England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/08/2018

MR JUSTICE CHOUDHURY :

Introduction

1. The First and Second Claimants, Mr Brown and Ms Bhoma, are former employees of the First Defendant, Neon Management Services Ltd, and the Third Claimant, Ms O'Reilly, is a current employee serving her notice. The First Defendant is the management service company of the Second Defendant, Neon Underwriting Ltd, a Lloyd's syndicate providing insurance and underwriting services in respect of financial transactions.
2. The Claimants complain that the Defendants breached their contracts of employment by, amongst other things, failing to pay salary increases and discretionary bonuses that had been awarded to them, making the salary increases and bonuses conditional upon acceptance of detrimental new contractual terms and the removal of profit commission ("PC") agreed at the time of their recruitment. The Claimants contend that those breaches individually and cumulatively amounted to a repudiatory breach of contract entitling them to resign. They resigned on 16 March 2018. Those resignations were on notice. Thereafter, the Claimants, and in particular the First and Second Claimants, contend that the Defendants committed further repudiatory breaches of contract by, amongst other things, failing to pay the salary increases and bonuses, failing to pay PC and/or calculating the PC on a basis that was contrary to that which was agreed, making unjustified finding of misconduct on their part and reporting such conduct to their regulator. The First and Second Claimants accepted that alleged repudiation by resigning with immediate effect on 1 May 2018.
3. The Claimants seek damages. The First and Second Claimants also seek declarations that they were wrongfully dismissed, with the effect that contractual post-termination restrictions ("PTRs") fall away in accordance with the principles established in General Bill posting Ltd v Atkinson [1909] AC 118.
4. The Defendants deny that there were any repudiatory breaches. They say that they were contractually entitled to make the salary increases and bonuses subject to the acceptance of more extensive PTRs, that the other contractual changes were not detrimental, that the Claimants fundamentally misunderstood how the PC is to be calculated, that the findings of misconduct and reporting of that misconduct to Lloyd's were perfectly warranted given the First and Second Claimants' various breaches of contract and company policies in sending highly sensitive confidential information to their private email addresses shortly before their collective resignations on notice. In any event, say the Defendants, even if there were breaches of contract the modern legal position is that the PTRs do not automatically fall away and continue to be enforceable.

Procedural background

5. On 15 May 2018, the Claimants issued their Claim and made an application for trial to be expedited. A few days later they filed and served their Particulars of Claim. By consent, on 21 May 2018, it was ordered that the trial of the issues be determined on an expedited basis with the trial to commence on 9 July 2018 or as soon thereafter as convenient. On 4 June 2018, the Defendants served their Defence and Counterclaim. The Counterclaim comprised a claim that the First and Second Claimants' repudiatory conduct had caused substantial losses to the Defendants. Those losses were said to be in the region of £1 million. On 11 June 2018, the Claimants served their Reply and Defence to Counterclaim. Following standard disclosure, witness statements were exchanged on 3 July 2018. The trial in this matter then commenced just a week later on 10 July 2018.

Witnesses

6. There is little in the way of disputed fact in this matter although certain matters, such as the proper interpretation of what was agreed in relation to the PC and the reasons for resigning, are hotly contested. The Claimants each gave evidence in support of their claims. Ms Bhoma was the first to give evidence. The Defendants criticise that evidence as being partisan and not a true reflection of the facts. Whilst I accept that her evidence as to the effect of her PTRs was inaccurate and that she appeared in one small respect to change her evidence in the course of cross-examination to suit the Claimant's case as to the PC, in general, I found her evidence to be credible and consistent with the contemporaneous documentation.
7. The next witness was Mr Brown. His evidence was less satisfactory. There is some substance to the Defendants' criticism that his evidence was sometimes hesitant and unfocused. Particular criticism was made of the difficulty Mr Brown had in accepting relatively innocuous propositions such as the fact that the Claimants had agreed to join Neon as a team and that he had negotiated the PC element of their remuneration on their behalf. However, rather than being indicative of a witness who was being evasive, it seems to me that Mr Brown's faltering performance in the witness box was largely down to his natural cautiousness and being overly defensive. His evidence as to key issues was largely consistent with the contemporaneous documentation. For the reasons set out below, I do not consider that he sought to change his case as to the basis on which he believed the PC would be calculated. I do not, therefore, accede to the Defendants' invitation to reject Mr Brown's evidence in this regard.
8. Ms O'Reilly's evidence, by contrast with that of Mr Brown, was clear, cogent and largely unperturbed by cross examination. She was incorrect in one respect in relation to her understanding of the PTRs. However, she readily accepted that she was wrong, and her evidence was otherwise consistent with the contemporaneous documentation.
9. Other live witnesses for the Claimants were Mr Ross Louden, Deputy Chief Underwriting Officer of Axis Capital, the second lead insurer behind Neon under a consortium agreement for 2018 between Neon, Axis and several other insurers, and Mr Andrew Thornton, an underwriter in the Claimants' team at Neon. Mr Louden's evidence included a reference to a meeting he had had with Mr Brown on 19 March 2018, shortly after Mr Brown had tendered his resignation on notice. Mr Louden admitted that he had misled Neon in subsequent communications as to that meeting and his knowledge of Mr Brown's resignation. However, despite starting his evidence "on the back foot" for that reason, I found Mr Louden's evidence to be otherwise clear, credible and consistent with the other evidence before me. Mr Thornton's evidence was largely uncontroversial and no particular criticism is made of it by the Defendants. A further written witness statement from Mr Rowley Higgs, an insurance broker, was admitted unchallenged.
10. The Defendants called four witnesses. These were Ms Caroline Andrew, Neon's Global Head of Human Resources, Mr Ian Harman, Neon's Head of Finance, Mr Andrew Dougall, Deputy Active Underwriter and Head of Casualty Lines, and Mr Brown's line manager, and Mr Alistair McKay, Neon's General Counsel. None of these witnesses could give direct evidence as to the recruitment of the Claimants and the terms of their remuneration as they were not involved at that time. Each of them gave evidence in a straightforward manner, making concessions where appropriate, although some aspects of their evidence were not accepted. I shall refer to some of those concessions and those aspects where relevant below.

Factual Background

11. The Defendants, to whom I shall also refer collectively as "Neon", were previously known as Marketform and are part of the Great American Insurance Group, a multinational insurance group operating in a number of countries. In 2014, Neon was a loss-making syndicate with no significant presence in the M&A underwriting market. It sought to establish itself in the M&A market by recruiting a market-leading team. Neon's enquiries led it to identify the First Claimant, Mr Brown, who was then working for Pembroke Managing Agency Ltd, as a suitable candidate to lead such a team. Other key recruitment targets identified at that time were the Second and Third Claimants, Ms Bhoma and Ms O'Reilly, both of whom were then also working for Pembroke.
12. In about October 2014, Neon approached Mr Brown and asked him whether he would be interested in joining Neon to head up a new M&A division. Mr Brown was interested, and soon afterwards, in December 2014, he met with a number of senior executives from Neon and related companies. He entered into discussions with Mr Simon Lotter, the then Chief Underwriting Officer at Neon, and Mr Scott Gregory, the then Communications and Marketing Director at Neon.
13. During these early discussions, Mr Brown was told that Neon could offer a ring-fenced profit commission scheme enabling him to share in the profits of the M&A class of business. This was important to Mr Brown because Neon was, at that time, a loss-making syndicate whereas he believed the M&A class would be highly profitable. It was also very important to Mr Brown that there should be a PC scheme enabling him to share in profits rather than risk relying entirely on a discretionary bonus. It was agreed between Mr Brown, Mr Gregory and Mr Lotter that they would negotiate and agree a set of terms to form Mr Brown's contract and that these terms would be reflected in the employment contracts of any other persons joining the M&A division at Neon around that time.
14. On 30 January 2015 at 18:15, following one of these ongoing discussions, Mr Gregory sent Mr Brown an email with the subject matter, "Info as discussed" attaching Neon's existing PC rules and a proposed PC calculation. Mr Brown noted that the proposed formula featured a PC calculated at 6% of a notional profit figure. Mr Brown required a higher percentage figure closer to 10%. Mr Lotter explained to Mr Brown that the PC rules had been set up across Neon and could not be varied. However, Mr Lotter said that it would be possible to agree changes to the way in which the PC was calculated under those rules.
15. Mr Brown and Mr Lotter had several discussions about the calculation of PC. One particular feature discussed was the loss ratio that would be taken into account in calculating the profit for the purposes of the PC. The loss ratio for these purposes refers to the total claims expressed as a percentage of total premiums in the same period; clearly, the lower the loss ratio the greater the likely profit and therefore PC. Mr Brown's historic loss ratio was about 3% and, whilst on the Pembroke consortium, was in the region of 1%. It was expected that the M&A team at Neon would perform at similar levels resulting in a loss ratio in the region of 1 to 3%.
16. Mr Brown's unchallenged evidence as to his discussions with Mr Lotter as to the loss ratio was as follows:

"24 I found that the PC Rules were just not easy to understand, so I relied on Mr Lotter's explanation. I had several discussions with him over the calculation. Among other aspects of the calculation, we discussed in some detail the loss ratio that would be taken into account in calculating the class profit for the purposes of the PC; there was clear agreement between us that this calculation of the loss ratio would use actual losses including a best estimate of the most likely outcome of notified claims only and not a general provision for incurred but not reported losses. Mr Lotter told me that "Best estimate" was the best estimate of the likely outcome of notified claims. I verified with Simon that this loss ratio for the PC was not to include any element of IBNR (incurred but not reported losses). Had it done so, then there would have been a very different outcome for the calculation of the PC (and I would definitely not have accepted it)."

17. Another feature discussed was the figure for the Gross Ultimate Loss Ratio ("GULR"). GULR reflects an estimate of the final loss figure at the expiry of the policy period. The policy period is generally seven years and the actual losses incurred during the period would not be known until the end of that period. However, it is common to apply an estimate of the ultimate loss ratio for the purposes of calculations undertaken prior to the end of the period. The GULR figure is established by a team of actuaries, finance teams, claims teams and underwriters. It is, by its very nature, an estimate and is not directly related to the number of actual reported claims that may have been made by any given time. Typically, in the M&A class of business, the GULR at the inception of the transaction might be in the region of 60%, dropping to around 45% after a year and then to around 25% after two years. GULR continues to reduce year-on-year until the close of the book after the seventh year of the policy period when the GULR would be the actual loss incurred during the whole risk period.
18. In the spreadsheet attached to Mr Gregory's email, the figure for GULR was recorded as 20%. Mr Brown's unchallenged evidence was that in all of his discussions regarding the GULR, he was told by Mr Lotter that this was just a notional figure and that it would be replaced by the actual loss ratio for the purposes of calculating the PC.
19. Mr Gregory sent a further email on 30 January 2015 at 19:00 headed, "Answers to q's", in which Mr Gregory said as follows:

"Rob

I've spoken with Simon re your 3 questions.

To reconfirm the loss ratio figure of 20% in the calc is an example number. The calc will be based on actual at the close of say 2015. The PC payment would then be paid after the close of the year and therefore for 2015 early 2018."

20. Mr Brown was reassured by this response that the PC for the M&A division would indeed be calculated on the basis of actual figures as opposed to the notional GULR on the spreadsheet. I shall say more about the effect of these exchanges below.
21. There were further negotiations throughout the month of February 2015. It was agreed that the allocation of the PC pool would be agreed each year with Mr Brown's input. I should note here that the Claimants' pleaded case was that the discretion to allocate lay with Mr Brown alone. During cross-examination, Mr Brown accepted that that was incorrect and that the position was in fact as set out in his statement, namely that the allocation would be determined by Neon with Mr Brown's input. The significance or otherwise of this error is also considered below. Other matters agreed were that 9.4% of the M&A profit for each year of account would go into the PC pool. Various iterations of the PC calculation were exchanged at this time, all of which referred to the notional figure of 20% for GULR. Mr Brown was not concerned by these references given the agreement he believed had been reached as to the losses that would be used to calculate PC.
22. It was further agreed that 70% of PC would be paid after one year following the end of the relevant underwriting year, with the remaining 30% not being due until the following year. If there was any reconciliation required, then it would be carried out at this stage when the remaining 30% was to be paid.
23. Mr Lotter was also engaged in discussions with Ms Bhoma. In an email dated 5 March 2015, Mr Gregory responded to certain queries that had been raised by Ms Bhoma as to the terms of the proposed PC. In response to a request for confirmation of the employee profit share percentage, Mr Gregory said as follows:

"The Marketform PC scheme works on the basis of a fixed percentage of the line of business result and also a fixed percentage of the overall syndicate… result. The PC calculation is on actual numbers. We recognise that we need to give you more certainty than an interim discretionary arrangement for the 2016 and 2017 years. I've tonight sent a proposal to our Remuneration Committee and anticipate getting back to you regarding this tomorrow."

Ms Bhoma regarded this response from Mr Gregory as significant. She wanted to be rewarded for actual profitability such that only actual losses were used in the calculation as she was confident, given the Claimants' track record at Pembroke, that such losses would be low.

24. It is clear from internal communications at that time that Neon was particularly keen to recruit the Claimants. By an email of the same date, Mr Lotter wrote to other managers at Neon about the potential recruitment of the Claimants in the following terms:

"The bottom line is if we don't do this or find another solution very quickly, they will not join us as they don't want to walk away from two years of meaningful bonuses. I don't believe they are talking to anyone else but I'm sure others would match this or more."

25. Ms O'Reilly was working for Pembroke in Singapore at this time. She was very keen to stay there as she had built a successful book of business in that region and wanted to grow that book further. When she was contacted by Neon she expressed her reluctance to leave Singapore and her reservations concerning Neon's poor loss record. She was concerned to ensure that the bonus for the M&A team if she were to join was separately ring-fenced. Ms O'Reilly was happy to let Mr Brown and Ms Bhoma take the lead in finalising the terms of the PC scheme with Mr Lotter and Mr Gregory, and she trusted them to negotiate the best PC deal on her behalf. By March 2015, Mr Brown was in a position to inform Ms O'Reilly that an agreement had been reached that the M&A PC would be ring-fenced from the wider performance of Neon so that the team would receive a share of the net profit generated for a given year of account. From her conversations with Mr Brown, Ms O'Reilly understood that the PC calculation would be based on the actual results as it was her view that this was the only way one could directly and reliably reward diligent underwriting and low losses. At no point did she think it would be based on estimates which she considered could be arbitrary. Ms O'Reilly accepted that figures for GULR, if prepared by actuaries as described above, would not be arbitrary.
26. On 6 March 2015, Ms Dawn Kempson of Neon sent emails to each of the Claimants attaching an offer letter of the same date. That offer included the text of Mr Lotter's email of the same date in which the terms of a guaranteed profit commission amount for the 2015 account were set out. Between 6 and 11 March 2015, each of the Claimants accepted offers of employment and agreed to PTRs. In doing so, Mr Brown turned down approaches from more established insurers and higher counter-offers from Pembroke to join Neon. Mr Brown also had various family commitments which meant that it was important for him to be able to earn meaningful PC bonuses. The First, Second and Third Claimants commenced working for Neon in December, September and June 2015 respectively.

