England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBENI 98/0321/1

COURT OF APPEAL (CIVIL DIVISION )

(MR JAMES GOUDIE QC )

Royal Courts of Justice

Strand, London WC2A 2LL

Thursday 2nd April 1998

B e f o r e

LORD JUSTICE STUART-SMITH

LORD JUSTICE MORRITT

LORD JUSTICE ROBERT WALKER

WILLIAM HILL ORGANISATION LTD Respondent

v.

TUCKER Appellant

(Handed down transcript of

Smith Bernal Reporting Limited, 180 Fleet Street

London EC4A 2HD Tel: 0171 421 4040

Official Shorthand Writers to the Court)

MR ANDREW CLARKE QC and MR ANTONY SENDALL (instructed by Messrs Allen & Overy, London EC4A 1BD) appeared on behalf of the Appellant (Defendant).

MR MARTIN GRIFFITHS (instructed by Messrs Macfarlanes, London EC4A 1BD) appeared on behalf of the Respondent (Plaintiff).

J U D G M E N T

(As approved by the court)

©Crown Copyright

LORD JUSTICE MORRITT:

1. When an employee has given notice to determine his contract of employment may his employer, whilst continuing to pay his remuneration, insist that he stays away from work for the duration of the notice period, colloquially known as sending him on garden leave? It is not disputed that he may do so if there is an express contractual term to that effect. The issue on this appeal is whether, in the absence of such a term, William Hill Organisation Ltd (“the Employer”), was entitled to do so in the circumstances of this case. Mr James Goudie QC, sitting as a deputy judge of the Queen’s Bench Division, considered that it was not and refused to grant an injunction to restrain its employee, the defendant, Mr Tucker, from working for a competitor during the notice period. He considered that, if he were wrong on that central issue, the injunction sought should only be granted for three months and not for the full notice period of six months. The Employer contends that the judge was wrong on both points and appeals with his leave. Mr Tucker claims that the judge was wrong on the second point and submits that no injunction should be granted for the first three months of the notice period even if the Employer was entitled to exclude him from work.

2. The Employer carries on the business of bookmaking. It has a subsidiary which operates in the field of spread betting called William Hill Index Ltd. Such betting is regulated by the Securities and Futures Authority and William Hill Index Ltd is one of only five companies authorised by the SFA to carry on such a business. One of the other four is City Index Ltd.

3. Spread betting was pioneered by City Index Ltd in 1980. Initially it was confined to betting on changes in financial indices but by 1984 had been extended to sporting events. The principle is simple. It involves betting on whether a variable but ascertainable quantity will come to more or less than the bracket, or spread, quoted by the bookmaker. Thus the number of goals to be scored in a football competition, such as the World Cup, is variable but will be ascertained at the conclusion of the tournament. The bookmaker may quote a bracket of 300 to 320. A person who considers that more goals than 320 will be scored buys; one who doubts that as many as 300 will be scored sells. The stake wagered is £x per goal. Thus if 280 are scored on a £1 stake the latter wins £20 but the former loses £40. The bookmaker makes his money from the spread, but, of course, it is important that the spread is properly placed within the range of the probable. The spread is widely advertised and those who wish to have a bet may chose between the spread offered by each of the five companies authorised by SFA to conduct this sort of business. The choice will be affected by the width of the spread as well as its place within the range. The difference between spread and other betting is that in spread betting the loss will usually exceed the stake. I have no doubt that, as stated by the principal deponent for the Employer, “there is enormous potential to make or lose a lot of money”.

