong language and personally abused one of the managers present in the meeting. The Claimant then stated that he would accept the new terms under protest, for the duration of his notice period. However, the Respondent being quick to react, withdrew the offer of new terms and terminated his contract with immediate effect.

The Claim and the Response

The Claimant brought proceedings for breach of contract in relation to the summary termination as well as alleging that the “orderly transition” of his clients’ business was a breach of the implied term of mutual trust and confidence.

The Respondent argued that the summary termination was lawful based on the Claimant’s conduct at the meeting, as well as several serious regulatory compliance failures during his engagement, which were only discovered after termination. Examples of regulatory compliance failures included a breach of complaint handling and unreported potential conflicts of interest. It was stated that the Claimant failed to report a complaint made by an unhappy client, instead opting to resolve the issue through a £10,000 interest free loan as an “investment in friendship”. On a separate occasion he proposed lending cash to a client’s grandmother, secured against the value of portfolio run by the Respondent.

Judgement in the High Court

It was found that the Respondent had no contractual right to present the Claimant with the ultimatum, as it had no right to make a payment in lieu of notice. However, the Claimant’s conduct as a whole, including his outburst at the meeting and the history of regulatory issues, amounted to serious misconduct and a breach of the implied duty of mutual trust and confidence. On this basis, the summary dismissal was justified.  

The court went on further to state the fact that the Respondent had been poised to deny the Claimant his notice period did not affect its entitlement to rely on the repudiatory conduct that was later discovered. The court therefore did not need to consider the Claimant’s claim to an implied right to an "orderly transition" of business.

What this Judgement Highlights for Employers

The judgement highlights how conduct that was not considered at the time of the dismissal can later form part of the employer’s argument for making the dismissal, despite the employer itself being in repudiatory breach. It is therefore an important reminder to employers that the conduct of employees should be closely monitored throughout employment and therefore always considered if situations similar to the above arise. On the other hand, it is an important reminder to the employee to conduct themselves appropriately, so that such arguments cannot be raised by an employer should they find themselves in this situation.

If you need advice or have any queries about dealing with any workplace issues arising from employee conduct and / or dismissals, please contact Paul Chamberlain or another member of the employment team at JMW Solicitors LLP on 0345 241 5305.

This note is for general guidance only and should not be used for any other purpose. It does not constitute, and should not be relied upon as legal advice.

JMW Solicitors is a Limited Liability Partnership. The copyright in this note is owned by JMW. Any reproduction of this article should be credited to JMW. All rights reserved.