The Contracts of Employment

27. Each of the Claimants' Contracts of Employment contained the following express terms, amongst others:

i) that each Claimant's "Basic Salary will be reviewed annually, with effect from 1^st January in each year commencing in 2016."

ii) that Neon "may, without obligation, pay you a discretionary bonus in such amount, calculated on such basis, and payable at such time or times as [Neon] shall, in its absolute discretion think fit. You acknowledge that you have no contractual right to receive a discretionary bonus until it is declared in writing in respect of the financial year to which it relates and that you will not acquire such a right on the basis that during the Employment you have already received one or more bonus payments."

iii) that the Claimants would each be required to enter "Restrictive Covenant Agreements" which, together with those sections of the First Defendant's "Employee Handbook" marked as having contractual force, would form part of the terms of their Contracts of Employment; and

iv) that each of the Claimants would be entitled to pension contributions made by Neon based on their base salary. For Mr Brown this was 12.5% of his base salary, for Ms Bhoma this was 10% of her base salary, and for Ms O'Reilly this was 5% of her base salary (subsequently increased to 7.5%).

28. As to bonuses, the contracts provided:

"7.3 In addition, Marketform may, without obligation, pay you a discretionary bonus in such amount, calculated on such basis, and payable at such time or times as Marketform shall, in its absolute discretion think fit. You acknowledge that you have no contractual right to receive a discretionary bonus until it is declared in writing in respect of the financial year to which it relates and that you will not acquire such a right on the basis that during the employment you have already received one or more bonus payments. Marketform reserves the right at its discretion to vary or withdraw the terms of this discretionary scheme at any time

7.4 You shall not be entitled to receive a discretionary bonus if on the date that the bonus is due to be paid you are no longer employed (for whatever reason and howsoever caused and whether the termination of the Employment was in breach of contract or otherwise) by Marketform or any Group Company or you are under notice of termination of employment (whether such notice is given by you or Marketform) or on Garden Leave, or subject to disciplinary investigation, or suspended pursuant to the terms of this agreement."

29. The PTRs were largely identical as between the Claimants, save that there were differences as to the duration of the restrictions post-termination, with Mr Brown being subject to longer periods of restriction. Clause 5 of the PTRs provides that Neon:

"…reserve[s] the right to review the restrictions contained in this Agreement from time to time and in particular in conjunction with any pay review or bonus award and make it a condition of acceptance of any such pay review or bonus award that such restrictions are re-affirmed or new or revised restrictions are entered into.

30. Whether or not that clause entitled Neon to introduce the disputed changes to the Contracts of Employment in this case is considered below.

Time at Neon

31. Mr Lotter was dismissed by Neon soon after Ms Bhoma commenced employment. Around that time, a new CEO, Mr Martin Reith, was appointed. Mr Reith established a task force to review the business which was continuing to lose money.
32. At a meeting with Mr Ian Martin, Managing Director, and a member of the task force, the M&A team were told that the wording of their contracts was considered to be ambiguous and that Mr Martin would prefer another letter to be sent to clarify those terms. Mr Martin reassured the team that any changes to the PC scheme would not be to their detriment.
33. On 8 February 2016, Ms Bhoma and Ms O'Reilly received letters headed, "Contract of Employment Amendment". The letter was said to contain "explanations and amendments" in relation to the recipient's entitlement to the PC. In respect of the 2016 year of account, the letter provided:

"you will be entitled to participate in the M&A bonus pool. An estimate of the ultimate financial performance of the M&A class for the 2016 YOA will be made in the final quarter of 2017, this estimate will include an initial forecast of the M&A bonus pool to which the underwriting team are entitled. I have attached a schedule which illustrates the format as to how this bonus pool will be calculated"

34. The attached schedule was in a similar format to schedules that were sent when contracts of employment were first agreed; thus, they included a figure of 20% for GULR. Mr Brown had approved the schedules before these were sent to Ms Bhoma and Ms O'Reilly. It was suggested that he had also seen and approved the letters to which the spreadsheets were attached. Mr Brown could not recall having seen the letters. There is an email addressed to Mr Brown containing the spreadsheets which Mr Brown recalls having seen and approved. There is, however, no email to Mr Brown attaching the letters themselves. There is no other evidence to suggest that Mr Brown had seen and approved the letters. It was suggested that Mr Brown's evidence in this regard was confusing given that the pleaded case was that he had expressly denied knowing or approving of the changes to Ms Bhoma's and Ms O'Reilly's contracts. It might be said that, having been sent the schedules which were to be attached to the letters, Mr Brown might have been expected to ask to see the letters themselves. However, given the absence of any clear email trail that any draft of a letter was sent to Mr Brown beforehand, I accept his evidence that he cannot now recall whether he did see the letters or not. I reject the suggestion that he is seeking to mislead the Court by concealing that he had seen and approved the letters.
35. The letter went on to state that:

"Your personal profit share entitlement (PSP) will be expressed as a percentage of the bonus pool. The exact percentage you will receive will be at the discretion of the Remuneration Committee of the Marketform Managing Agency. They will base their judgement upon recommendations made by both the Head of the Class (currently Robert Brown) and the Group CEO (currently Martin Reith). In December 2017 a payment of 70% of your PSP based upon this early estimate of the class profitability will be made.

Once the 2016 YOA is closed, the exact profitability will become known and the 2016 Bony Pool will be calculated. Your PSP percentage share will be the same as applied to the initial payment and if further payments are due they will be made in June 2019 or soon after the closure of the 2016 YOA as is practicable.

As I stated at our meeting we are reviewing all bonus schemes within Marketform. If we were to alter or introduce new schemes for the 2017 YOA onwards these would be at least as beneficial as prior schemes which have been considered for. If we maintain the current scheme future payments to you from the 2017 YOA onwards would be "normalised" (i.e. any payment due paid fully on the closure of any given YOA).

For avoidance of doubt, the terms of the PC bonus payments are as follows:

You will need to be an employee of Marketform to receive the PC bonus payments.

You will not be entitled to receive a PC bonus payment if you no longer work for Marketform or for any of the reasons outlined in Clause 7.4 of your Contract of Employment."

36. Both Ms Bhoma and Ms O'Reilly accepted the amendments by signing and returning their letters. Mr Brown was not sent any such letter.
37. Neon continued to make losses overall following the Claimants' recruitment. The M&A team, however, was profitable. This was notwithstanding the fact that it failed to hit ambitious revenue targets for each of the years 2015 to 2018. Those revenue targets were reduced year-on-year, and in 2018 the revenue target was £8.25m, of which £3.547 million had been achieved by the time of Mr Brown's and Ms Bhoma's departure on 1 May 2018 (which appeared to be on track given that the year-end was December). Neon has sought to highlight these failures to meet targets as being indicative of unrealistic promises made by Mr Brown to deliver business. However, it would appear that during their employment, the Claimants were not criticised for poor performance; indeed, all of them were regularly in receipt of positive appraisals from their line managers. By way of example, Mr Brown's performance review for 2017, completed by Mr Dougall, states, amongst other things, that:

"Loss notification looks excellent at this stage. You set high standards for risk acceptance and have stuck to your guns as evidenced by declinature rates and quote to bind ratios.… You have a reputation and a brand that's now well-established and will serve you and Neon well will stop… I recognise all the excellent work undertaken."

38. Furthermore, contrary to the tenor of his witness statement on this issue, Mr Dougall confirmed in cross-examination that the Claimants "were performing well against that reduced target." I find that there was in fact no issue with the performance of any of the Claimants and that the M&A team was performing well, albeit against a target reduced from previously unrealistic levels.
39. The PC for 2016 was due to be paid in December 2017. However, at a 'Town Hall' meeting in November 2017, at which information about the state of Neon's business was provided to employees in a slide presentation, there was a slide entitled "Housekeeping" by which Neon sought to adjust the 2018 appraisal timetable. The adjusted timetable would mean that communications as to any salary increases and bonuses would be sent in March 2018 and paid in the March payroll, and any salary increases backdated to 1 January 2018. Attendance at that meeting was not compulsory. Mr Brown and Ms O'Reilly were in attendance, but Ms Bhoma was not. They did all receive and read the slides at a later stage. The Defendants rely upon the slides as amounting to written notification of a change to the Claimants' terms and conditions in accordance with clause 7.1 of the PC rules, which provides that "Amendments may be made from time to time to the scheme in writing and such amendments are entirely at the absolute discretion of MGL". I do not accept that the information contained in the slides suffices to amount to written notification of a contractual amendment within the meaning of clause 7.1. The slides were presented at a non-compulsory Town Hall meeting and there was no apparent mechanism to ensure that employees who were not in attendance had expressly seen any contractual changes purportedly communicated at the meeting. Moreover, there is nothing in the relevant slide itself to indicate that the change to the payment timetable amounted to a permanent contractual change or anything more than a temporary adjustment to the payment timetable for the 2018 year of account. In that context, Ms Bhoma's evidence that it did not occur to her that the terms of her contract might be varied by a PowerPoint slide of a meeting she did not attend, is wholly unsurprising.

Proposed New Contracts

40. Employees were given notification of the rebranding of Marketform to Neon in June 2016. At the same time, they were informed that new employment contracts along with an updated staff handbook would be issued in due course. However, it was not until early 2018 that Neon began the process of issuing the new contracts. By an email dated 27 February 2018, HR informed employees that new contracts of employment would be issued because the current ones "do not represent our new culture and outlook as Neon". Further information was provided to employees about these changes in the form of questions and answers. In answer to a question, "Have there been any changes to my existing terms?", the answer was:

"Yes, although we hope that you agree that these changes are beneficial to you. The main changes would like to draw your attention to are as follows:

Pension: we have removed the age-related pension contribution scheme and replaced it with a single rate scheme…"

41. Other changes highlighted were in relation to holiday carry over, special leave, and maternity leave.
42. In answer to a question, "Have you introduced any new terms or policies?", the answer was:

"Yes. In particular, we would like to highlight:

: all employees will be subject to Post Termination Restrictions in respect of non-solicitation of Restricted Employees and in respect of team moves."

43. The email concluded by stating that the employee handbook had been attached for reference "along with the standard Employment Agreement". Employees were finally informed that they would receive, "a copy of your own updated Employment Agreement and a Handbook acknowledgement form, for signature, when you have your year-end compensation discussion with your manager..."
44. Given that this email notification merely sought to highlight certain changes, it was reasonable for the Claimants to await receipt of their actual amended contracts to consider the changes affecting them.
45. On 7 March 2018, Mr Brown was called into a meeting with Mr Martin. Mr Brown was told that all employees would shortly receive letters from HR containing the new employment contracts and handbooks. Mr Martin said that the bonus pool would be approximately 70% of the previous year's amount. He went on to explain that the pay rises and bonuses that had been awarded would only be given out if the new employment contracts were accepted and signed. Mr Martin also informed Mr Brown that the PC pool for the Claimants had been calculated at £150,000 and the company was being generous by paying out considerably more. Mr Brown explained to Mr Martin that the PC bonus pool amount sounded incorrect and that he had expected it to be closer to £500,000 because there had been no losses in 2016, that being the relevant year for the PC payment in question. Mr Martin said that an assumed loss ratio figure had been used for the calculation. Mr Brown explained that the agreement at the time of joining Neon was that a figure based on actual losses should be used and that the PC was the reason that the team joined Marketform in the first place. However, Mr Martin indicated that he was not prepared to discuss the PC bonus calculation any further stating that "it is what it is". When Mr Brown indicated that his team would not be happy with the PC scheme that they had agreed being replaced with a discretionary bonus and being forced to accept new contracts, Mr Martin was not interested and said, "it was up to people whether they choose to work here or not". These notes of what Mr Martin said emerge from a note prepared by Mr Brown immediately after the meeting. It has not been suggested to Mr Brown that the note is inaccurate, and I accept it as a correct (though clearly not verbatim) record of their discussion. Mr Brown continued to press upon Mr Martin that the proposed changes would mean that the M&A team would lose people, but Mr Martin was not prepared to change his view.
46. Mr Brown left that meeting feeling very unhappy about the changes proposed and the way in which they were being put forward which, as he saw, was a "like it or lump it" approach without discussion, debate or negotiation. In my judgment, having considered the note of Mr Martin's comments at that meeting, which I accept as being accurate, Mr Brown's description of Mr Martin as taking a "like it or lump it" approach was apt.
47. On 8 March 2018, Mr Brown informed Ms O'Reilly that Neon were proposing to replace the PC entitlement with a discretionary bonus. Ms O'Reilly was shocked to hear this as the PC was the main incentive for joining. She met with Mr Martin later that day. Mr Martin told Ms O'Reilly that the M&A PC was being removed and being replaced with a discretionary bonus scheme. Ms O'Reilly said that she was very disappointed with this and queried how the discretionary bonus would work. Mr Martin informed her that part of the total Neon bonus pool would be based on the financial performance of Neon as a whole. Ms O'Reilly considered that this would clearly be detrimental to her, particularly as Neon as a whole was still making a loss. She pointed out that in theory her bonus could be zero under such a scheme and Mr Martin did not disagree. When she tried to explain how disappointed she was, Mr Martin did not engage with her and presented the new terms as a fait accompli. In an email sent to Mr Martin the following day, Ms O'Reilly asked Mr Martin to "provide me with details of the profit commission calculation for the 2016 year of account so as I can make an informed decision as to what is in my best interests going forwards (sic)". No such information was provided.
48. There were several communications between the Claimants on 8 and 9 March 2018 during which they expressed their disappointment at the changes which they understood were going to be introduced. Ms Bhoma wrote to Mr Brown at 12:41 on 9 March 2018, saying as follows:

"I've had a very upset Astrid on the phone as I understand there is to be a fundamental change to our contractual bonus pool calculation. I have no detail on this and of course still do not know my bonus for the 2016 year of account. Astrid is very unsettled by this as am I. Astrid believes we are to receive a letter on the topic but I have not yet received one. As you know, that bonus structure was absolutely critical to my decision to join the team and is also the basis on which I have been able to recruit Andrew and Suhail.

Can you please urge management to let us all know what they propose as this is an issue which affects every single person in the M & A team? If letters are going out, I assume they are to every person in the team. So far, it looks as though only Astrid and I have been invited to have a discussion with Ian Martin…"

49. At 12:52 on 9 March 2018, Mr Brown received an email from Ms Andrew stating that contracts needed to be signed by the following Tuesday.
50. Letters (which were dated 7 March) enclosing the new Employment Agreement, Employment Handbook and acknowledgement form were distributed to the M&A team later on 9 March 2018. Ms Bhoma was working from home that day and received hers the following Monday.
51. The letter addressed to Mr Brown stated as follows:

On behalf of the board, I would like to thank you for your contribution to the company during 2017.

Discretionary Bonus

Once again, American Financial Group have, very generously, agreed to fund a bonus pool in order to recognise individual performance, effort and achievement during what has been a period of continuing change and growth for the Company. The bonus also reflects a desire to incentivise you to stay and help us to achieve our ambitions for the Company going forward. I am therefore pleased to confirm that, subject to the requirements outlined below and the discretionary bonus rules set out in paragraphs 5.1 and 5.2 of the revised Employee Handbook, you have been awarded a discretionary bonus for the calendar year 2017 of £75,000 (the "2017 Bonus").

If you give notice to terminate your employment with the company on or before 23 March 2019, 100% of the net amount of the 2017 Bonus received by you will become immediately due and repayable to the company.

Basic Salary

Effective 1 January 2018, and subject to the requirements outlined below, your annual Basic Salary (the "Basic Salary") will increase to £257,500. Your March 2018 payslip will record not only this new Basic Salary payment but also top up payments for the past two months to reflect that the increase was effective from 1 January 2018.