4. Mr Tucker joined the Employer in 1987. Until April 1995 Mr Tucker worked in the Employer’s fixed odds compiling department in Leeds. In April 1995 he moved to London to take up the position of Senior Dealer within William Hill Index Ltd at their office in Finsbury. He entered into a new contract of employment with the Employer comprising an “Individual Statement of Main Terms and Benefits” and a “Staff Handbook”. It is plain from these documents that he was appointed to the post of “Senior Dealer within William Hill Index Ltd” for a full working week, when necessary at weekends or on public holidays, at a salary payable monthly. He was entitled to determine the contract on one month’s notice but the Employer had to give him three months' notice for that purpose. The Handbook emphasised that Mr Tucker must be prepared to work those hours necessary to carry out his duties in a proper and professional manner. It also underlined the Employer’s commitment to its staff and readiness to ensure that they have every opportunity to develop their skills. Mr Tucker was entitled to annual holidays of specified duration and to be absent for certain specific reasons. In addition to his salary he was entitled to holiday pay and to participate in a bonus scheme dependent on employment during the year in question.

5. With regard to his duties during the subsistence of the contract the Handbook contained a number of provisions to which I should refer in greater detail. Under the heading “Performance of Duties” it was provided

“The duties and responsibilities of members of staff are as assigned by the Company or by the individual managers. Managers will discuss such duties with members of staff individually. All staff will be required to work such hours as are necessary for the proper performance of their duties. They must try, wherever possible, to maintain and improve the business of the Company and further its reputation and interests.”

The heading “Disciplinary and Grievance Procedure” contained a provision for dismissal with notice if, despite warnings, conduct or performance did not improve. It provided that in such cases the employee would receive notice as required by his contract or payment in lieu of notice and holiday pay. It also contained provision for dismissal without notice or summary dismissal in cases of gross misconduct. There was a power to suspend, usually on full pay, if additional time was required further to investigate an alleged serious breach of discipline or security. Finally under the heading “Rules and Restrictions” provision was made for “Conflicts of Interest” and “Enticement”. In the case of Conflicts of Interest it was provided that

“Whilst in employment, you must not undertake any other employment, or hold office, which creates a conflict of interest with the Company, or any company within the Group. You should declare to your Manager any interests/connections with existing/potential suppliers or customers of the Company. If so directed, you will sever the interest/connection immediately or render yourself liable to disciplinary action.”

In the case of “Enticement” it was provided that the employee would not for a period of 12 months following the termination of employment either on his own account or for any other person endeavour to entice away any employee of the Company or any other Group company or any person who during the previous 12 months had been an actual or prospective customer with whom the employee had had dealings.

6. On 12th September 1996 Mr Tucker agreed to a variation of his contract of employment. He was to receive an increased salary and became entitled to a company car. In return the period of notice he was required to give to determine the contract was increased from one to six months. Notwithstanding this agreed variation on 2nd February l998 Mr Tucker purported to give one month's notice of his intention to leave William Hill Index. His letter stated

“My reasons for leaving are due to a lack of ambition shown by the Management of William Hill and a far more challenging and lucrative offer made to me by City Index.

The reasons for me not giving six months notice are, I believe it would be very unfair to restrict a loyal employee from furthering his career elsewhere, also the fact that I was not offered a satisfactory car or paid in lieu, l0 months after signing the offer letter, in my view makes this invalid.”

7. Correspondence between the parties and their respective solicitors ensued. On 6th February l998 the personnel manager of William Hill Index responded by indicating that six months notice was required with the consequence that Mr Tucker’s employment would continue until lst August l998. He added

“I also confirm that you are not required to attend work for the remainder of your notice period. You will continue to receive your salary and all other contractual benefits during this period including, for the avoidance of doubt, your bonus.”

The personnel manager proceeded to remind Mr Tucker of his continuing obligations during the course of his employment with regard to confidential information, fidelity and the enticement of employees. On 23rd February Mr Tucker, through his solicitors, offered undertakings not to endeavour to entice customers or employees but denied that he had any confidential information or customer connection which the Employer was entitled to protect. Two days later he returned to the Employer certain documents he had taken with him, including his proposals for spread betting during the forthcoming World Cup.

