Conditional contractual benefits and compromise agreements

Redmans Solicitors
December 17, 2012

The recent case of Imam-Sadaque v Bluebay Asset Management (“Bluebay”) has received a great deal of press coverage – mainly, one assumes, because of the tale of intrigue, duplicity and wrongdoing that occurred in the City of London. In this post we’ll take a look at the case of Imam-Sadaque v Bluebay and draw some conclusions about whether employers may withhold contingent benefits if they find (after the signing of the agreement) that the other party has been in repudiatory breach of his compromise agreement.

The facts of Imam-Sadaque v Bluebay Asset Management

Mr Imam-Sadaque was a highly-paid senior investment manager (Head of Sales for the UK, Middle East and Australia) who worked for Bluebay – an asset management company. He agreed to join a start-up competitor, Goldbridge Capital Partners LLP (“Goldbridge”) in June 2011, with a start date of January 2012. He gave his notice in June 2011. However, problems subsequently came to the fore (complaints made against him) and he considered resigning in August 2011. However, if he were to resign then he would be treated as a “Bad Leaver” and he would forfeit share options worth £1.7 million. He therefore entered into a compromise agreement with Bluebay in August 2011 and went on gardening leave for 4 months. Under the compromise agreement Mr Imam-Sadaque expressly agreed that he did not have new employment (he actually did) and that he had not enticed other employees away (he had – a Mr Nixon at Bluebay). Bluebay subsequently discovered these breaches and refused to pay Mr Imam-Sadaque his share options. Mr Imam-Sadaque subsequently pursued a claim in the High Court for breach of contract.

Good reading on the internet: What the best compromise agreement solicitors should do for you

How did Mr Imam-Sadaque breach his compromise agreement?

Mr Imam-Sadaque breached the terms of his compromise agreement by engaging in starting-up a competitor, already having employment at the time of the signing of the compromise agreement (but warranting that he did not) and by enticing a fellow-employee away from Bluebay.

Was his employer entitled to withhold benefits under the compromise agreement as a result?

The High Court held that Mr Imam-Sadaque was in repudiatory breach of contract through the express breaches of the terms of his compromise agreement. They therefore were entitled to withhold from complying with the terms of the compromise agreement. Further, the condition was not a penalty by the employer.

Redmans Solicitors are London employment lawyers with offices in Richmond and Covent Garden.