Changes to terms and conditions

As you are already aware, following our E-mail to all staff of 27 February 2018, we are using this period of change and growth for the Company as an opportunity to refresh our Employment Agreements and Employee Handbook so that they better reflect the needs of the business and are brought up to date to reflect recent regulatory changes. Enclosed with this letter is your revised Employment Agreement, our new Employee Handbook and a Handbook acknowledgement form. Together, your Employment Agreement and Part 2 of the Employee Handbook form your contractual terms and conditions with the Company. Please read and review your terms and conditions carefully. This year's increase to your Basic Salary and the 2017 Bonus payment, outlined above, are conditional on you entering into these new terms. For the avoidance of doubt, you explicitly agree that the rules of any Profit Commission Scheme of which you were once a member, no longer apply and instead subject to the Company's discretionary annual bonus scheme. If you do not agree to the new terms then your existing terms will remain in place and you will not be eligible to receive the increase to your Basic Salary or your 2017 Bonus…

If you have any questions about the content of this letter, please do not hesitate to contact a member of the HR team."

52. The attached schedule setting out the PC calculation indicated that a figure of 48% had been used for GULR. Upon reviewing the contracts, the Claimants considered that, as well as the removal of the PC entitlement which they believed they had, the following paragraphs of the new contract of employment were detrimental to them:

i) By paragraph 5.5, pension contributions were to be capped as a percentage of notional base salaries of £80,000 for Mr Brown and £100,000 for Ms Bhoma and Ms O'Reilly, which were lower than their actual respective base salaries;

ii) By paragraph 6.2, Ms Bhoma's holiday entitlement of 25 working days plus statutory holidays a year was reduced to 20 working days plus 6.5;

iii) Extensive new post-restriction terminations were introduced; and

iv) Discretionary bonuses were subject to a clawback if notice was given within certain stipulated periods.

53. The Defendants accept that extensive new PTRs were introduced. Ms Andrew accepted in cross examination that these would be detrimental to the Claimants and favourable to Neon. However, Neon disputes that the other changes as to pension contributions and holiday pay were detrimental. As to the bonus clawback, it is said that this should not be considered as it is not part of the pleaded claim. I shall return below to these proposed changes, and in particular to the PC entitlement.

Response to proposed changes

54. Mr Brown considered that he had little choice but to resign from Neon even though he had nothing to go to because the proposed terms were materially less attractive than those which he had. He considered that he had been treated extremely badly and did not see how he could remain at Neon. He sought legal advice. In the early hours of 12 March 2018, Mr Brown sent an email to Mr Martin setting out his PC calculation using actual losses based on notified claims to date and not assumed future losses. As there were no claims, he used a figure of 0%, in that email he said amongst other things:

"Ian,

I know you that you didn't want to go through the PC calculation when we met briefly last week but it is incorrect for 2016 YOA. The calculation includes £3,940,960 of losses (which is an assumption) but the actual losses are zero. Taking the actual losses of zero, creates a total profit for the M&A division of £5,395,523; therefore the 9.7% PC of £523,365 (not the hundred and £141,190 in your spreadsheet). The PC is calculated from actual losses incurred, not assumed future losses, and that is why the calculation for 2016 YOA should have been done and paid at the end of December 2017 (not sooner) and why there is a deficit clause built into the rules to provide for later deterioration (if there is any) of results after the PC is calculated and paid.

I received my letter and new contract on Friday afternoon. It appears from the letter that I will only receive my bonus and pay rise if I accept and my new contract by Tuesday. The 2016 YOA bonuses should have been calculated and paid in December 2017. Now I am being advised that I (and others in the team) will not receive this payment to which we were entitled and instead, receive a smalerl payment with more onerous restrictions.

The reason that I and others joined the company was because of the PC and now I am being told that I have to forego this and accept less attractive benefits. The letter which I received on Friday states that, if I don't accept the new contract I will not receive a pay rise. Is it correct that I will not receive the current pay rise (any presumably any future pay rises) unless I sign the new contract.

Please could you clarify what the future bonuses will look like because it appears to me that I would be waving predictable PC bonuses, ring fenced from the wider Neon result, for completely discretionary bonuses of an unknown amount?

Up until this point, I had believed that I was a valued part of Neon and have been working very hard to work towards our ambitious goals. Now I feel that the imposition of these new employment terms and the way in which it is being done is unreasonable. It comes across quite clearly that, if I do not give up my 2016 PC bonus and beyond, for much more modest bonuses and small pay rise, I will not receive future pay rises and frankly wouldn't have a future at Neon. This puts me in an awful position personally as I have dependents and financial commitments. As I mentioned when we spoke last week I'm concerned that the new contracts, removing the PC bonus, may lead to valuable team members leaving at a point where we have a good reputation and strong momentum into 2018…

55. Mr Martin responded by stating that Mr Brown's analysis was one-sided, and he asked for any information that countered his understanding of the position. He stated that no one would get a 2017 discretionary bonus or pay rise until they signed and that that was a condition for all employees including Mr Martin himself. Mr Martin ended the email by saying, "Understand how you feel. However, I believe Neon culture is what will define us – the fact is we all need to have a shared vision, motivation and rewards."
56. Mr Martin forwarded his exchange with Mr Brown to Mr Reith, the group chief executive, saying "FYI – I am hardening my line the below has made me cross.… You either believe in being part of something or not." Mr Reith responded by saying, "I agree… I wonder if we are coming to the end of the line here, seriously!" Another member of the executive team, Mr Matthew Washington, commented on Mr Brown's email as follows:

"This is a terrifying level of self-centred, short-term self-interest akin to the sorts of behaviour that underpinned the MBS/CDO or market in 2007. One book with a circa 7-year tale, why should a PC be based on incurred after 2 years? It's simply insane.

Payroll cut off is today, so anyone who has failed to return the contract does not receive their offered rise/bonus. We have to hold the line on this hard, or else no-one will believe any deadline we set, ever again.

I can only say that I'm disappointed at Rob; here is a man who has brought us 3 x employee issues and failed to meet his business plan expectations for the two underwriting years for which he has been at Neon. Coupled now with a level of toxic short-termism, I would say that does not fit with any culture that I would ever want to be a part of.

Very sad."

57. Upon receipt of her contract, Ms Bhoma expressed her immediate concerns to Mr Brown by email on 12 March saying:

"(1) the bonus number cannot be right unless I have been given a disproportionately low share which given my exceptional performance for 2016, I believe cannot be the case. I know Ian Martin refused to show you the bonus pool calculation last week but can this be discussed see if anything has moved on? (2) given I have only just received it, I don't see how I can properly read and consider the proposed contract by tomorrow. I need to be able to understand the implications and need to read line by line any proposed changes of term for me. I feel as though I have a gun to my head!"

58. Later that day, Mr Martin met with Mr Dougall. By all accounts this was a difficult meeting. It is fair to say that Mr Brown did not help his position by engaging in behaviour which understandably appeared to Mr Dougall to be somewhat odd. This involved repeatedly looking at Mr Dougall with "blank, silent extended looks" and staring at Mr Dougall "alarmingly". Mr Dougall, based on his understanding of the PC agreement between Neon and the Claimants, had gone into that meeting with the view that Mr Brown had mis-communicated bonus expectations to the rest of the team. He sought to explain to Mr Brown his understanding of GULR and sought to persuade him to "buy into Neon". Mr Dougall was aware that without Mr Brown's cooperation he would not be able to convince the rest of the M&A team. Mr Dougall was sympathetic to the fact that the letters of 7 March 2018 setting out salary increases and discretionary bonuses, subject to agreeing new terms, had been "handed out bluntly by Mr Martin". However, he considered that timings were very tight for Neon and it was necessary for people to make their mind up on the new terms within a very short timeframe. Mr Brown was told that he had a deadline of 13 March 2018 to make up his mind and if he was not on board by then, "We will call it a day", which Mr Brown, not unreasonably, understood to mean that his employment would just come to an end.
59. Mr Brown updated Ms Bhoma as to his communications with Mr Dougall and Mr Martin. She felt she was being pressured into giving up her PC and that Neon's PC calculation was based on a wholly unfavourable and unrealistic loss ratio. She felt undervalued and betrayed.
60. Ms O'Reilly had a meeting with Mr Dougall on 13 March 2018. Ms O'Reilly prepared a detailed note of that meeting immediately afterwards. It was not suggested to her that the meeting note was inaccurate, and I accept it as a correct record of the key points made by Mr Dougall. Mr Dougall acknowledged that Mr O'Reilly was not happy and told her to "get it all off your chest now". Ms O'Reilly said she was unhappy with the changes to the PC and the discretionary bonus. Mr Dougall said that the 48% figure for GULR was correct and that "no insurance company would base PC on actuals one year after on long tail business as this means they could be stung with a big claim later on". Mr Dougall further stated that the 8 February 2016 letter was clear that the PC calculation is an estimate based on ultimate financial performance and that the Claimants "had clearly been miscommunication (sic) to by Simon Lotter". Mr Dougall went on to describe Mr Lotter as a "fuckwhit" and said "no one can promise a PC on actuals after the first year. No regulator or Lloyds could approve that". The meeting concluded by Mr Dougall saying that Ms O'Reilly had two choices, "1. Accept new contract and trust that Neon would reward for good performance and low loss ratios in the future; and 2) get into a contractual dispute but doesn't think I have a good argument."
61. Ms Bhoma also had a meeting with Mr Dougall. This was on 14 March 2018. Once again, a note of this meeting was prepared by Ms Bhoma very shortly afterwards. The note was not challenged and I accept it as being an accurate record. She was also told to get everything off her chest. As to the PC calculations Mr Dougall rejected any suggestion that the PC should be calculated on the basis of actual losses. He further stated that, "Simon Lotter is a "fuckwit" and the business lost £50m last year so can't pay it". (Emphasis added) The "it" there was clearly a reference, in the context of the note, to PC calculated on an actual loss basis.
62. The Claimants sought advice from the same solicitors. They decided to resign and they all tendered their resignations on the same day, 16 March 2018. Their resignations letters were not identical but were in similar terms. Broadly speaking, each of them contended that their position had become untenable due to the proposed detrimental changes to their Contracts of Employment, and the removal of the PC, which were being forced upon them. Although the resignation notices referred to fundamental and repudiatory breaches of contract entitling them to resign without notice, each of the Claimants resigned on notice. That would mean, in Mr Brown's case that his employment would come to an end 12 months later on 15 March 2019. The notice periods for Ms Bhoma and Ms O'Reilly were shorter and due to expire on 15 September 2018. None of them had any other jobs to go to.
63. The timing of these resignations was seen by Neon as suspicious and it assumed that this was a coordinated act that had been in the planning for some time. Mr Dougall, in an executive summary of the situation sent to fellow managers on 17 March 2018, said, "it's reasonable to assume this is coordinated with some external guidance and has been initiated and planned in advance of last week for them to move so quickly."

Events after resignation

64. At 14:43 on 19 March 2018, Mr Reith sent an email announcing the resignations internally. He said, "Neon remains committed to the M&A class and the remaining team. We wish to continue to build out this class and Andrew, Darren and I will support the team through this period." The reference to Andrew, Darren and Mr Reith supporting the remaining team is of note because it suggests that the Claimants would no longer take the lead in supporting the team.
65. On the same day Mr Brown and Ms Bhoma attended a meeting with Ms Andrew and Mr Martin. Mr Brown was instructed not to discuss his resignation with anyone as Neon wanted to "control the messaging" and he was reminded of his ongoing obligations to his employer.
66. Mr Brown had a pre-arranged dinner meeting with Mr Louden for Monday 19 March 2018. Mr Louden and Mr Brown had known each other for a number of years and, as Mr Louden was the Deputy Chief Underwriting Officer of Axis, the second lead insurer behind Neon in the consortium, he and Mr Brown would meet regularly in a business capacity. Following his resignation on 16 March 2018, Mr Brown had tried to cancel the dinner through the Outlook system. When Mr Louden received notification of the cancellation he contacted Mr Brown to ask what was going on. Mr Brown called Mr Louden and asked if Neon had been in touch. He also told Mr Louden that things were "tricky at the moment" and asked if the dinner could be rearranged. Mr Louden immediately assumed from Mr Brown's tone and the awkwardness of the conversation that Mr Brown had resigned. This came as something of a surprise to Mr Louden as he thought the team at Neon seemed happy and the consortium itself had been performing well. As Mr Louden was concerned about the future of the consortium he felt he needed to find out more about the situation. His employer had committed substantial capital to the project and he was concerned that there was a risk that things might not be going to plan. Mr Louden insisted that the dinner should go ahead as originally planned.
67. At the dinner, Mr Louden asked Mr Brown directly what was going on and whether he had resigned. Mr Brown confirmed that he had done so and asked once again whether Neon had been in touch. Mr Louden confirmed that Neon had not been in touch. Mr Louden expressed disappointment that no one from Neon had told him about the resignation. After the dinner, Mr Louden considered that he needed to find out directly from Neon what its position was in relation to the resignations. By 21 March 2018, frustrated that he had still not heard anything from Neon, he contacted Mr Dougall and said that there was "Lots of noise in the market concerning Rob and team and I haven't been able to catch up with him. I thought I would come straight to you in case there is any truth in it and discuss the implications." Mr Louden acknowledges that it was wrong of him to have implied to Mr Dougall that he did not already know about Mr Brown's resignation. Mr Dougall did call Mr Louden back and explained the situation. At 15:09 that day a bulletin from "The Insurance Insider" publication announced the departures of the Claimants publicly.
68. One of the effects of the resignation being announced was that new business was likely to dry up as no broker could be expected to place their clients' risks in a market where the lead underwriter and the team may not be there to execute the deal. As stated by Mr Higgs, whose evidence was unchallenged, "In short, business drops off immediately after the resignation of the key figure within a team is announced." There were further resignations from the M&A team in subsequent weeks such that by about 23 April 2018, only one of the team had not given notice of resignation: Ms Vanessa Young resigned for unrelated reasons, Ms Nash had already resigned prior to the Claimants' resignations, and Mr Thornton resigned on 23 April 2018. The inevitable consequence of the Claimants' resignations, I find, was that the workflow quickly dried up. Mr Dougall referred to the work as having "fallen off a cliff as you would expect until you re-engage" at a meeting with consortium members on 17 April 2018.
69. On 21 March 2018, Mr Dougall told Ms O'Reilly to clear her desk, work from home and report to Ms Young, who was a less experienced underwriter than Ms O'Reilly.
70. The Claimants' Solicitors sent a letter before action on 26 March 2018. Various breaches of contract were alleged including that their declared pay rises and discretionary bonuses had not been paid, and that the PC had been incorrectly calculated. Ms Andrew indicated that she would respond to the letter before action by 16 April 2018. By this time, however Ms Andrew had undertaken a search of Mr Brown's and Ms Bhoma's emails. Neon's suspicions had been raised following the joint resignation and it was thought that a search of their emails might reveal evidence of wrongdoing. The search apparently resulted in the identification of two emails containing confidential information which had been sent by Mr Brown and Ms Bhoma to their private email addresses. The sending of these emails led Neon to write to the Claimants solicitors on 20 April 2018 in the following terms:

"We are concerned to learn that Rob Brown and Dawn Bhoma have both breached their contractual obligations to Neon Management Services Ltd ("Neon"), and breached their common-law duties of confidentiality. We refer to their respective contracts of employment which set out their obligations and which Neon is entitled to enforce… It has come to our attention that Rob and Dawn have both forwarded confidential information from their Neon email address to their private email addresses. There is no legitimate business reason for them to forward any such confidential information. We are undertaking further investigations into your clients' conduct and will provide an update next week…"

71. Various undertakings were sought including for the delivery up of property and confidential information and a written schedule of all clients or potential clients to whom they had made approaches or with whom they have had dealings. The letter concluded by saying, "However, as we are a regulated business, it was our duty to inform the regulator of this breach, which we have duly done. In the meantime, all our rights are expressly reserved."
72. The regulator in this case was Lloyd's of London. The consequences of such a report for the Claimants' professional standing are potentially serious. Neon had not provided the Claimants with any opportunity to answer any allegations of misconduct prior to this report being made to Lloyds.
73. The Claimants' solicitors responded by email dated 23 April 2018. They stated that the allegations were "baseless" and that they lacked particularity. It was stated that in so far as personal email addresses had been used this was in order exclusively to further Neon's business interests and that the information had not been shared with any Third Parties. It was asserted that it was accepted practice at Neon for staff to use their personal IT equipment.
74. On 24 April 2018 Ms Andrew denied that the Claimants had valid business reasons for forwarding emails and attachments to their private email addresses. However, she did say:

"We accept that employees do, on occasion and in limited situations, use their private email accounts. However this is the exception rather than the rule. Your clients are attempting to justify their behaviour by hiding behind the notion that employees need to rely on their personal email accounts to perform their role. This is simply untrue."