8. This action was commenced by a writ issued by the Employer on 24th February l998. The summons which in due course came before Mr Goudie QC sought injunctions until lst August or further order restraining Mr Tucker from entering into employment with City Index Ltd or doing or omitting to do anything else which would amount to a breach of his obligation to the Employer of good faith and fidelity. That application was dismissed by Mr Goudie on l3th March l998. After reviewing the facts and submissions for the parties and the authorities relied on by them, in particular Herbert Clayton and Jack Waller Ltd v Oliver [l930] AC 209 and Provident Financial Group v Hayward [l989] ICR l60 he said

“..if the employee has a concern to work and a concern to exercise his skills, then it seems to me that there is a correlative obligation on the part of the employer to provide work and to enable him to exercise his skills and that therefore in normal circumstances there is a duty on the part of the employer to provide a skilled employee such as this defendant with work and the ability to exercise his skills save in circumstances where there is an express or implied right not to provide work.”

There was no such express right. The judge considered that there was no basis for implying such a right. Accordingly he concluded that the Employer

“had it wanted to keep him to his contract for the six months then it needed not only to pay him but to provide him or at any rate to offer him work. It would not of course be for the [Employer] to force him to drink but at least they had to give him the opportunity of going to the water. That it did not do and in my judgment it therefore put itself in breach of contract at that stage and there has been no affirmation since in relation to that breach. The defendant remains entitled to accept that as terminating the contract today and on that basis the contract no longer subsists and the basis for the [Employer’s] application for an injunction goes.”

As I have already indicated the Employer contends that the judge was wrong in law to conclude that there was any such obligation on the Employer so as to entitle Mr Tucker to be discharged from his contract of employment.

9. The judge also considered what, if any, relief he would have granted to the Employer if it had not been under the obligation he had found to exist. In that context he considered that there was no relevant customer connection or confidential information requiring protection but that the Employer had a legitimate interest in preserving a stable work force. Against that he balanced Mr Tucker’s concern to maintain and develop his own skills. His conclusion was that he would have granted the injunction sought not for the full notice period of six months but for the first three months only. Both parties are dissatisfied with that conclusion. The Employer claims that the judge failed to take into account confidential information Mr Tucker possessed regarding the Employer’s treatment of what were described as “prestige clients” and had he done so would have granted the injunction for the full six months. Mr Tucker suggests that excluding him from work during the notice period does nothing to preserve a stable work force; he submits that in the exercise of his discretion the judge should have refused to grant the injunction altogether.

l0. Thus there are two points. The first is the so-called “right to work” point. This obviously has ramifications far beyond this case. The second is the exercise of the judge’s discretion which is of great importance to the parties but not to anyone else. I will deal with the alleged “right to work” first.

ll. For the Employer it was submitted that there was no general right to work whether or not the employee was skilled. It was accepted that such a right may be implied in cases where the provision of work furthers the career of the employee or enables him to earn remuneration. It was also accepted that an employer might not capriciously deny to an employee work which was reasonably available. It was suggested that the decided cases might now be rationalised by reference to the implied obligation on both parties to a contract of employment to refrain from conduct likely to damage or destroy the mutual trust and confidence each is entitled to have in the other. Malik v Bank of Credit and Commerce International SA [l997] 3 WLR 95, 99, l09.

l2. For Mr Tucker two propositions were advanced, a narrow proposition and a broad one. The narrow proposition was that an employee appointed to a particular and unique position may not be excluded from that position in the absence of his consent or a term in the contract entitling the employer so to do. The broad proposition was that it is a guiding principle (not a universal rule) when construing a contract of employment that the employee’s interest in doing his job, as well as being paid his salary, is now recognised; in particular in the case of skilled workers and others who benefit from practising their skills either because their remuneration depends on it or because their career prospects would be thereby advanced. It was accepted that in the case of each proposition it is necessary to construe the contract in the light of its own surrounding circumstances.

