Veitch Penny LLP - Exeter | Crediton, Devon

Case

Collidge v Freeport Plc
Queen’s Bench Division – 25 May 2007

Issues

(1) Compromise Agreements
(2) Breach of Warranty
(3) Dismissal

Facts

Mr Collidge was the Chief Executive of the Defendant company. Until 2005 he was also its Chairman. The company sold designer products at discounted prices in four European countries. In March 2006 allegations were made against Mr Collidge regarding his claim to expenses. Negotiations ensued and at the end of that month a termination agreement was signed in which Mr Collidge would receive a large payment subject to a number of conditions. One of the conditions in the agreement stated: “there are no circumstances of which you are aware or of which you ought to be aware which would constitute a repudiatory breach on your part of your contract of employment which would entitle or have entitled the company to terminate your employment without notice”. It subsequently came out that there were circumstances which suggested Mr Collidge was in breach of that warranty and he was subsequently dismissed summarily.

Proceedings were brought against the company. The company submitted evidence of the employee’s breach of the warranty showing a misuse of the company’s credit card and chauffeur. The court therefore had to determine whether there existed at the date of the agreement circumstances which entitled the company to dismiss Mr Collidge summarily.

Decision

It was found that, given the wording of the agreement then the company was not under an obligation to pay the settlement sum. Upon considering the evidence Mr Collidge had clearly been in breach of the warranty clause because he had dishonestly obtained expenses from the company on a number of occasions justifying his summary dismissal.

Comments

This case highlights the usefulness to employers of ensuring that an appropriately and effectively worded compromise agreement is used when negotiating termination packages.

Rachel Billen – Associate Solicitor, Commercial Department at Veitch Penny.
Tel: 01392 278381, Fax: 01392 410247, Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This Employment Law Update does not constitute legal or other professional advice and should not be relied on as such. You should take specific advice regarding your circumstances before taking any action based on the information contained within this Update.