75. Meanwhile, on 17 April 2018, Mr Dougall held a meeting with Mr Louden in order to reassure him that even though the M&A work was slowing down significantly following the staff departures, it was still important to follow through on deals that were in the pipeline. In short, the aim was to persuade Mr Louden that it was "business as usual". Mr Dougall sought to represent at the meeting that the remaining members of the team had been told to continue to refer risks to Mr Brown and Ms Bhoma notwithstanding their resignations. This was not in fact correct. Neon had made it clear to Mr Thornton and others that risks were to be referred to Mr Boorman and Mr Dougall. Mr Thornton gave unchallenged evidence to that effect. Furthermore, as is apparent from a note of the meeting on 17 April 2018, when Mr Dougall sought to suggest that Mr Brown and Ms Bhoma retained authority for new risks, Mr Thornton said as follows:

"AT: and just to go back to what Andrew [Dougall] said about the authority thing it's because we were told at the start we were told to go to you [CB – Mr Boorman] and Andrew [Dougall] but it's now, is it going to be Rob and Dawn as well now?"

76. Mr Thornton's apparent uncertainty as to the managers he was reporting to is understandable given the inconsistency between what Mr Dougall had previously said to him and what he was now saying to Mr Louden at this meeting. In fact, this inconsistency on the part of Mr Dougall was one of the reasons given by Mr Thornton for his resignation a few days later. I find therefore that the remaining team members had been instructed to direct work to Mr Boorman and Mr Dougall. Furthermore, I find that this diversion of work in conjunction with the downturn in new work was the cause of the Claimants' relative inactivity following their resignations. The work was simply no longer there to be done and Mr Brown and Ms Bhoma had not sought to obstruct any restructuring that Neon tried to implement in order to keep the business afloat.
77. Mr Brown said very little at the meeting on 17 April 2018 as is apparent from the note of the meeting. It was suggested to Mr Louden he and Mr Brown had agreed that Brown would say very little and they would "go through the motions" at the meeting (as Mr Louden had stated in a subsequent email to Mr Brown). This was denied by Mr Louden who explained that the reference to "going through the motions" was to how "painful and awkward" the meeting was given that Neon was trying to persuade Mr Louden that things could continue to work when in fact further team members, including Miss Vanessa Young, had already resigned; a fact which was not disclosed to Mr Louden until Miss Young told him herself at the end of the meeting. I am satisfied that there was no plan or intention on the part of Mr Brown and/or Mr Louden to deceive Neon at this meeting; on the contrary seems to me that Mr Dougall was doing all that he could to portray the business as being sustainable when it must have been clear to him by that stage that it was not.
78. Mr Dougall provided an update to fellow managers on 18 April 2018. He described the situation in the M&A team as "a viper's nest" and referred to the disruption created by Claimants with "Rob planting traps to dismantle the consortium." What these "traps" were was not at all clear. Whilst the situation in M&A was undoubtedly difficult, it does not appear to me that Mr Brown was doing anything deliberately to undermine the consortium. Mr Dougall continues his email by saying, "God knows where this is heading legally with him [Mr Brown] but theres [sic] no doubt they are simply trying to get out with money and being free to take staff and get operating." Mr Darren Lednor, Chief Underwriting Officer, responded to Mr Dougall and said:

"Agree it seems we are losing control of the situation without Vanessa and Andrew. Agree we stop new new, tell Lloyds. Tell consortium but we don't let him go until the new people are in. We keep him in the office. We change his role to project work. Eek (sic) out his contractual terms. Unless of course we lose the legal action."

79. It is clear from these exchanges that by this stage Neon's managers had convinced themselves that the Claimants were seeking sums to which they were not entitled and were engaged in acts of wrongdoing with a view to damaging Neon's business. I shall return below to whether or not there was any foundation for that belief. However, the lack of trust and confidence which Neon had in the Claimants, and in Ms Bhoma and Mr Brown in particular, was made clear by a further letter dated 26 April 2018 sent after a meeting on the same day at which Mr Brown and Ms Bhoma were put on gardening leave. That letter said, amongst other things:

"Since your resignation notice on 16 March 2018 we have found your behaviour to be increasingly disruptive and unprofessional. You have been absent from the office without explanation several occasions and have not been performing your duties under your employment contract dated 6 March 2015…"

80. Various findings of breaches of contract are then set out and Ms Andrew continues by saying, "We have lost trust and confidence in you and been forced to take the decision to suspend the M&A class for new business."
81. Mr Brown and Ms Bhoma resigned with immediate effect on 1 May 2018 on the basis that Neon's conduct amounted to a fundamental breach of the contract of employment.

The Issues

82. The parties have agreed a detailed list of issues. I shall deal with each issue in turn in light of the findings of fact made above and having regard to the further findings and inferences to which I refer below. The numerous issues are grouped under the following main headings:

i) The Terms implied in the Claimants' Employment Contracts

ii) The PC Terms

iii) Alleged failure to pay discretionary bonuses and pay rises

iv) Alleged failure to pay Unpaid PC

v) Alleged repudiation by the First Defendant

vi) The Post Termination Restraints

vii) The Defendants' Counterclaim

Terms implied in the Claimants' Employment Contracts

Was the First Defendant obliged to exercise any contractual discretions: (i) rationally and in good faith, for the purpose for which the discretion was furnished, both as to its decision-making process and as to the outcome of that discretion (as the Claimants contend) or (ii) not irrationally (as the Defendants contend)?

83. I struggle to see any difference in substance between the two options above. A discretion which is exercised for an irrelevant purpose or for a purpose for which the discretion was not intended would probably not be a rational exercise of the discretion. Similarly, it would be arguable that a discretion that was exercised in bad faith was not a rational exercise of the discretion. As such the apparent qualifications in the first option add little, in my judgment, to the established approach which is that a contractual discretion to award bonuses must not be exercised irrationally: see Clark v. Nomura International plc [2000] IRLR 766 (QB) per Burton J. at 40 as subsequently cited in Horkulak v. Cantor Fitzgerald [2005] ICR 402 (CA) per Potter LJ at 40 and Keen v. Commerzbank AG [2007] IRLR 132 (CA) per Mummery LJ at 59

If the First Defendant suspected misconduct by the Claimants:

Was it obliged to conduct an investigation?

84. Whether or not there is an obligation to conduct an investigation would depend on the circumstances. The Defendants' position is that there was no reasonable need to investigate here because Mr Brown and Ms Bhoma 'admitted' that confidential information was sent to their personal email addresses and that amounted to a breach of the relevant IT policy. However, the chronology is significant; if Neon reached firm conclusions as to misconduct prior to any such "admission", then it might be said that Neon had acted prematurely, particularly if no opportunity had been provided the individuals to explain the impugned conduct. Furthermore, it is also relevant to note that the breaches first identified by Ms Andrew in her email of 20 April 2018 were not stated to be breaches of the IT policy, but were said to be breaches of confidence in that they forwarded confidential information to their private email addresses having no legitimate business reason to do so. An allegation comprising those elements, in order to be made good, would usually require the employer, acting in a manner not likely to undermine trust and confidence, to provide the individual concerned with an opportunity to explain whether there was a legitimate business reason for sending information.
85. The real question in this case is whether the way in which Neon approached this matter amounted or contributed to a breach of the implied duty of trust and confidence. That question is considered below under the heading, "Alleged repudiation by the defendant".

In what circumstances was the Second Defendant obliged to report a suspected "regulatory breach" to Lloyd's?

86. Neon relies here upon the evidence of its General Counsel, Mr McKay, who suggests that it was under a regulatory obligation to report "misconduct" as defined in the applicable Lloyd's Bylaws. Part C of those Bylaws provide that any person subject to the enforcement jurisdiction of the Society, who believes or has reason to believe that any other such person "has committed or intends to commit misconduct within the meaning of this bylaw", shall notify the Council of the belief in writing soon as practicable and provide any documents or other material they believe to be relevant. There is no dispute that Mr Brown and Ms Bhoma are persons subject to the jurisdiction of the society. The question is whether there were grounds for believing that they had committed an act of misconduct. "Misconduct" for these purposes is defined in Part A of the Bylaws. The relevant limbs of the definition provide that "misconduct" means:

i) engaging in or being associated with or conspiring with another person to engage in discreditable conduct, whether or not connected with the business of insurance; or

ii) conduct that is detrimental to the interests of the Society, members, underwriting agents or Lloyd's policyholders or others doing business at Lloyds;

87. The question therefore was whether Mr Brown and Ms Bhoma were engaging in discreditable conduct or conduct that was detrimental to the interests of Neon in sending emails to their private email addresses. Not every breach of the strict terms of the IT policy, which is not contractual, would amount to conduct that was "discreditable" or detrimental to the interests of Neon conduct. Neon accepts that employees do on occasion use their private email accounts. Mr McKay gave evidence that on at least five occasions between December 2016 and February 2018 he sent company information, which was in most cases sensitive and confidential, to his personal email account and describes other occasions where such information was sent to or from his personal email address (including on one occasion to his young son's tablet). Mr McKay sought to suggest that he had general clearance from the Head of IT to send such material, but it seems highly doubtful that even the most relaxed approach to the IT policy would authorise the use of a child's tablet. There is no suggestion that Mr McKay was reported to Lloyd's for such conduct. No doubt this was because it was considered that he was acting in this way for legitimate business purposes and/or because there was no other option but to do so in order to gain access to or print documents. Mr Brown and Ms Bhoma say that they too had a legitimate business purpose for sending the documents in question and that they had to do so because of technical limitations. There is no reason to believe that the Head of IT would have had any objection to Mr Brown and Ms Bhoma (who were both senior employees) acting in a similar way to Mr McKay as regards personal devices and addresses. However, it would appear that Neon reached firm conclusions as to their conduct and reported them to Lloyd's before conducting any sort of investigation as to their reasons for so doing. I shall return below to the question of whether that failure to investigate and the rush to report to Lloyds amounted or contributed to a breach of the duty of trust and confidence.
88. But in answer to the question posed by this issue, in my judgment the obligation to disclose misconduct to Lloyd's could only arise where, following a reasonable investigation, there was reason to believe that Mr Brown and Ms Bhoma had committed or were intending to commit an act of misconduct as defined. It was certainly not enough simply to rely upon the fact that private email addresses may have been used without enquiring as to the circumstances in which that was done. That was all the more so where, as Neon well knew, reporting the matter to Lloyd's could have serious professional consequences for Mr Brown and Ms Bhoma.

The PC Terms

Was the original PC to be calculated on actual losses or estimated losses (such as GULR)?

89. The Claimants contend that there was an express agreement at the time of their recruitment that their PC would be calculated on the basis of actual and not estimated losses. The Defendants say that any agreement as to PC must necessarily have been based on estimated losses and that this is confirmed by the inclusion of GULR in the contemporaneous documentation.
90. It is important to note that the two types of loss are not mutually exclusive. That is because even a reference to actual losses will involve an element of estimation since the true actual losses would not be known until after the end of the policy period, which as we have seen, extends to seven years. The reference to "actual losses" on the Claimants' case, therefore, is more accurately described as an estimate of loss based on actual notified claims to date.
91. Although the Defendants contend that the Claimants have sought to change their case in this respect, with Mr Solomon going so far as to suggest that Mr Brown's admission that Mr Lotter had in fact used the phrase "best estimate" during their negotiations was devastating to the Claimant's case, it is my judgment that the Claimants have in fact been consistent in their case as to "actual losses" and that it meant an estimate of loss based on actual notified claims to date. I have already referred above to the unchallenged evidence of Mr Brown in his witness statement where he said that Mr Lotter had told him that "best estimate" was the "best estimate of the likely outcome of notified claims". Mr Brown's reference to "best estimate" in cross-examination was therefore neither a new point nor one that was inconsistent with his case that PC was to be calculated on the basis of actual losses.
92. Similarly, Ms Bhoma said as follows during her cross examination:

Q. How can an actual loss, incurred as at a date, be an estimate?

A. Because if you were to look at -- you would look at notifications received, for example, in relation to that year. So you could say, as an example: we have received ten notifications of claims for the 2016-year, by the end of, for instance, December 2017; and you therefore make an estimate of which of those notifications will lead to actual loss.

Q. So on your understanding, it was always going to be an estimate, not actual losses, but would only involve notified claims; is that right?

A. Yes, so it would be actual losses, as identified at the date of running the calculation.

Q. Why not future potential claims, not yet notified?

A. Because that was not what was agreed. So to get an accurate calculation, I accept you would only know the final result at the end of year 7; but that was not what we agreed.

93. The final question in that extract from the cross-examination of Ms Bhoma refers to future potential claims not yet notified. This would be referred to as claims which are "incurred but not reported" or "IBNR". There was a reference to an internal email sent by Mr Lotter to other managers at Marketform at the time that negotiations were being conducted with the Claimants in which he stated that "IBNR remains within our control". Ms Bhoma was asked about this email even though she was not a party to it at the time. She initially accepted that IBNR was discussed with Mr Lotter but later sought to clarify that whilst that term was not used, they had discussed "estimates or actuals" and that they "did not agree that he could use any form of estimate, whether it be GULR or IBNR". In my judgment, Ms Bhoma was not seeking to change her evidence here and nothing in that extract undermines her case as to what was agreed. In any case, whatever Mr Lotter might have said or not said to his colleagues is of limited assistance in determining what was agreed between the Claimants and Mr Lotter and Mr Gregory (who clearly had authority on behalf of Neon/Marketform to negotiate and agree terms).
94. As to what was agreed, the contemporaneous communications from Mr Gregory and Mr Lotter to the Claimants are of more significance. These have been set out above, but they bear repeating here:

i) Mr Gregory emailed Mr Brown on 30 January 2015:

"I've spoken with Simon [Lotter] re your 3 questions. To reconfirm the loss ratio figure of 20% in the calc is an example number The calc will be based on actual at the close of say 2015. The PC payment would then be paid after the close of the year and therefore for 2015 in early 2018"

ii) Mr Lotter emailed Mrs Bhoma on 5 March 2015:

"The PC calculation is based on actual numbers"

95. Mr Solomon submits that the reference to "close" in the phrase "actual at the close of say 2015" in the first of these emails is, when read with the rest of the passage, a reference to the end of the three-year period and that "actual" would be calculated at that point. I reject that submission, which seems to me to be an attempt get around the obvious meaning of the phrase, "actual at the close of say 2015" said immediately after saying that the GULR figure of 20% was just an "example number". That phrase is perfectly consistent with the way in which the Claimants have put their case, namely that the loss ratio would be based on actual notified claims as at the end of the year of account. That loss ratio would still involve an estimate, but it would be grounded in the actual notified claims as at that point. Although the Defendants contend that such an approach is commercially unacceptable there is, in my judgment, some rationale for it in this sector in that most claims are usually made in the first two years of the policy, as explained by Ms O'Reilly:

Q.  And you agreed that that's the right way to determine the financial performance of the M&A class, on an estimated basis?   

