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Legal Update

Implied Trust And Confidence: An Update

10 November 2003
Mayer Brown JSM Legal Update

Summary

In a recent UK case, Steven Horkulak v Cantor Fitzgerald International [2003] EWHC 1918 (QB), the High Court made it clear that a high pressure working environment and well paid job cannot justify conduct that is likely to destroy the relationship of implied trust and confidence. The defences that the working environment was very stressful and the employee received a substantial remuneration were rejected. 

Full Update

The Facts

The employee was a senior executive of the employer. During his course of employment he was insulted and humiliated by the CEO on a regular basis. The CEO also used abusive language to the employee concerned, even in front of the employee's subordinates. In a particular incident, the CEO launched a hysterical verbal attack on the employee over trivial matters, without giving the employee a chance to respond.

Following this incident, the employee resigned claiming constructive dismissal. He then brought proceedings against the employer, claiming that the CEO's conduct had undermined his authority to manage his staff and breached the implied duty of trust and confidence. The employer alleged that the employee worked in a high pressure environment where foul language was common. He was also highly paid.

Legal Principles

At common law, an employer must not conduct itself in a manner that would destroy or seriously damage the relationship of trust and confidence between it and its employee. To do so is a fundamental breach of contract entitling the employee to claim constructive dismissal.

The test to determine whether there has been a breach of the implied duty of trust and confidence is an objective one and the breach can be a single act or a series of acts.

The Court's Decision

The Court considered the following points in determining that the employer had breached the implied duty of trust and confidence:

  • a senior manager required the overt support of his superior in order to enable him to perform his duties,
  • any rebuke to an employee must be proportionate to the alleged failing,
  • the employee's superior was very dictatorial,
  • threats of dismissal should never be used to intimidate,
  • the employee's superior had criticised the employee and given him no opportunity to respond, and
  • certain criticism of the employee had been made in front of subordinates, thereby undermining the employee's authority (whilst the Court accepted that a manager was free to manage in such manner as they chose, they should do so with at least an element of cooperation).

The Court awarded damages to the employee of in excess of GBP 900,000.

Conclusion

The consequences for the employer of breaching the implied duty of trust are that the employee can resign immediately claiming constructive dismissal and also bring a claim for damages for breach of contract. Even where the employment environment is high pressure and employees are highly paid there will be standards of behaviour which the courts will not accept as being acceptable.

For further information, please contact:

Name: Duncan A. W. Abate
Position: Partner
Phone: +852 2843 2203
Fax: +852 2103 5066

Name: Anita W. C. Lam
Position: Solicitor
Phone: +852 2843 4536
Fax: +852 2103 5158

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