Cook v MSHK Limited and Ministry of Sound Recordings Limited - be careful not to be too nice

01/10/2009

By Nick Hobden, Partner and Head of Employment

This is an interesting case, demonstrating just how difficult it can be to get things right when dealing with dismissals for misconduct.

Mr Cook worked for MSHK in a fairly senior position. Having accepted a new job with a rival company, he submitted a letter of resignation in accordance with the terms of his contract of employment. However part-way through his 6-month notice period, an issue arose regarding the truthfulness of some comments that Mr Cook had made about whether, in his new role, he would be in competition with MSHK.

MSHK decided to discipline and dismiss Mr Cook for what it saw as, amongst other things, a breach of the implied term of mutual trust and confidence. It was principally concerned with (i) the allegation that Mr Cook had lied about whether his new employment would place him in competition with MSHK and (ii) an issue relating to a company loan and the matter of whether he had put his own interests ahead of those of his employer.

Legal proceedings were issued in the High Court with regard to the question of whether Mr Cook's dismissal was lawful. When the matter came before the Court of Appeal, a particular issue arose as to whether MSHK had acted in such a way that even if the employee had breached the contract of employment, the employer had implicitly agreed to waive such breaches and affirm the contract. It was alleged that during a period of sickness that occurred after he had resigned, Mr Cook was treated with "sympathy and thoughtfulness"; from this he argued that such treatment was inconsistent with the idea of MSHK having reserved the right subsequently to dismiss him for any misconduct of which it was already aware. In effect he argued that his breaches of contract has been waived by his employer.

MSHK sought to argue that their conduct during this time was motivated by a wish to avoid the risk of being held to be in breach of contract themselves; they did not want to do anything that might have the effect of releasing the employee from the post-termination restrictions to which he was otherwise subject. However the Court of Appeal concluded that the employer had not reserved its position in relation to matters concerning Mr Cook's new employment. As a result it had, through its conduct, affirmed the contract of employment and could not seek to justify the employee's dismissal on this basis.

In many respects, this decision seems unduly harsh, effectively punishing the employer for being understanding when its employee fell ill after his resignation. But the lesson to learn from this is that any compassion that you show in these situations must be tempered with the need to be clear about your intention to protect your business from breaches of contract when the employee recovers.