l3. We were referred to many more authorities than were drawn to the judge’s attention and have had greater opportunity than he did to consider the implications and effect of these rival submissions. I mention that because neither party appears to support the broad proposition, which I have quoted, on which the judge founded his decision. Neither side suggests that there is “a right to work” having any source other than the contract of employment. Moreover the submissions for each side are inconsistent with the existence of rights and obligations arising from the status of employer and employee as explained by Lord Steyn in Malik v Bank of Credit and Commerce International SA [l997] 3 WLR 95 at page l09. Thus it is common ground that the solution to the problem must be found from the terms of the contract between the Employer and Mr Tucker. I agree. One proposition which is clearly demonstrated by all the cases to which we were referred is that the question whether there is a “right to work” is one of construction of the particular contract in the light of its surrounding circumstances.

l4. The issue is most clearly expressed in the judgment of Stirling LJ in Turner v Sawdon & Co . [l90l] 2 KB 653 at page 659 in a passage expressly approved by the House of Lords in Herbert Clayton and Jack Waller Ltd v Oliver [l930] AC 209. He said

“It is an agreement by which the defendants agreed to engage and employ the plaintiff, and the plaintiff agreed to devote the whole of his time to their service. The question is, What is the meaning of the word “employ” as used in this agreement? It seems to me clear, and if authority be required we find it in the case of Emmens v Elderton , that the word “employ” is capable of two meanings - to retain in service, or to give actual work to be done by the person employed. There are many cases in which the nature of the work to be done shews which of these meanings should be adopted. Take the case of a medical man engaged for a term at a fixed payment. No one would say that employment must be found for him. On the other hand, in the case of an actor who accepts an engagement, it may be an important consideration with him to have an opportunity of displaying his abilities before the public, and it may be that there is an implied obligation on the part of the master to afford such an opportunity: Fechter v Montgomery . So in the case of a commission agent, to which reference has been made. The term “employ” being one with a flexible meaning, I feel the force of the argument that the plaintiff was to be employed in the capacity of salesman to serve and solicit orders, and so there should be a correlative duty on the employers to give him the opportunity of doing this.”

l5. In more recent times the same point was made by Sir John Donaldson in Langston v AUEW (No.2) [l974] ICR 5l0 at page 52l. He said

“In our judgment, the crucial question to be asked is “What is the consideration moving from the employers under the contract of employment?” In the case of theatrical performers it is a salary plus the opportunity of becoming better known. Thus a failure to pay the salary produces a partial failure of the consideration and thus a breach of contract. But so does the cancellation of the performance, even if the salary is paid: see Herbert Clayton and Jack Waller v Oliver [l930] A.C. 209. Similarly the consideration in a commission or piece work contract of employment is the express obligation to pay an agreed rate for work done plus the implied obligation to provide a reasonable amount of work: see Devonald v Rosser & Sons [l906] 2 K.B. 728. In a contract for the employment of one who needs practice to maintain or develop his skills, the consideration will include an obligation to pay the salary or wage, but it may also extend to an obligation to provide a reasonable amount of work. The complainant’s work as a spot welder may have been in the “skilled” category, but we do not think that he needs practice in order to maintain his skills. There are, however, other cases in which the sole consideration moving from the employer is the obligation to pay a wage. An example is provided by Turner v Sawdon & Co. [l90l] 2 K.B. 653.”

l6. Given that the question must be resolved by construing the particular contract of employment in the light of its surrounding circumstances previous cases decided on their own wording and circumstances are of limited value. But in this field the cases do illustrate certain categories and trends which are of assistance. Thus in the case of theatrical engagements the courts have been ready to find an obligation on the part of the employer to afford the opportunity to the employee to perform the part for which he was engaged. cf Fechter v Montgomery (l863) 33 Beav. 22; Marbe v George Edwardes (Daly’s Theatre) Ltd [l928] l KB 269 and Herbert Clayton and Jack Waller Ltd v Oliver [l930] AC 209. Similarly engagement for a specific project such as employment on a specific voyage ( Driscoll v Australian RMSN Co . (l859) l F & F 458) or in a specific and unique post such as the chief sub-editor of a newspaper ( Collier v Sunday Referee Publishing Co. Ltd [l940] 2 KB 647) or as the manager of an overseas business ( Addis v Gramophone Co Ltd [l909] AC 488) have been treated by the courts as giving rise to an obligation on the part of the employer not to do anything which puts the promised employment out of his power. And where the promised remuneration depends on the employer providing the opportunity to earn it then an obligation to afford the employee an opportunity so to do is readily implied. cf Devonald v Rosser [l906] 2 KB 728 and Addis v Gramophone Co Ltd [l909] AC 488.