A.  On an estimate which would be based on actuals, yes.   

Q.  Where does it say that?   

A.  It doesn't say that, but that was my understanding from what I had been told by both Robert Brown and Simon Lotter, and it also speaks about an initial forecast; so you can't make your forecast on numbers which you pluck out of the air.  The forecast has to be based on notifications.  And given also that the way we calculate the profit commission is, for most policies, over a year after the first date of inception, the majority of claims arise in the first two years.  So you would have a very clear picture as to how the outlook of the book would go. And secondly, because there's, (a), a 30 per cent hold-back, so if a claim did arise after that, then that would be taken into account in the 30 per cent tranche.  And, (b), our profit commission was subject to a two year deficit clause.  So if there were a loss, then it could be clawed back at a later date, to account for any potential overpayment.

96. The Defendants rely on several matters in support of their contention that the agreement could not possibly have been based on actuals as suggested.
97. The first is that all of the schedules sent to the Claimants at the time of their recruitment referred to GULR, which is, on any view, an estimate. In my judgment the reference to GULR in the schedules does not undermine the Claimants' case. In the first place, it was made abundantly clear at the time that any figure for GULR in the schedules was merely notional. Thus, there was never any suggestion that the 20% figure against GULR in those schedules would be a figure that would actually be used in any PC calculation. I accept that GULR is generally understood to be a best estimate calculated on an actuarial basis. As such, the repeated inclusion of that term in the schedules was apt to confuse because the agreement was not to rely upon any such actuarial number but to base the calculations on actual notified claims. However, it is clear that the schedules were pro formas laid out in the company's usual format. Other than the mere fact of its inclusion in these pro forma schedules there is no contemporaneous evidence to suggest that the agreement reached between the parties was to use GULR to calculate PC. Indeed, the email sent by Mr Gregory on 30 January 2015 in which he said, "To reconfirm the loss ratio figure of 20% in the calc is an example number The calc will be based on actual at the close of say 2015", makes it clear my judgment that GULR (as that term would normally be understood) would not form the basis of the calculation. Given that the Defendants' case is that GULR is a figure that is carefully reviewed every quarter, it seems surprising that, if the intention had been to base PC on GULR, the relevant figure at that time was not used instead of a notional one.
98. The Defendants also rely upon the contents of the contractual amendment letters dated 8 February 2016, which refer to, "An estimate of the ultimate financial performance", "...an initial forecast of the M&A bonus pool...", "a payment of 70% of your PSP based upon this early estimate of the class profitability will be made", and "Once the 2016 YOA is closed, the exact profitability will become known and the 2016 Bonus Pool will be recalculated." Mr Solomon submits that each of these references to "estimates" and "forecasts" is necessarily a reference to GULR and that there would be no need to recalculate the PC Pool if it had been based on actual profit in the first place. The difficulty with that submission is that it is based on the incorrect notion that the Claimants' case as to what was agreed involved no element of estimation at all. For reasons already set out, it is my judgment that the agreement did involve an element of estimation but based on actual notified claims. Seen in that light, none of the passages from the amendment letters highlighted above are actually inconsistent with the Claimants' case. There is no reason why the "estimates" and "forecasts" referred to in the letter could not be based on actual notified claims as agreed. Moreover, the element of recalculation referred to in the letter is also consistent with the 30% holdback mechanism in the Claimants' agreement. It is noteworthy that no reference is made to GULR in the body of the amendment letter (although it is referred to in the Schedule which, once again, uses the notional figure of 20%).
99. It is also said that any such agreement would be commercially unrealistic. Mr Dougall, in his evidence, went further and said that it would be "ridiculous" and "naive" to agree the PC on such terms. However, the fact that Mr Dougall, Mr Martin and others may have regarded the deal struck by Mr Lotter (for whom Mr Dougall clearly had little respect) and Mr Gregory as a very bad one is no reason in itself to conclude that it was unlikely to have been reached.
100. What Neon appeared to forget was that, as is evident from the communications at the time, Neon was extremely keen to secure the Claimants' services and it was evidently willing at the time to agree terms which might now appear to Neon to be somewhat uncommercial. I am satisfied that, given their situations at the time, the Claimants would not have joined a loss-making entity such as Neon without the terms as to PC that I find were agreed. I also consider it highly unlikely that the Claimants would have agreed to a PC scheme based on GULR (in the usual sense) which would involve the wider Neon business, and/or which would include an element of IBNR. Mr Brown gave unchallenged evidence that he would not have accepted such an agreement. Ms Bhoma and Ms O'Reilly were equally clear as to their understanding. It seems highly unlikely to me that these three experienced and highly regarded M&A underwriters could have misunderstood what Mr Lotter and Mr Gregory had actually communicated to them as to the calculation of the PC. A ring-fenced, actual loss-based PC was a vital element of the deal for each of them and the contemporaneous communications, such as they are, support rather than detract from their case that that was what was agreed.
101. In seeking to highlight the supposed commercial unreality of the Claimants' case, Mr Solomon referred me to the response given by Mr Harman to questions about the actual and estimated basis of calculating PC, which was that the two are "opposites" and that "you can't put those two things together". Mr Harman went on to say, however, "But if you're doing it purely on a different outside of the normal insurance industry calculation, then, yes". What Mr Harman appears to be accepting here is that it would be possible, but outside the norm, to calculate PC on the basis contended for by the Claimants. Mr Harman also accepted (in relation to questions about the meaning of the amendment letters) that "in principle" there was no reason why an estimate of ultimate financial performance could not be based upon actual notified losses to calculate PC. It is also worth noting that this approach to calculating PC is contemplated in the consortium agreement itself. At paragraph 8 it provides:

b. 'Known Outstanding Losses' means, following receipt of a notification of a claim under a policy bound pursuant to this Consortium Agreement, an amount equal to the reserve that the Claims Team and the Consortium Leader reasonably believes should be posted against such a claim." (Emphasis added).

102. Mr Dougall suggested that the consortium agreement was different because it included a deficit provision, allowing Neon to claw back any over-payments made on a Known Outstanding Losses basis. However, it seems to me that the 30% holdback arrangement agreed with the Claimants allows for a similar clawback.
103. A further point made by the Defendants is that the Claimants' basis of calculating PC would be unacceptable to the regulator as it would involve a GULR which failed to take account of required elements. However, it seems to me that whereas GULR would need to be prepared on a certain basis for the regulator's purposes, particularly in relation to a reserving or accounting exercise, there is no regulatory requirement precluding the calculation of PC on an "actual" loss basis. Indeed, Mr Harman accepted in his evidence that the calculation of a PC agreed under a contract was different to making a reserve under Lloyds' valuation of liability rules, and that calculating PC on an actuals basis would have no impact on Neon's regulatory position.
104. A final point raised by Mr Solomon in oral closing submissions was that the existence of "entire agreement" clauses in the various contracts preclude reliance on any oral agreements that may have been reached in respect of PC. I do not accept that submission. It is clear that the agreement as to PC was always intended to be and was separate from the Contract of Employment, and so any entire agreement clause therein is of no effect as far as the PC was concerned. As for the PC Scheme Rules, the entire agreement clause in respect of that cannot apply for the simple reason that the offer letters to each of the Claimants made express amendments to the "standard profit commission rules".
105. For those reasons, I have reached the conclusion that the original PC was to be calculated on an estimate of loss based on actual notified claims, or, as it has been referred to in the pleaded case, "actual losses".

In any event, did each of the Claimants later agree a contractual variation that the PC would be calculated on estimated rather than actual losses?

106. For the reasons already set out in the previous section, I find that the amendment letters did not have the effect of changing the agreed basis on which PC was to be calculated. Thus, when Mr Brown agreed in cross-examination that it would be wrong for his PC to be calculated on a different basis from that which applied to Ms Bhoma and Ms O'Reilly, that was just a reflection of the fact that the amendment contracts had not changed the substance of the agreement as to PC reached with all three at the outset of their employment.

Was it a matter for the First Claimant's discretion how to distribute the PC Pool?

107. It is quite clear that the discretion in this regard was to be exercised by Neon with input from Mr Brown. That was Mr Brown's evidence. I accept that this evidence was inconsistent with the pleaded case which suggested that the discretion lay entirely with Mr Brown. However, I do not consider that this inconsistency undermines the Claimants' case as to the PC more generally. It is a detail in the Particulars of Claim which, as Mr Brown stated, appears to have been "overlooked". Given the speed with which this matter has been brought to trial it is perhaps not altogether surprising that one or two such inconsistencies have not been spotted.

Alleged failure to pay discretionary bonuses and pay rises

Was the First Defendant entitled to withhold the Claimants' pay rises and discretionary bonuses sums under clause 5 of the Restrictive Covenant Agreement, because the Claimants did not accept the New Terms?

108. The material sentence of para. 32 of the Defence and Counterclaim reads:

"Pursuant to clause 5 of the Restrictive Covenant Agreement, Neon Management was contractually entitled to make payment of the pay rise and discretionary bonus conditional on acceptance of the new post-termination restrictions contained in the New Terms"

109. However, clause 5 (which is set out above) refers only to the conditionality in respect of pay and bonus being related to the review of the PTRs; it does not suggest that pay and bonus may be made conditional upon other matters, for example the PC. On a proper reading of the clause, the only condition that may be imposed in respect of pay and bonus is the review of PTRs; any other changes would not fall within the scope of the clause.
110. The Claimants say that the effect of the clause is even more limited in that only changes to the PTRs which involve tidying up and/or which are not substantially more onerous than existing restrictions may be made. Reliance is placed upon the case of Daniels v Lloyds Bank plc [2018] EWHC 660 (Comm). However, Daniels is a case of a unilateral variation. There, the contract with the employer Bank contained a clause which allowed the Bank to change the relevant plan at any time and, pursuant to that clause, the Bank purported to introduce a new term by which it could adjust down to nil the number of shares which would vest. Cockerill J held that the clause which permitted the Bank to amend, was not apt to cover the introduction of the new clause.
111. Clause 5 is not a unilateral variation clause. It confers upon the Defendants an ability to withhold a pay review or bonus award when the Claimants refuse to sign up to new PTRs. If the Claimants refused, their contract would not be varied. In my judgment, clause 5 would permit the introduction of more extensive PTRs as a condition of being paid the salary and bonus. There is nothing inherently unfair about that since the extent and scope of any revised PTRs would still be subject to the requirement that they be reasonable. It has never been argued here that the proposed new PTRs were unreasonable or not required for a legitimate business purpose.
112. The real question here is whether the Defendants were entitled to impose other conditions going beyond the acceptance of the revised PTRs in respect of the payment of salary and bonus.
113. The Claimants were cross-examined on the basis that they would not have signed up to the new PTRs even if those were the only changes to their contracts of employment. It is right to say that Ms Bhoma and Ms O'Reilly did say that they would not have accepted the changes to the PTRs if these had been sent to them and that Mr Brown said that, given the choice, he would not accept. The purpose of that line of cross-examination appears to be in order to set up an argument based on Lavarack v. Woods of Colchester Ltd. [1967] 1 QB 278 whereby damages for breach of contract would be assessed on the assumption that the employer would have performed the contract in the way most beneficial (or least onerous) to him. However, the question here is not whether the Defendants could have performed the contract in a different way, but whether or not they had breached the implied term as to trust and confidence in seeking, amongst other things, to impose additional conditions in respect of the payment of declared salaries and bonuses. I do not, therefore, regard it as being of particular significance in the circumstances of this case that the Claimants made admissions as referred to above.
114. The fact is that the revised PTRs were not the only changes being introduced. The further changes comprised changes to the pension contributions, changes to the holiday pay of Ms Bhoma, extensive new PTRs, changes to the bonus awards (by introducing a clawback mechanism), and most significantly, an express requirement to forego any contractual entitlement to PC for a purely discretionary one.
115. As to those further changes, the Defendants' case is that they were not detrimental. As far as the holiday pay is concerned, I agree with the Defendants. Ms Bhoma had a holiday entitlement equivalent to a full-time worker notwithstanding the fact that she worked part-time. The revised contract purported to reduce her holiday entitlement on a pro-rata basis to match her part-time hours. I accept Ms Andrew's evidence that this was an administrative oversight and had it been raised with her or HR at the time it would have been remedied. Mr Craig very fairly accepted that if the reduced holiday entitlement were the only additional condition being imposed then this litigation probably would not have arisen.
116. I turn therefore to consider the other conditions and I begin with the changes to the pension contributions.

Pension contributions

117. The Claimants had a contractual entitlement to pension contributions based on a percentage of their salary. This was substituted with a discretion to pay the difference between: (a) 10% of basic salary; and (b) £10,000. The relevant clause is 5.3 (g) of the proposed new Employment Handbook, which provides:

"If your Basic Salary is greater than £100,000 the Company may, in its sole discretion, pay you the difference between 10% of your Basic Salary and 10% of your Pensionable Salary in equal monthly instalments, via payroll, less normal payroll deductions."

118. The Defendants say that whilst clause 5.3 of the proposed new Handbook gave Neon a discretion in relation to any differences in relation to pension contributions, it had made clear in writing to all staff (including the Claimants) how that discretion would be exercised. Ms Andrew confirmed that the discretion would have been exercised in that way. On that basis, say the Defendants, the change was not detrimental. Criticism is made of the Claimants, and of Ms Bhoma and Ms O'Reilly in particular, for not taking care to read the communications in respect of pension and for failing to raise queries with HR and/or other affected colleagues about the matter. However, whether or not they did so does not change the reality which is that the changes to pension contributions were detrimental. The fact that the discretion may be exercised in accordance with what was stated in the relevant email does not change the fact that what was previously a contractual entitlement to a certain level of contributions was now payable at the "sole discretion" of the employer. Moreover, Ms Andrew accepted in cross examination that although the discretion had been exercised favourably for the current year, it would "not necessarily" decline to exercise discretion in other years and confirmed that the discretion was "in there just so we have discretion if we need it". In other words, it was far from guaranteed that the discretion would consistently be exercised in the way it had been in 2018. That was, in my judgment, plainly a less favourable position for the Claimants than had hitherto been the case.
119. The Defendants make these criticisms of the Claimants in order to demonstrate that all they were concerned about was the PC and had no real concerns about any of the other matters now being relied upon as amounting to a detrimental change to their contract. Whilst the PC was of paramount concern to the Claimants, I do not accept that the other matters, including the pension contributions issue, were irrelevant. Each of the resignation letters refers to other detrimental terms: Ms O'Reilly states that her position at Neon has "become untenable due (amongst numerous matters) to the proposed detrimental changes to my contract of employment, including the profit commission scheme, which you are forcing on me"; Mr Brown states that, "Now my class profit commission has been taken away from me under proposed new contractual terms that are utterly unacceptable for this and other serious reasons"; and Ms Bhoma, refers to "Neon's attempt to force new contractual terms on me… including (but expressly not limited to) by denying me a pay rise and the bonus which Neon plainly recognises I am entitled unless I agree to the new terms and conditions (which are plainly detrimental…)… has caused an irreparable breakdown in the trust and confidence…". There can be no suggestion in those circumstances that the Claimants concerns related only to PC.

