The claimant sought payment of three years’ salary after termination of his service contract. He said that an agreement had been made by the company to purchase a ‘financial institution’, which would trigger the additional payments. The defendants said that the clause requiring the payment was a penalty, and also sought damages under the 1985 Act on the basis that the agreement required approval of the company in general meeting.
Held: The term ‘financial institution’ had not been given the extended meaning asserted by the claimant, no qualifying acquisition had occurred, and the clause triggering the longer notice term had not arisen. The clause was a penalty since it failed to require the claimant to mitigate his losses after termination. If the clause had operated, the claimant would have been required to repay the sums due under s322 of the 1985 Act. No award would have been made to the claimant avoid circuity of actions.
Judges:
Stanley Burnton J
Citations:
[2004] EWHC 1927 (QB), [2005] IRLR 946
Links:
Statutes:
Companies Act 1985 320 322(3)(b) 727
Jurisdiction:
England and Wales
Citing:
Cited – Alghussein Establishment v Eton College HL 1985
A literal construction of the relevant provision of a lease would have led to an absurd result that a contractor who failed to complete a development without fault could not call for a lease, whereas a contractor who wilfully defaulted could do so. . .
Cited – Cine Bes Filmcilik Ve Yapimcilik and Another v United International Pictures and Others CA 21-Nov-2003
The parties entered into agreements licensing the exclusive distribution of encrypted television channels within Turkey. A clause provided a calculation of damages for a breach amounting to the balance of licence fees due, and other penalties, . .
Cited – Dunlop Pneumatic Tyre Company Ltd v New Garage and Motor Company Ltd HL 1-Jul-1914
The appellants contracted through an agent to supply tyres. The respondents contracted not to do certain things, and in case of breach concluded: ‘We agree to pay to the Dunlop Pneumatic Tyre Company, Ltd. the sum of 5 l. for each and every tyre, . .
Cited – Duckwari Plc v Offerventure Ltd and Another: In Re Duckwari Plc (no 2) CA 8-May-1998
A company director entering into an unapproved contract with his own company was liable to the company for the loss as at the time that loss was realised, not at the time of the breach. Where directors had entered into contracts with their company . .
Cited – Duckwari Plc v Offerventure Ltd and Brian Stanley Cooper; In Re Duckwari Plc (No 2) CA 19-Nov-1998
The company made a claim to recover the borrowing costs incurred to buy property in breach of s320 (no shareholder approval). The acquisition of the property had been unprofitable, and the company was held to be entitled to recover from the . .
Approved – Lordsvale Finance Plc v Bank of Zambia QBD 20-Mar-1996
The court looked at a facility agreement opened by a bank in favour of the defendant which provided that in the event of default the defendant should pay interest during the period of default at an aggregate rate equal to the cost to the bank of . .
Cited by:
Cited – Euro London Appointments Ltd v Claessens International Ltd CA 6-Apr-2006
The court considered whether a clause in an employment agency’s terms and conditions amounted to a penalty and was unenforceable. The contract provided that if the offer was withdrawn by the eventual employer after acceptance but before the . .
Cited – Tullett Prebon Group Ltd v El-Hajjali QBD 31-Jul-2008
The defendant signed an employment contract to join the claimants as a senior broker. He changed his mind and decided to stay in his existing job. The new employers sued for breach of contract. The defendant said that the claimants had refused to . .
Appeal from – Murray v Leisureplay Plc CA 28-Jul-2005
The court considered the extent to which the content of negotiations leading up to the signing of a contract were admissible. Arden LJ said: ‘Lord Dunedin in the Dunlop case makes the point that, although the issue is one of construction, the court . .
Lists of cited by and citing cases may be incomplete.
Contract, Employment
Updated: 11 June 2022; Ref: scu.199844