l7. In the case of employees engaged for an indefinite term and at a fixed wage or salary the courts have been much more reluctant so to construe the contract as to cast on the employer an obligation over and above the payment of the promised remuneration. Thus the claim for such an obligation was rejected in the cases of a representative salesman ( Turner v Sawdon & Co . [l90l] 2 KB 653) and, by implication, of domestic servants ( Collier v Sunday Referee Publishing Co. Ltd [l940] 2 KB 647).

l8. But as social conditions have changed the courts have increasingly recognised the importance to the employee of the work, not just the pay. Thus in Langston v AUEW [l974] Lord Denning MR considered that it was open to a welder to argue that

“..a man has by reason of an implication in the contract a right to work. That is he has a right to have the opportunity of doing his work when it is there to be done.”

Cairns LJ thought it arguable that the contract of employment gave the employee “a right to attend normally at his place of work”. Stephenson LJ likewise recognised that the employee might be able to show that

“he has a right to work out any notice which he may be given, that it is his employer’s duty to allow him to exercise that right by providing him with the work, and that by continuing to suspend him on full pay, as they are doing, they are in breach of their contract of employment with him.”

l9. In Provident Financial Group v Hayward [l989] ICR l60 there was a specific term absolving the employer from providing any work so that the question of construction did not arise. But in the context of the exercise of the discretion of the court as to how long to impose the restraint Dillon LJ observed

“The employee has a concern to work and a concern to exercise his skills. That has been recognised in some circumstances concerned with artists and singers who depend on publicity, but it applies equally, I apprehend, to skilled workmen and even to chartered accountants.”

Though it did not arise in that case Taylor LJ recognised that the employee would be concerned if in the period of restraint his skill was likely to atrophy.

20. It is important to appreciate the limits to the obligation for which Mr Tucker contends. It is not suggested that there is an obligation to find work if there is none to be done or none which can be done with profit to the employer. Nor does he contend that the employer is bound to allocate work to him in preference to another employee if there is not enough for both of them. He submits that if the job is there to be done and the employee was appointed to do it and is ready and willing to do so then the employer must permit him to do so. He submits, by reference to the analogy of the cook given by Asquith J in Collier v Sunday Referee Publishing Co. Ltd [l940] 2 KB 647, that though that judge was not bound to eat the food his cook provided he was not entitled to put another cook in her kitchen. So, likewise in this case, he submits, the Employer is not entitled to exclude Mr Tucker from the post to which they appointed him; the work is there to be done and it is the obligation of the Employer to permit Mr Tucker to do it unless, which there is not, there is a provision in the contract absolving the Employer from that obligation.

2l. For my part I accept that the contract of employment in this case can and should be construed as giving rise to such an obligation on the part of the Employer. First, the post of Senior Dealer was a specific and unique post. It is not in dispute that Mr Tucker was asked by the Employer in August l994 to investigate what was involved in setting up a spread betting business. After considering the product of his researches the Employer decided to extend its operations into that field. Mr Tucker was the only senior dealer. There were juniors below him and a manager above him but he was the person appointed to conduct this new and specialised business. No doubt every employment nowadays has a title and job description which make it sound specific and unique but I have no doubt that the post to which Mr Tucker was appointed merited that description both in substance as well as form. Secondly, the skills necessary to the proper discharge of such duties did require their frequent exercise. Though it is not a case comparable to a skilled musician who requires regular practice to stay at concert pitch I have little doubt that frequent and continuing experience of the spread betting market, what it will bear and the subtle changes it goes through, is necessary to the enhancement and preservation of the skills of those who work in it.