PC entitlement

120. Ms Andrew accepted that the Claimants were entitled to a contractual PC for the 2016 YOA. However, she maintained that there was no entitlement for subsequent years. I do not accept that contention for the following reasons:

i) The Claimants' offer letters state that the profit commission scheme "is an annual arrangement" and that they would "be considered for subsequent years of account in the same way as other underwriters";

ii) In an email from Megan Field to Mr Brown on 4 March 2015, Ms Field stated that although membership of the PC scheme was reviewed annually, it was "completely understood" that if Neon were to withdraw the scheme, it would lose its best underwriters;

iii) There is no evidence that it had been suggested to the Claimants at any stage before 2018 that they were not still participating in a profit commission scheme for 2017 YOA;

iv) On the contrary, Neon's discussions with the Claimants in March 2018 were all predicated on the fact that they were being required to "forego" their PC scheme because Neon wanted them to be in the same position as others;

v) In its letters of 8 February 2016 Neon had expressly told Ms Bhoma and Ms O'Reilly that it would either maintain their PC scheme for 2017 or else replace it with something "at least as beneficial" (Emphasis added).

121. There can be little doubt that a purely discretionary bonus is less favourable than one based upon a contractual formula: see, for example, Khatri v Cooperatieve Centrale Raiffeissen Boerenleenbank [2010] IRLR 715. This was detrimental irrespective of whether the method of calculation was correct.

Bonus clawback

122. The Defendants say that, as this particular detrimental change is not pleaded by the Claimants and does not form part of the Agreed List of Issues, the Court should ignore it. The relevant passage is at paragraph 28 of the Particulars of Claim. It states that, "The New Terms would have been materially less favourable to each of the Claimants than the existing terms of the Contract of Employment, inter alia by…", and goes on to list the pension contributions, holiday pay and the introduction of extensive new PTRs. The use of the phrase 'inter-alia' seems to me to be significant as the Claimants were not confining themselves to the three matters listed. I accept that no further particulars are provided as to what else might be relied upon, but equally, none were sought. The issue of the bonus clawback was presaged in the witness statements and it cannot be said that the Defendants were taken by surprise by it. I therefore consider that it is appropriate for me to consider it. I can deal with it briefly.
123. The letters dated 7 March 2018 introduced a provision stating that:

"If you give notice to terminate your employment with the Company on or before 23 September 2018 [in Ms Bhoma's case], 100% of the net amount of the 2017 bonus received by you will become immediately due and repayable to the Company.

124. Ms Andrew accepted in evidence that this could fairly be described as a "handcuff" on the Claimants and that it was detrimental to them. In my judgment, it is clear that this is a detrimental change in respect of pay. It renders a declared bonus payment repayable in the event that notice of termination is given, whereas previously a declared bonus was not repayable once paid. Ms Andrew also said that Neon only intended to impose this condition because it did not have a mechanism for deferring payment of bonuses over the course of the year.
125. In Farrell Matthews & Weir v Hansen [2005] ICR 509 per Nelson J at [61], it was held an employer's decision to pay bonuses in instalments over the course of a year, rather than paying immediately when due, was a significant factor in the EAT's decision (upholding that of the employment Tribunal) that an employee had been constructively dismissed. In the present case, it would appear that as Neon did not have the mechanism to defer bonus (which could itself have been repudiatory, according to the judgment in Farrell), it decided to impose a more onerous condition.

Did clause 7.4 of the Employment Contracts entitle the First Defendant to withhold payment of those discretionary bonuses because the Claimants were on notice at that date?

126. Clause 7.4 provides:

"You shall not be entitled to receive a bonus if on the date that the bonus is due to be paid you are no longer employed (for whatever reason and howsoever caused and whether the termination of the Employment was in breach of contract or otherwise) by Marketform or any Group Company or you are under notice of termination of employment (whether such notice is given by you or Marketform) or on Garden Leave, or subject to a disciplinary investigation, or suspended pursuant to the terms of this agreement."

127. The Defendants contend that this provision bites in respect of the discretionary bonuses because all of them gave notice on 16 March 2018 – before the payment date of 23 March 2018 (being the March payroll date) for their discretionary bonuses.
128. Clause 7.4 makes clear that if an employee was no longer employed as at the bonus payment date then the entitlement to bonus would be lost irrespective of the reason for termination and even if that termination was in breach of contract. However, clause 7.4 does not similarly stipulate that bonus may be withheld when notice is given"for whatever reason and howsoever caused and whether [because of] a breach of contract or otherwise". Instead, the clause provides that the bonus will not be payable "whether such notice is given by you or Marketform". Thus, on a proper construction, the Claimants would not be disentitled from receiving their declared bonus awards in March 2018 if notice was given in circumstances where Neon was in fundamental breach of contract.
129. If there had been such breach, then Neon could not rely upon its own breach of contract as a reason for not paying the sum. As the House of Lords made clear in Alghussein Establishment v Eton College [1988] 1 WLR 587, there is a well-established rule that a party cannot take advantage of his own wrong:

"A party who seeks to obtain a benefit under a continuing contract on account of his breach is just as much taking advantage of his own wrong as is a party who relies on his breach to avoid a contract and thereby escape his obligations." Per Lord Jauncey at 593–4

130. That supports the fact that on a proper construction of clause 7.4, the Claimants would not be disentitled from receiving their declared bonus awards if they gave notice because of Neon's breach of contract, a fortiori where that breach was repudiatory (as it was here). Clear words would have to be used to exclude an entitlement to a declared bonus in circumstances where the contract provided at clause 7.3 that an employee became entitled to receive a discretionary bonus once it was "declared" (as it was in the 7 March 2018 letters to the Claimants).

In any case, did the First Defendant mislead the Claimants as to the (un)favourableness of the New Terms to them?

131. This claim is based on the communication from HR to all employees on 27 February 2018, stating, in answer to the question, "Have there been any changes to my existing terms?":

"Yes, although we hope that you agree that the changes are beneficial to you."

132. In my judgment, this email, to which none of the Claimants paid particular attention at the time, is not misleading. It expresses a hope that the contractual changes, taken as a whole, are regarded by the employees as beneficial. However, it falls far short of providing any clear assurance that particular terms which have been changed will be more beneficial in every case than those which they replace.

Alleged failure to pay Unpaid PC

133. The Defendants' primary case in respect of this issue is that the PC had been calculated on a correct GULR basis. However, for reasons set out above, I have concluded that the Defendants' approach to the PC was not consistent with what had been agreed with the Claimants when they were recruited. As such, a question does arise as to whether or not there was a failure to pay the correct amount by way of PC.

Did the First Defendant contractually vary the date of its obligation to pay the 2016 First PC Tranche to March 2018 under clause 7.3 of the Employment Contracts?

If so: (i) Did clause 7.4 of the Employment Contracts entitle the First Defendant to withhold payment of that PC because the Claimants were on notice at that date? and (ii) Did the First Defendant waive that entitlement by making (allegedly part) payment of it on 23 March 2018?

134. The issue here is whether or not the Defendants were in breach in changing the payment date for the PC which had previously been December 2017. It only applies in respect of Ms Bhoma and Ms O'Reilly because Mr Brown's PC arrangements were not subject to the changes imposed by the letters sent to Ms Bhoma and Ms O'Reilly on 8 February 2016.
135. I have already dealt above with the suggestion that a change to the date of payment was made in writing by the delivery of slides first shown at the Town Hall meeting in November 2017. Such slides were not, in my judgment, effective to change the date of payment. The Defendants' alternative position is that insofar as the change of payment date amounts to a breach of contract any such breach was waived and/or affirmed by Ms Bhoma and/or Ms O'Reilly. Reliance is placed upon parts of their cross-examinations an example of which is as follows:

"Q. And he told you that it was at the end of March and you were content with that?

A. He explained that he could raise with HR, if I wanted to receive the payment earlier, given that my 2016 profit commission had, in fact, been due in December 2017; and I told him that he did not need to raise it with HR.

Q. Okay. So you specifically took the decision not to raise a concern with HR?

A. Yes, I did.

Q. And therefore, you were content with your payment being received in March?

A. Yes."

136. I do not find that such concessions in cross-examination are indicative of a waiver or affirmation on the part of Ms Bhoma and/or Ms O'Reilly in respect of the payment date. When the changes were first announced at the Town Hall meeting, there was no suggestion that the proposed changes were intended to be contractual and/or applicable in respect of any future payment dates beyond 2018. In the circumstances it seems to me that the position as to the proposed change of payment date was not sufficiently clear to enable Ms Bhoma and/or Ms O'Reilly to be in a fully informed position to waive or affirm any breaches of contract. Accordingly, I find that the payment date in respect of the PC remained as originally agreed, namely December 2017. Notice of resignation had not been given as at that date and therefore clause 7.4 did not apply.
137. It has subsequently been suggested by Ms Andrew that the payment of PC was a gesture of goodwill. However, the email dated 19 March 2018 in which Ms Andrew sets out the payments refers to the PC pool as being "now due" with no suggestion of it being made as a gesture of goodwill. Furthermore, there was no suggestion that reliance had been placed on clause 7.4 and the fact that notice had, by that stage, already been given. I find that this payment was made because the Defendants recognised at the time that it was a sum that was contractually due to the Claimants. The payment was, however, not correctly calculated as it was based on a GULR figure of 48%.

If (contrary to the Claimants' primary case) the PC was to be calculated on estimated figures, did the First Defendant breach the PC Terms and/or the duty in issue by including a significant estimated loss without reasonable basis?

138. The Claimants' case in this regard, if I have correctly understood it, is that a loss ratio of 48% applied by Mr Harman in his calculation of the PC was outside the bounds of a rational estimate. However, Mr Harman was applying a GULR that was not based on actual losses as agreed with the Claimants. Mr Dougall had not provided Mr Harman with all the documentation relevant to the terms agreed with the Claimants including, in particular, any correspondence referring to PC being based on actual numbers. In those circumstances, it is not surprising that Mr Harman took the approach that he did. His approach, which was not based on actual notified claims, was consistent with the usual approach to GULR that would apply when there was no specific agreement otherwise. I cannot describe the taking of that approach in those circumstances as unreasonable or irrational in the sense described in Braganza v BP Shipping Ltd [2015] 1 WLR 1661 per Lady Hale at [30], [32].

Alleged repudiation by the First Defendant

Did the First and the Second Claimant affirm or waive any alleged breaches in relation to the pay-rises, discretionary bonuses and the alleged Unpaid PC by resigning on notice on 16 March 2018?

139. The Defendants' case is that by resigning on notice on 16 March 2016, Mr Brown and Ms Bhoma elected to affirm the alleged repudiations to that date and keep their contracts alive. The Claimants contend that even if they had thereby affirmed the contract the Court can and should take into account those matters prior to 16 March in determining whether the post 16 March events amount to a repudiatory breach of contract. Reliance is placed on the recent decision of the Court of Appeal in Kaur v. Leeds Teaching Hospitals NHS Trust [2018] EWCA Civ 978 where it was held that an employee who is a victim of a continuing cumulative breach of contract is entitled to rely on the totality of the employer's acts notwithstanding a prior affirmation:

"51 I am afraid I cannot agree with that passage. As I have shown above, both Glidewell LJ in Lewis and Dyson LJ in Omilaju state explicitly that an employee who is the victim of a continuing cumulative breach is entitled to rely on the totality of the employer's acts notwithstanding a prior affirmation; provided the later act forms part of the series (as explained in Omilaju) it does not "land in an empty scale". I do not believe that this involves any tension with the principle that the affirmation of a contract following a breach is irrevocable. Cases of cumulative breach of the Malik term (which was not the kind of term in issue in either Safehaven or Stocznia Gdanska ) fall within the well-recognised qualification to that principle that the victim of a repudiatory breach who has affirmed the contract can nevertheless terminate if the breach continues thereafter. It is true that, as Safehaven says, the correct analysis in such a case is not that the victim can go back on the affirmation and rely on the earlier repudiation as such: rather, the right to terminate depends on the employer's post-affirmation conduct. Judge Hand may therefore have been right to jib at Lewis J's reference to "reactivating" the earlier breach (though, to be fair to him, he did say " effectively re-activates"); but there is nothing wrong in speaking of the right to terminate being revived, by the further act, in the straightforward sense that the employee had the right, then lost it but now has it again.

…

55 I am concerned that the foregoing paragraphs may make the law in this area seem complicated and full of traps for the unwary. I do not believe that that is so. In the normal case where an employee claims to have been constructively dismissed it is sufficient for a tribunal to ask itself the following questions:

(1) What was the most recent act (or omission) on the part of the employer which the employee says caused, or triggered, his or her resignation ?

(2) Has he or she affirmed the contract since that act ?

(3) If not, was that act (or omission) by itself a repudiatory breach of contract ?

(4) If not, was it nevertheless a part (applying the approach explained in Omilaju ) of a course of conduct comprising several acts and omissions which, viewed cumulatively, amounted to a (repudiatory) breach of the Malik term ? (If it was, there is no need for any separate consideration of a possible previous affirmation, for the reason given at the end of para. 45 above.)

(5) Did the employee resign in response (or partly in response) to that breach ?

140. The Defendants further submit that the most recent acts (in this case those that came after 16 March 2018) must be considered to contribute "something" to the earlier acts, applying the approach in Omilaju v London Borough of Waltham Forest [2005] ICR 481, and that the post-16 March 2018 acts relied upon in this case do not add "something".
141. In my judgment, it is clear that by resigning on notice on 16 March, Mr Brown and Ms Bhoma affirmed their contracts of employment. It is well-established that in the face of a repudiatory breach of contract the employee must not leave it too long before resigning otherwise he will be taken to have affirmed: see Western Excavating v Sharp [1978] QB 761 (CA) at 769C–D, per Lord Denning MR. In the present case, whilst Mr Brown and Ms Bhoma did reserve all their rights, they clearly indicated that they would be working out the entirety of their notice periods, which, in Mr Brown's case, involved a further year of employment. It would be unconscionable to keep one's right to discharge a repudiated contract alive for that length of time in the absence of any further breaches of contract. Of course, if there are further breaches of contract then, as per the judgment of the Court of Appeal in Kaur, such breaches would not "land in an empty scale" and may be taken into account with the pre-16 March 2018 breaches. Whether or not there were further breaches post-16 March 2018 and whether they add "something" to the earlier breaches is considered below.

In any case did the First Defendant repudiate the First and Second Claimants' Employment Contracts (and thereby wrongfully dismiss them)?

