Three Lord Justices sitting in the Court of Appeal have, this week, unanimously dismissed

BGC's appeal in its long running battle with fellow interdealer broker Tullett Prebon.

The case, although directly concerned with financial market broking, has a significant

bearing on team moves in other arenas, notably the insurance industry.

Background

Tullett Prebon and BGC (formerly Cantor Fitzgerald) are both leaders and long standing

competitors in the interdealer broking market. The principal assets of each firm are their

highly paid teams of brokers.

In February 2009, Tullett Prebon discovered that BGC were in the process of directing a

raid, led by a former Tullett Prebon executive, Anthony Verrier, on Tullett Prebon's

employees. BGC's strategy was to use the heads of broking desks at Tullett Prebon as

"recruiting sergeants" to recruit other more junior brokers. 13 Tullett Prebon brokers,

including 4 desk heads, signed "forward contracts" with BGC under which they agreed to

work at BGC as soon as they were contractually free to do so. Three of these brokers later

changed their minds deciding to remain with Tullett Prebon.

On discovering the raid, Tullett Prebon attempted to encourage its brokers to remain loyal

and stay. However in late March 2009, those brokers who had signed forward contracts

with BGC resigned claiming constructive unfair dismissal on the grounds that Tullett

Prebon's attempts to retain its brokers had broken the relationship of trust and confidence

between them. Tullett Prebon responded by applying to the High Court for, inter alia, an

injunction to prevent BGC approaching any other UK based employees of Tullett pending a

speedy trial.

At trial, the High Court judge, Mr Justice Jack, upheld Tullett Prebon's claims in conspiracy,

breach of contract and inducing breach of contract. He also enforced a period of garden

leave/ post termination relief and upheld the interim injunction prohibiting all BGC's

recruitment of Tullett Prebon employees for a period of 1 year from 2 April 2009. Finally, he

also dismissed the departing brokers' claims for constructive dismissal and BGC's

counterclaim that Tullett Prebon had induced breaches of BGC's forward contracts.

Appeal

BGC appealed the High Court's rejection of both the departing brokers' claims for

constructive dismissal and BGC's counterclaim. Various other appeals were not permitted.

In dismissing BGC's appeal, Lord Justice Maurice Kay described Mr Justice Jack's original

judgment as "meticulous". On the constructive dismissal point, the Court of Appeal ruled

that the proper test, to determine whether there has been a repudiatory breach of contract

PDQ

Team Moves: Lessons from Tullett Prebon

PLC v BGC Brokers LP

www.clydeco.com

February 2011

www.clydeco.com

by an employer, necessary to support a successful claim for constructive dismissal,

involved taking an objective view of whether the contract breaker has clearly shown an

intention to abandon and altogether refuse to perform the contract. The Court of Appeal

agreed with Mr Justice Jack's analysis that Tullett Prebon, faced as it was by BGC's raid

on its employees, had tried to strengthen its relationship with its brokers - quite the reverse

of the abandonment or refusal to perform its obligations that the defecting brokers would

have been required to show to support their successful claim for constructive dismissal.

In relation to BGC's counterclaim, the Court of Appeal ruled that although the brokers'

employment with BGC had not yet started, the "forward contracts" did contain a mutual

obligation of trust and confidence. Accordingly, in light of BGC's recruitment methods which

were considered to have destroyed the relationship of trust and confidence, the three

Tullett Prebon brokers who had signed "forward contracts" with BGC, but who then

decided to remain with Tullett Prebon, were entitled to rip those contracts up.

We await with interest the results of the damages hearing listed to commence on 14 March

2011.

Implications

In light of the Court of Appeal's glowing endorsement of the High Court's judgment, and

the fact that the appeal was limited to a small number of points, this week's decision

serves to reinforce the lessons of Mr Justice Jack's original judgment, which include:

• the provision of indemnities by BGC to the departing brokers was, in effect, an

acknowledgement by BGC that the brokers' conduct might be unlawful;

• courts will approach attempts by employees to fabricate constructive unfair

dismissal claims in these types of team move situations with a degree of

scepticism;

• express contractual clauses in brokers' contracts that required Tullett Prebon

brokers to inform their employer if they received an approach were enforceable;

• the reasoning in RDF Media Group Plc v Clements [2008] IRLR 207, which held

that an employee who was himself in repudiatory breach of contract could not

accept a breach by his employer, is wrong. The Court preferred that, when

assessing a constructive dismissal claim, consideration is given to all the

circumstances, including an employee's own conduct;

• team leaders have an implied duty to inform their employer of the proposed raid by

a competitor once they had become aware of it; and

• in the face of an unlawful poaching raid, the Courts are prepared to grant effective

injunctive relief.

Contrary to the impression given by the recent, and rather odd, decision in Lonmar Global

Risks Limited v West & Others [2011] IRLR 138 (where team and poacher escaped

unpunished despite incriminating evidence of wrongdoing), the Tullett Prebon case serves

as a timely reminder for both defecting employees, and those employers who plan to

recruit from their competitors, that they face many pitfalls. Assessing the position at the

earliest opportunity is therefore recommended.

Finally, employers looking to hold onto their workforce would be minded to include a

provision in their standard contracts of employment requiring employees to report

approaches by competitors.

Further information

For further information on any

issue raised in this update please

contact:

Steve Blunt

Partner, Guildford

steve.blunt@clydeco.com

Tel: +44 (0) 1483 555 555

Chris Duffy

Partner, London

chris.duffy@clydeco.com

Tel: +44 (0) 20 7623 1244

Paul Newdick

Partner, London

paul.newdick@clydeco.com

Tel: +44 (0) 20 7623 1244

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