Sitting in the garden may be pleasant but it’s no holiday

22 Nov 2013

For a case about garden leave, the apparently aptly named (the irony comes later) employee was a Mr Holliday. He is a stockbroker. On 5 July 2013 he gave notice to his employers that he was intending to leave to join a competitor. On 10 July 2013 he was placed on garden leave. The contract under which he worked had been amended in 2008. It provided for 12 months garden leave on notice to terminate being given. At the same time, his salary was tripled from £40,000 to £120,000 per year. He had an exit interview on 29 July 2013, the purpose of which was to ensure he understood the conditions of his garden leave.

Once his garden leave had started, he complained that his employers had repudiated his contract by failing to provide him with daily financial reports, which he received whilst actively working. They had not, he argued, continued to give him the same benefits as he was entitled to when he was actively working. So he resigned, claiming constructive dismissal, on 2 August 2013.

By so doing, he of course hoped that he could avoid the entire consequences of both the garden leave provisions and some post-termination restraints.

Following his failure to agree not to take up his new employment, his employers issued proceedings on 12 August 2013. They obtained an injunction restraining him from doing so on 16 August 2013. At the same time, an order for a speedy trial was made. This trial concluded on 31 October 2013 and the judgment of Simler J was delivered on 18 November 2013 resulting in the injunction being continued for the full term of 12 months from the date of his notice to 4 July 2014: J M Finn & Co Ltd v Holliday [2013] EWHC 3450 (QB).

These background facts for a garden leave/post-termination restraint injunction case may be unremarkable.  But the case is notable for five reasons:

  1. The court acknowledged that whilst an injunction sought to enforce garden leave, clauses must be justified on similar grounds as those for a restrictive covenant. The court has the discretion to reduce the terms of the garden leave clause or its period whereas it has no power to do so in relation to a restrictive covenant. That is because a restrictive covenant contained in a contract is either enforceable – so as to justify the grant of an injunction enforcing it – or it is unenforceable and no injunction will be granted. Where a garden leave clause is concerned, the court is enforcing a negative covenant to aid or support the enforcement of the garden leave clause rather than enforcing the garden leave clause itself. “As a result any injunction obtained might be for a shorter period than that envisaged by the garden leave clause itself.”
  2. This decision echoed earlier cases where there was said to be a strong public interest in employees being held to contracts, which they have freely entered into, for substantial remuneration. Employers can take some real comfort that this proposition is being accorded significance whereas they can sometimes doubt whether the efforts that have been put into creating what are believed to be enforceable contracts are worthwhile.  
  3. Mr Holliday fared poorly as a witness. The judge, a highly experienced employment lawyer, found he was unreliable and overly defensive; his evidence was inconsistent with contemporary documents and his explanations were implausible and opportunistic. This would have played with particular significance against him in her finding on his claim for constructive dismissal: “Those circumstances give rise, at the very least, to a potential concern that the argument of repudiatory breach is deployed as a means of avoiding the notice period and garden leave” [para 42.]  This is often felt by employers to be the case, the considerable benefit to the employee of escaping the effect of post-termination restraints prompting unwarranted claims of repudiatory breach.
  4. One of the much envied benefits of being placed on garden leave is that you are being paid for doing nothing as opposed to actually putting in a shift. Mr Holliday however was told he could have been expected to have expended some energy on non-horticultural matters. The central complaint which led to his contention of constructive dismissal was that he was being denied information reports that were produced by his employers and sent to all employees early each morning. The reports contained a convenient digest of information available from a variety of sources including the financial press, the internet and so on that are likely to be helpful to the hard-pressed busy broker who doesn’t have time to carry out extensive research himself. The real value of these reports was speed.  However, the judge held the need for speed was not one that applied or could apply during garden leave.  Mr Holliday “would have far more time than normal to carry out research whilst on garden leave and would not be having to make time pressured investment decisions” – para 46.  His reluctance to accept that he would have much more time to keep abreast of the markets and to maintain his knowledge whilst on garden leave was surprising.  
  5. Finally the compressed litigation timetable demonstrates just how speedily a case is capable of being disposed of from a standing start to a final hearing.  From a resignation in August to trial concluded by the end of October with judgment being handed down in November, fewer than four months after problems first arose, is quick work. Especially as the summer holidays intervened…


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