142. This issue comprises several elements. For clarity, I shall set out the issue in full as it appears in the list of issues before dealing with each element in turn:

In any case, did the First Defendant repudiate the First and Second Claimants' Employment Contracts (and thereby wrongfully dismiss them) by:

(1) Not paying in March and/or April 2018:

(a) the pay rises it had determined to award them (backdated to 1 January 2018) and/or

(b) the discretionary bonuses it had determined to award them and/or

(c) the alleged Unpaid PC?

(2) Making findings, allegedly without proper basis, expressed:

(a) In its email dated 20 April 2018, that they had

(i) breached (unspecified) contractual obligations

(ii) breached common-law duties of confidentiality and/or

(iii) forwarded (unspecified) information confidential to the First Defendant from their work email addressed to their private email addresses with "no legitimate business reason"?

(b) In its email dated 24 April 2018, that they had

(i) breached clauses 9.(2)(a)–(d) (in unspecified respects) and 18.1 of their Employment Contracts and their duties of good faith and fidelity

(ii) "Hid[den] behind the notion that employees need to rely on their personal email accounts to perform their role" and that this was "untrue" and/or

(iii) no intention of complying with their contractual obligations?

(c) In its letters dated 26 April 2018, that they had

(i) breached clauses 4 (as regards the Second Claimant, in unspecified respects) and 20 of their Employment Contracts

(ii) the company's IT policy

(iii) failed to return confidential information and property as requested

(iv) been absent from the office without explanation

(v) not performed their duties (in unspecified ways) and/or

(vi) been "unprofessional" and in the First Claimant's case "disruptive"

(3) Reaching the above conclusions without conducting an investigation in accordance with the term implied according to issue ?2?

(4) Raising (unspecified) concerns with Lloyd's without warning or notifying them and/or

(5) Telling them by the letters of 26 April 2018 that it had "lost trust and confidence" in them and/or

(6) Any of these matters or combination thereof, together with any of its actions before their resignations on notice?

(1) Not paying in March and/or April 2018: (a) the pay rises it had determined to award them (backdated to 1 January 2018) and/or (b) the discretionary bonuses it had determined to award them; and/or; and (c) the alleged Unpaid PC?

143. The relevant legal principles are not in dispute. Payment of agreed remuneration goes to the heart of the employment relationship and a deliberate refusal to pay undermines the entire foundation of the contract of employment: see Cantor Fitzgerald International v Callaghan [1999] ICR 639 at 648G–649G.
144. In this case, Neon, by its letters dated 7 March 2018, awarded each of the Claimants a pay rise and declared the amount of discretionary bonus. It is also not in dispute that in ordinary circumstances, those pay rises and declared bonuses thereby became payable. The Defendants' position is that as the Claimants did not agree the new PTRs, they were not entitled to their payments pursuant to clause 5.3 of the restrictive covenant agreement.
145. I have concluded above that the Defendants were not entitled to rely upon that clause to withhold the pay rises and bonuses because of the attempt to attach conditions that went beyond merely accepting revised PTRs. It follows that the Defendants' failure to pay the pay rises and bonuses in March and April 2018 (and, in respect of the pay rises, to pay backdated amounts from January 2018) was a fundamental breach of contract.
146. As to the PC, the Defendants' case is that there was nothing owing to the Claimants. However, for reasons already discussed above, it is my judgment that the Defendants failed to comply with the agreed terms as to the PC and calculated the amount incorrectly. Accordingly, the appropriate amount of PC for each of the Claimants was not paid. Furthermore, again for reasons already discussed above, the Defendants' defence that the bonuses and the PC were not payable because the Claimants were on notice as at the date of payment does not apply.

(2) Making findings, allegedly without proper basis, expressed:

(a) In its email dated 20 April 2018, that they had: (i) breached (unspecified) contractual obligations; (ii) breached common-law duties of confidentiality and/or (iii) forwarded (unspecified) information confidential to the First Defendant from their work email addressed to their private email addresses with "no legitimate business reason"?

147. This issue describes the matters set out in the email dated 20 April 2018 as "findings" made without proper basis. I agree with that description. There can be no doubt that, even at this early stage in the dispute, the Defendants had reached firm conclusions as to the Claimants' conduct. Not only does that emerge from the terminology used in the email (which included references to Mr Brown and Ms Bhoma having "breached" their contractual obligations and common-law duties of confidentiality); it also emerges from the fact, as declared in that email, that the Claimants' conduct had already been referred to the regulator.
148. The Defendants' submission as to this email is that Ms Bhoma's and Mr. Brown's position "crumbled" under cross-examination as a result of their admissions that by sending emails containing confidential information to their personal email addresses they knew they were in breach of the IT policy. However, that submission fails to recognise that the findings set out in the 20 April 2018 email were not that there had been a breach of the IT policy – indeed, that policy is not mentioned – but that there had been breaches of contractual obligations and their common-law duties of confidentiality. In particular, it was said that Mr Brown and Ms Bhoma had "no legitimate business reason" for sending confidential information to their private email addresses. Ms Andrew accepted in cross-examination that, by 20 April 2018, she had reached a conclusion that "they had been sending this information for a nefarious purpose" and specifically because Neon believed that the information was going to be used to help the Claimants to compete with Neon in the future.
149. There are several difficulties with the Defendants' position:

i) Firstly, it was readily apparent that the information sent by Mr Brown and Ms Bhoma (which was undoubtedly sensitive and confidential information) was sent for a legitimate work purpose:

a) thus, Ms Andrew accepted that the information sent by Ms Bhoma on 6 March 2018 concerned a business plan for Neon which she wanted to print off at home in order that she could mark it up for Mr Brown to send to Mr Reith;

b) there were limitations in Neon's system which meant that it was not possible to print documents from work phones, and any attempt to print via Neon's Citrix IT system would only produce a printout in the office printer. This was not something Ms Andrew investigated at the time but she accepted in cross-examination that that was the position;

c) Mr Brown did send the business plan with Ms Bhoma's input to Mr Reith the following day. Ms Andrew's evidence as to that was as follows:

Q. And Mr Brown, we know, did send the plan to Mr Reith, the following day, 7 March. We have just seen it haven't we?

A. Yes.

Q. So that would have been work that she was doing as part of her job for Neon; correct?

A. Correct .

Q. And for the benefit of Mr Reith?

A. Correct .

Q. And for the benefit of Neon?

A. Yes .

Q. That is a legitimate business purpose, isn't it ?

A. Yes , it is .

Ms Andrew did not, at the time, take the step of enquiring with Mr Reith whether he had received the business plan.

d) The information sent by Mr Brown on 19 February 2018 comprised two spreadsheets containing up-to-date information that he required for meetings at work and so that he could open them on his iPad Pro tablet;

e) Ms Andrew also accepted that that would have been done for a legitimate business purpose "if Mr Brown had sent himself financial data in a summarised version". However, the distinction which Ms Andrew seeks to make between summary information, which she accepts would be legitimate, and the full dataset in the spreadsheets, is difficult to understand given that even the summary would still contain confidential and sensitive information. The other obvious difficulty with Ms Andrew's approach is that none of this was explored at the time as it could have been.

ii) Secondly, Mr Brown and Ms Bhoma were not given any opportunity to explain the purpose of sending these emails because none of the findings as to breach were particularised in Ms Andrew's email of 20 April 2018.

iii) Thirdly, it was apparent that the sending of emails to personal accounts was not confined to Mr Brown and Ms Bhoma. I have already dealt above with Mr McKay's use of his personal email addresses. It was accepted in Neon's subsequent email of 24 April 2018 that employees did "on occasion and in limited situations" (which were not defined) use their private email accounts. In February 2017, Ms Tricia Chong had sent an email to Mr Brown's private email address containing very similar data to that which he had sent himself in February 2018. It also emerged that Mr Brown had on many more occasions sent information to his private email address from early 2016 onwards and that Ms Andrew was aware of this from her search of his emails. Ms Bhoma also gave unchallenged evidence that the Head of IT was aware that she forwarded emails to her private email address. Furthermore, Ms Andrew accepted that even Mr Reith, the CEO, probably did send emails from his work email to his private email and that she had told Mr Brown as much.

iv) Fourthly, there was absolutely no evidence at the time (or now) that any of the information had been sent or forwarded to a third party so as to give rise to a breach of confidence.

v) Fifthly, although the material was not sent in an encrypted form, it is clear that the personal accounts used by Mr Brown and Ms Bhoma were password protected. Mr McKay did not password protect or encrypt documents he sent and said it was not possible to do so from his phone in any event. Ms Andrew accepted that no training was provided to employees on how to encrypt email attachments.

150. It can be inferred from all of these points that Neon was well aware that the use of personal email addresses was, if not commonplace within the organisation, certainly widely tolerated, and that Ms Andrew had fixed upon the emails sent in February and March 2018 not because of any reasonably grounded belief that these had been sent for illegitimate purposes but simply because they were the most proximate in time to the resignations.
151. It is for these reasons that the Defendants' reliance upon breaches of the IT policy does not advance their case. Breaches of the IT policy cannot, in my judgment, be equated with breaches of contractual obligations and breaches of confidence, which were the matters expressly relied upon in the email of 20 April 2018. Nor is it the case that a breach of the IT policy automatically renders illegitimate an act which is otherwise done for a legitimate business purpose. I should note here that much was made of the fact that Mr Brown had used a Hotmail address and that he knew that "for reasons of confidentiality" such an address should not be used. Indeed, Mr Solomon in his oral submissions went as far as to suggest that the mere fact that information passes through a Hotmail or Gmail server means that it is going to a third party because it is then no longer controlled by Neon. I do not accept that submission. In the first place, there was no evidence that, by using a Hotmail server, Mr Brown and Ms Bhoma were acting differently from other users of private email addresses whose actions were clearly tolerated. Furthermore, it would appear that this point arises out of an email exchange between Mr Brown, Mr Dougall and Mr Lednor in February 2017 (during which, incidentally, Mr Dougall appears to accept that he too forwards material to his own email in order to be able to print it) in which Mr Brown said that, "It's not secure to forward out of the Neon system to Hotmail." However, this exchange arose as a result of the difficulty which Ms Bhoma was having in printing documents and was with a view to obtaining an improvement in the system. This admission about the use of the Hotmail system, therefore, takes the Defendants' case no further than the Claimants' admissions as to the breaches of the IT policy.
152. The Defendants submit that the context in which the email dated 20 April 2018 was sent is also important. They highlight that the Claimants had resigned together on the same day, that there was material to suggest that Mr. Brown had concealed his meeting with Mr. Louden and that Mr. Louden had then lied to Neon on Mr. Brown's behalf. Only the first of those is material given that I have found that Mr Brown was not in fact seeking to conceal his meeting but was trying to cancel it and that there was no conspiracy between Mr Louden and Mr Brown in this regard.
153. As to the resignations, they too must be seen in context. These were not resignations that 'came out of the blue' so as to take Neon by surprise. It is clear that the Claimants had each expressed very serious concerns about the changes to their terms and conditions of employment, and in particular to the removal of the PC entitlement, in the days leading up to the resignations. The Defendants, as I have found, took what has fairly been described as a "take it or leave it" approach to the concerns. Indeed, Mr Dougall had given an ultimatum to Mr Brown suggesting that if he did not accept the terms on offer then they would have to "call it a day", and Mr Reith, in an internal exchange just days before the resignations (in which it was clearly implied that Mr Brown was an undesirable because of his "toxic short-termism") wondered whether "we are coming to the end of the line here".
154. In that context, the resignations cannot be said to be unexpected or worthy of immediate suspicion. And yet, having effectively told the Claimants' that they could "take it or leave it", Neon, instead of taking pause, responded to their decisions to "leave it" by immediately concluding that there was wrongdoing. In my judgment, that rush to so conclude was unjustified and did not have a reasonable foundation.
155. A further contextual matter relied upon by the Defendants is the Claimants' refusal to give the requested undertakings. However, the request for such undertakings was predicated on the findings of breach set out (in an unparticularised fashion) in the 20 April 2018 email. Given that there was no substance to those findings, it is understandable that the Claimants were reluctant to give wide-ranging undertakings and sought instead to understand the basis for Neon's concerns.

(b) In its email dated 24 April 2018, that they had: (i) breached clauses 9.(2)(a)–(d) (in unspecified respects) and 18.1 of their Employment Contracts and their duties of good faith and fidelity; (ii) "Hid[den] behind the notion that employees need to rely on their personal email accounts to perform their role" and that this was "untrue"; and/or (iii) no intention of complying with their contractual obligations?

156. By this stage, Mr. Brown and Ms Bhoma had, through their Solicitors, responded to Neon's email dated 20 April 2018. The Defendants submit that the response dated 23 April 2018 is unhelpful because, instead of admitting that they had breached the IT policy and giving the undertakings sought, they suggested that the findings of breach were "baseless". In my judgment, for reasons already set out above, the description of Neon's findings of breaches of contractual and confidentiality obligations (not the IT policy which had not featured by that stage) as "baseless" was reasonable and correct. Mr Brown and Ms Bhoma did accept that they had used their personal email addresses and sought to explain as best they could, given the unspecified nature of the allegations, the basis for doing so.
157. The Defendants' response on 24 April 2018 was, for the first time, to assert a breach of the IT policy and rejected the explanations provided as to why private email addresses were used. In doing so, Neon set out further findings of wrongdoing, stating that Mr Brown and Ms Bhoma, were in breach of each of clauses 9.2(a), 9.2(b), 9.2(c) and 9.2(d) of their employment contracts. These relate to non-competition and non-solicitation during employment. It is relevant to note that once again Neon's position was not that misconduct was merely suspected but that it had made conclusive findings that there had been breaches. Given that stance, it was therefore somewhat surprising that there was no evidence before me of any breaches of these provisions, and Ms Andrew was not able satisfactorily to explain the basis for them in cross-examination. It is noteworthy that these further alleged breaches form no part of Neon's pleaded case or counterclaim.
158. Neon went on in that email to acknowledge that other employees did on occasion and in limited situations use their private email accounts but suggested that Mr Brown and Ms Bhoma were "attempting to justify their behaviour by hiding behind the notion employees need to rely on their personal email accounts to perform their role" and that this was "simply untrue,". The analysis of the position as to the use of personal email addresses in the previous section demonstrates that this allegation that Mr Brown and Ms Bhoma were giving a false explanation for their conduct was unwarranted. It would also appear that although Neon clearly tolerated other employees behaving in a similar fashion Neon was choosing to single out Ms Bhoma and Mr Brown for their conduct. Ms Andrew accepted that no action had, to her knowledge, ever been taken against other employees for forwarding documents from work to private email addresses.
159. The email also reiterated that Neon had raised its concerns with Lloyds and that it was not willing to correct any information that had been passed on. However, for the reasons set out above, it is my judgment that none of the matters relied upon could reasonably be characterised as "misconduct" within the meaning of the relevant bylaws and that, therefore, the reporting of the matter to Lloyds in this way was also unwarranted.