22. Both those considerations arise from the surrounding circumstances in which the contract falls to be construed. But, thirdly, when one turns to the terms of the contract there are further considerations pointing to the same conclusion. Not only does the contract provide for the hours and days of work so as to fill the normal working week, it specifically imposes on the employee the obligation to work those hours necessary to carry out his duties in a full and professional manner. If the work is available it is inconsistent with that provision if the employee is entitled or bound to draw the remuneration without doing the work. To my mind that consideration is unaffected by the provision that the duties of members of staff are as assigned by the Employer or by individual managers. Not only is it followed immediately by a further stipulation requiring all staff to work such hours as are necessary for the proper performance of their duties but, in this case, the post of senior dealer in the spread betting business itself involved a broad assignment of duties. But the absence of an obligation on the Employer, as contended for by Mr Tucker, would be contrary to two express terms. The first is that appearing under the heading “Training and Development”. In that part of the Staff Handbook the Employer declares that

“The most important asset in any business is its employees and the [Employer] is prepared to invest in its staff to ensure that they have every opportunity to develop their skills.”

The second is the express power of suspension, to which I have already referred, which is limited to cases where more time is required to investigate serious allegations of breach of discipline or security. If the Employer were to be entitled to keep its employee in idleness the investment in its staff might be as illusory as the limited power of suspension would be unnecessary.

23. For these reasons I conclude that on the proper construction of this contract of employment the Employer was under an obligation to permit Mr Tucker to perform the duties of the post to which it had appointed him in accordance with his contract as well during the period of his notice as before it was given. In reaching this conclusion it is not necessary to accept or reject the propositions advanced on either side; a consideration of each plays its part in the construction of the contract but cannot be conclusive. I agree with the judge’s conclusion and refusal to grant the injunction sought. In those circumstances it is unnecessary to consider the basis on which, if he had one, he exercised his discretion.

24. Before parting with this case I would add two observations. First, much of the argument was directed to the question of which party had to demonstrate a term in his favour. Did the employer have to demonstrate an express or implied term entitling him to send his employee home, albeit on full pay, for the period of his notice, colloquially known as garden leave? Or did Mr Tucker have to demonstrate an obligation on the Employer to permit him to do the work? In my view in all cases involving garden leave the first question must be that posed by Sir John Donaldson in Langston v AUEW (No.2) [l974] ICR 5l0. Does the consideration moving from this employer extend to an obligation to permit the employee to do the work or is it confined to payment of the remuneration agreed? If the answer is in the sense of the latter alternative then the employer is entitled to send his employee home on garden leave notwithstanding the absence of an express or implied power to do so because there is no contractual obligation to prevent him. If the answer is in the sense of the former alternative then the employer needs a provision entitling him to send his employee on garden leave so as to absolve him from what would otherwise be a breach of contract. It is unlikely, given the hypothesis on which the point arises, that there could be an implied power for that purpose. Thus, in practice, an employer will need to stipulate for an express power to send his employee on garden leave in all cases in which the contract imposes on him an obligation to permit the employee to do the work.

25. Second, there appears to be a trend towards increasing reliance on garden leave provisions in preference to conventional restrictive covenants, no doubt because hitherto the courts have treated the former with greater flexibility than the latter, as explained by Neill LJ in Credit Suisse v Armstrong [l996] ICR 882, 892. But the reported cases dealing with the court’s approach to the grant of injunctions in this field show that if injunctive relief is sought then it has to be justified on similar grounds to those necessary to the validity of an employee’s covenant in restraint of trade. It seems to me that the court should be careful not to grant interlocutory relief to enforce a garden leave clause to any greater extent than would be covered by a justifiable covenant in restraint of trade previously entered into by an employee.

26. I would dismiss this appeal.

LORD JUSTICE ROBERT WALKER: I agree.

LORD JUSTICE STUART-SMITH: I also agree.

Order: Appeal dismissed with costs; costs to include

respondent's notice; inquiry into damages be

referred to the master; application for leave

to appeal to the House of Lords refused.