(c) In its letters dated 26 April 2018, that they had: (i) breached clauses 4 (as regards the Second Claimant, in unspecified respects) and 20 of their Employment Contracts; (ii) the company's IT policy; (iii) failed to return confidential information and property as requested; (iv) been absent from the office without explanation; (v) not performed their duties (in unspecified ways) and/or; (vi) been "unprofessional" and in the First Claimant's case "disruptive"

160. These letters had the effect of placing Mr. Brown and Ms Bhoma on garden leave. That was undoubtedly something which Neon was entitled to do. However, the Claimants' complaint is not that they were placed on garden leave, but that by this email Mr Brown and Ms Bhoma were found, without justification, to have committed further acts of misconduct.
161. Thus, Mr Brown was found to have been "increasingly disruptive and unprofessional", absent from the office without explanation on several occasions, and in breach of clause 4 of this contract (duties) by, amongst other things, not working to the best of his ability, not using best endeavours to promote Neon's interests and not devoting the whole of his time, attention and abilities to his duties during working hours. No particulars were provided of any of these breaches. My findings of fact above include findings that Mr Brown was not seeking to be disruptive and that there was little or no work for him or Ms Bhoma to do in the weeks following their resignations. In the light of those findings, and in the absence of any particulars provided of these breaches in this email, the conclusion must be that these findings of breach were made without proper foundation. (See also the Counterclaim below).
162. Similar unparticularised allegations were made against Ms Bhoma. For similar reasons, these too were unwarranted.
163. Ms Andrew went on to state, in terms, that Neon had "lost trust and confidence" in both Mr Brown and Ms Bhoma.
164. In my judgment, the combination of making unwarranted findings (as opposed to raising allegations) against Mr Brown and Ms Bhoma, reporting their conduct to Lloyds without proper foundation, and stating that Neon had lost trust and confidence in them, amounted to a repudiation of the contract of employment.

(3) Reaching the above conclusions without conducting an investigation in accordance with implied terms?

165. I have expressed the conclusion above that whether or not a reasonable investigation is warranted will depend on the circumstances. There may be situations where the evidence of wrongdoing, even though circumstantial, presents an overwhelming picture of misconduct. In such circumstances, it may well be appropriate to come to a tentative or even firm conclusion that misconduct has occurred even before conducting an investigation. However, the circumstances in the present case were quite different. An investigation certainly was warranted here, not least because the misconduct being alleged appears to have involved conduct which was widely tolerated in other parts of the organisation. At the very least, these otherwise highly regarded employees ought to have been given the opportunity to explain the purpose of sending the emails in question before their conduct was reported to Lloyds. Furthermore, the context was one where the resignations on notice of a team (which had joined Neon as such) could not be said to be unexpected or so as to give rise to an immediate suspicion of wrongdoing.
166. In my judgment, there was, in the circumstances of this case, no reasonable or proper cause for not conducting an investigation before reporting the matter to Lloyd's.

(4) Raising (unspecified) concerns with Lloyd's without warning or notifying them

167. The Defendants contend that Neon was under a regulatory obligation to report its concerns to Lloyd's as soon as practicable, and that there is no requirement to warn the Claimants in advance. In my judgment, for the reasons already set out, there was no reasonable foundation for concluding that Mr Brown or Ms Bhoma had committed or were intending to commit any act of "misconduct" as defined in the relevant bylaws. The rush to report the matter to Lloyds, without proper foundation and knowing the harm that this could cause to their professional reputations, was, in my judgment, calculated or likely to undermine trust and confidence.

(5) Telling them by the letters of 26 April 2018 that it had "lost trust and confidence" in them

168. I have dealt with this above.

(6) Any of these matters or combination thereof, together with any of its actions before their resignations on notice?

169. In my judgment, each of the matters considered in paragraphs 143 to 168 above amounts to a repudiatory breach of contract. If I am wrong about any particular matter relied upon, I am satisfied that those breaches, in any event, cumulatively amount to repudiatory conduct. These breaches post-16 March 2018 are certainly not trivial or innocuous and do add "something", in the Omilaju sense, to the breaches that had gone before. They can therefore be added to the scales already weighed down by the pre-16 March 2018 conduct. Taking all of these matters together, Mr. Brown and Ms. Bhoma were therefore clearly entitled to resign as a result of Neon's conduct, and they acted promptly in so doing. Although Ms O'Reilly did not leave on 1 May 2018, she is entitled to recover damages for the failures in respect of pay, bonuses and PC that apply to the others.

The Post Termination Restraints

If there was a repudiation, do the Post Termination Restraints fall away?

170. As I have found that the contract of employment was repudiated by Neon and such repudiation having been accepted, the rule in General Billposting Ltd v Atkinson [1909] AC 118 (HL) ("the General Billposting Rule") would normally apply such that PTRs fall away. However, Mr Solomon invites me to reject that rule. His submissions in this regard may be summarised as follows:

i) There has been significant judicial comment to the effect that the General Billposting Rule should be revisited. In Croesus Financial Services Ltd. v. Bradshaw & Anr [2013] EWHC 3685 (QB) at 88, Simler J (as she then was) said:

"88…The time may have come to revisit the [General Billposting Rule] but in light of my findings, this is not the appropriate case to do it."

ii) In Geys v Société Générale [2013] 1 AC 523, at [141] Lord Sumption said:

"141… In many contracts of employment, and perhaps in most modern ones, there is a large number of obligations which do not depend on the existence of the employment relationship. One example is the specific enforcement after a repudiation of express or implied covenant against competition, as in Lumley v Wagner 1 De GM & G 604. In appropriate cases, this may be subject to the proviso that the repudiation was not by the party in whose favour the covenant was included: see General Billposting Co Ltd [1909] AC 118…"

and at [68], Lord Wilson said:

"68 Contracts of employment often include provisions which are expressed to bind the parties following the termination of the contract: Rhys-Harper v Relaxion Group plc [2003] ICR 867 , para 36 (Lord Nicholls of Birkenhead). For example, they may oblige the employee not to compete with the employer for a specified period nor to use information which he has obtained in confidence during the period of his employment. Or, as in the present case, they may oblige the employer, within a specified period following termination of the contract, to make to the employee a termination payment, to be calculated in accordance with terms specified in it, and may oblige the employee, in consideration of the payment, to enter into a termination agreement on terms also therein specified. Such provisions of the contract are, by their terms, enforceable following its termination. The enforceability of, for example, a restrictive covenant by the repudiator against the innocent party is now the subject of some debate: Rock Refrigeration Ltd v Jones [1997] ICR 938 . There is no problem about the enforceability of such provisions against the repudiator.

iii) Most significantly, in Rock Refrigeration Ltd v Jones [1997] ICR 938, Phillips LJ (as he then was) at 958A-960B stated (albeit obiter) that the General Billposting Rule "accords neither with current legal principle nor with the requirements of business efficacy" (at 958 B). The Court gave the example of an employee who committed a repudiatory breach which was accepted by the employer, and comments that it would be "absurd" to suggest that the employee would thereafter be released from his negative post-termination obligations (at 959C). The same applies to an employer in repudiatory breach (at 959D-G). Further, the Court stated that General Billposting could be legitimately distinguished (at 959G et seq.).

171. In my judgment, none of these judicial comments, all of which were obiter, provides a firm foundation for setting aside such a long-established rule as the General Billposting Rule, particularly where, as in this case, it is the repudiator who seeks to enforce the PTRs against the innocent parties. The comment made by Simler J (as she then was) that the rule may need to be revisited was not based on any detailed analysis of the arguments on the issue. As for the comments of Lord Sumption and Lord Wilson in Geys, far from expressing a doubt as to the validity of the General Billposting Rule, they appear to approve the rule in so far as it applies to an attempt by the repudiator to enforce PTRs against the innocent party. That, as I have said, is this case. Those comments of the Supreme Court post-date, by some 20 years, the criticisms of the General Billposting Rule made by Phillips LJ in the Court of Appeal in Rock Refrigeration.
172. Perhaps of greater significance, given the terms of the Restrictive Covenant Agreement in this case, is Lord Sumption's comment in Geys that, "Whether collateral obligations of this kind continue to bind after the termination of the contract… will normally depend on the construction of the contract…" (at [141]).
173. Apart from the fact these authorities come nowhere close to setting aside the General Billposting Rule, a further difficulty for Neon is that the Restrictive Covenant Agreement here does not contain any provision seeking to preserve the PTRs in the event of repudiation. Paragraph 6.1 of the PTRs provides:

"Notwithstanding the lawful termination of the employment contract, this agreement will remain in full force and effect." (Emphasis added)

174. Mr Craig submits that the natural corollary of that provision is the recognition that the PTRs would not survive the unlawful termination of the employment contract. I agree. Thus, both on the construction of the relevant provision and on the basis of the General Billposting Rule, it is my conclusion that the PTRs in this case do fall away as a result of the Defendants' repudiation of the Contract of Employment.

If so, do they fall away as against both Defendants?

175. The Defendant's' submission here is that as the Restrictive Covenant Agreement is between the Claimants and both Defendants, the repudiation is only by the First Defendant, and that the PTRs therefore do not fall away against the Second Defendant. I do not accept that submission. The PTRs, although contained in a separate agreement, were clearly part and parcel of the employment relationship. Clause 25.10 of Mr Brown's Contract of Employment (and Clause 26.10 of Ms Bhoma's) provides:

"This agreement together with the restrictive covenants to be entered into between Marketform, Marketform Management Agency Ltd and you on or around the date of this agreement (the Restrictive Covenant Agreement) and those sections of the Staff Handbook which are marked as having contractual status constitute the entire agreement of the parties in relation to the Employment…"

176. In light of that provision, I cannot see any valid basis for arguing that, post-repudiation, the PTRs somehow continue to survive as regards the Second Defendant.

The Counterclaim

Were the First and/or Second Claimants in repudiatory breach of their Employment Contracts and/or in breach of equitable and/or tortious duty by, individually or cumulatively:

Both being disruptive and unprofessional by spreading untrue rumours in the insurance market about the Second Defendant?

177. No particulars were provided in the Defence and Counterclaim as to the "untrue rumours" allegedly being spread. I was referred in written closing submissions to paragraph 56 of Mr Dougall's statement. That refers only to the fact that Mr Brown was "communicating in the market that there was a contractual dispute between him and Neon". I struggle to see what is untrue about that given that there clearly was a contractual dispute. No further particulars are provided in that paragraph and there was nothing in cross-examination to suggest that anything that Mr Brown or Ms Bhoma said about Neon was untrue. For these reasons, this allegation is not upheld.

Both being absent from the office and unavailable for work without permission?

178. The evidence in this regard is thin. It appears to comprise anecdotal observations by Mr Dougall that Mr Brown and Ms Bhoma appeared not to be at their desks as frequently as prior to their resignations and that their diaries did not appear to be particularly full. The diary entries are far from conclusive, as was clear from the evidence that not all work done was even entered into the diary. As for the apparent absences, Mr Dougall appeared to accept in cross-examination that Mr Brown had not been absent without permission. In respect of Ms Bhoma, there appears to have been an allegation that she took an extended lunch on 20 April 2018. The triviality of that allegation speaks for itself.
179. In short, having regard to the fact that Mr Brown was on holiday part of the period, there was little work to do in the period in any case and the absence of further particulars, I find that this allegation is not made out.

Both not performing their duties in accordance with clause 4 of their Employment Contracts and/or clause 18 of the Handbook?

180. This issue is said to be subsumed under the other issues for the counterclaim, but it boils down to an allegation that Mr. Brown, following his resignation on 16 March 2018, was no longer engaging with the M&A business and that the discussions which he and Ms Bhoma were having within the workplace were affecting morale. As to the lack of engagement, I have already made findings as to that; in short neither Mr Brown nor Ms Bhoma had much work to do in that period and Mr Brown, in particular, did not wish to be seen to be soliciting staff. This may have had the unfortunate effect of Mr Brown appearing to be somewhat disengaged. However, I do not find he was thereby breaching any provisions of his contract and nor was Ms Bhoma.

The First Claimant on 19 February 2018 emailing to his private email address, without permission, password protection or encryption, the Second Defendant's confidential information of its 2017 and 2018 enquiries, quotes and deals, including tax aggregation figures and premiums?

The Second Claimant on 6 March 2018 emailing to her private email address, without permission, password protection or encryption, the Second Defendant's business-plan?

181. These allegations have been addressed above. There were no breaches as alleged arising out of the sending of these emails. Insofar as there were breaches of the IT policy, the Defendants accept that the policy is not contractual.

Both preventing the Second Defendant from implementing a new structure for the M&A team?

182. I have concluded above that post-resignations there was little work to be done and that Mr Brown and Ms Bhoma had not sought to obstruct any restructuring that Neon tried to implement in order to keep the business afloat. This allegation is not upheld.

The First Claimant refusing to communicate and ignoring other members of the M&A class?

183. This has been addressed above. The allegation is not upheld.

The First Claimant on 19 March 2018, contrary to management instructions, discussing his resignation with Mr Louden and complaints about the Defendants?

184. This is perhaps the high point of the Counterclaim. Mr. Brown did discuss his resignation, and the reasons for it, with Mr. Louden on 19 March 2018, and Mr Brown had been informed earlier that day that Neon would communicate his resignation to the market and that he should not discuss his resignation with any third-party. However, as set out above, Mr Brown's meeting with Mr Louden was long-standing. There had been an attempt to cancel it, but not to conceal it, and Mr Brown's discussion of his resignation was prompted by a direct query from Mr Louden, who had by that stage already made the assumption that Mr Brown had resigned. Furthermore, I have rejected the contention that there was any conspiracy to deceive or mislead Neon, notwithstanding Mr Louden's rather foolish attempt to feign ignorance in respect of Mr Brown's resignation. In any event it is noteworthy that Mr Thornton gave evidence, which is confirmed by Mr Dougall as being accurate, that the M&A team were told that if they were asked, they could say that the Claimants had resigned because they had issues with their new employment contracts. It would be odd if the rest of the team could answer questions about resignation in this way but the Claimants could not. Even if Mr Brown's and Ms Bhoma's conduct amounted to a failure to have regard to a specific management instruction, in the particular context of these fast-moving events, it was very far from being a serious failure resulting in any damage or loss to Neon.
185. The Defendants specifically submit that Mr Brown's conduct amounted to breaches of clause 4.4 of his contract of employment, in particular his duties to "be diligent, honest and ethical in the performance of your duties"; "conduct your personal and professional life to the highest standards and in a way which does not risk or adversely affect the standing and reputation of Marketform or the Group"; and/or "perform your services in a professional and competent manner and in cooperation with others". In my judgment, nothing that Mr Brown did in this regard amounted to a breach of these provisions. He was not dishonest (albeit that Mr Louden might have been to a certain extent), his meeting with Mr Louden did not adversely affect the standing or reputation of the Defendants, and he performed his services as best he could, given the lack of work available and the hostile environment that existed once Neon had determined, without justification, that the Claimants were engaged in wrongdoing.

Conclusions

186. For the reasons set out above, it is my judgment and I declare that:

i) Neon was in repudiatory breach of each of the Claimants' respective contracts of employment;

ii) The First and Second Claimants each accepted that repudiatory breach on 1 May 2018 and were thereby wrongfully dismissed;

iii) The First and Second Claimants accordingly no longer owe obligations under those contracts, including the PTRs, which fall away as a result of the Defendants' repudiation.

187. By reason of the above, it follows that the Claimants are entitled to recover by way of damages:

i) The pay rises awarded on 7 March 2018, backdated to 1 January 2018;

ii) The discretionary bonuses declared for each of them on 7 March 2018;

iii) The appropriate share of correctly calculated PC that would have been payable as at December 2017 or March 2018.

188. The Defendants' Counterclaim is dismissed in its entirety.
189. It only remains for me to thank all members of both legal teams for their diligence and hard work in enabling the Court to deal with this expedited trial in the time available.