Employment Cases Update

Imam-Sadeque v Bluebay Asset Management (Services) Ltd [2012] EWHC 3511 (QB)

Date published: 16/12/2012

Judgment in proceedings relating to £1.7m in shares in the defendant's business which would be due to the claimant if he was deemed to be a Good Leaver but where it was alleged he had breached the terms of a compromise agreement by assisting the set-up of another business while on garden leave. The judge found against the claimant.

In this judgment Popplewell J provides a thorough review of the evidence and finds that the claimant was in breach of his duties by helping the new business, recruiting a member of staff from the defendant and disclosing details of the compromise agreement and other sensitive information.  These were actions that could all have led to his dismissal for gross misconduct and so meant that he should not benefit from the vesting of the shares.

He also rejects the claimant's submission that the relevant clause in the compromise agreement would fall under the penalty doctrine, providing a comprehensive review of the authorities and their application in this case. He adopts the definition at [256] of Lewison in the Interpretation of Contracts that

"A penalty clause is a clause which, without commercial justification, provides for payment or forfeiture of a sum of money, or transfer of property by one party to the other, in the event of a breach of contract, the clause being designed to secure performance of the contract rather than to compensate the payee for the loss occasioned through the breach"

In this case, he finds the doctrine does not apply party because the compromise agreement did not provide for forfeiture of his interest in the shares if it was breached but instead  conferred a conditional benefit which never accrued because he failed to fulfil the condition of performance of the Agreement. Even if the doctrine had been applicable, he goes on to find that the provisions of the agreement were not so penal as to be unenforceable.
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Case No: HQ12X00380

Neutral Citation Number: [2012] EWHC 3511 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 10/12/2012

Before :

THE HON. MR JUSTICE POPPLEWELL

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Between :

FAHIM IMAM-SADEQUE (Claimant)

and -

BLUEBAY ASSET MANAGEMENT (SERVICES) LTD (Defendant)

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Daniel Oudkerk QC and Amy Rogers (instructed by Doyle Clayton) for the Claimant

Paul Goulding QC and Diya Sen Gupta (instructed by Allen & Overy) for the Defendant

Hearing dates: 9-12, 15, 16, & 19 October 2012

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JudgmentThe Hon. Mr Justice Popplewell :

Introduction

1. The Claimant, Mr Imam-Sadeque, is 41. Since leaving university and qualifying as a fellow of the Institute of Actuaries he has spent all his professional career in investment management. He was employed by the Defendant ("BlueBay") on 1 July 2004.

2. BlueBay was founded in 2001 by Hugh Willis and Mark Poole. As part of a reorganisation in April 2012, it transferred its business to a limited liability partnership, BlueBay Asset Management LLP, but for the purposes of this action it is not necessary to distinguish between the Defendant and the LLP, and I shall refer to both as BlueBay. BlueBay manages investments for institutions and high net worth individuals, focusing primarily on credit and fixed income products and alternative investment products. It is based in London and also has offices in the USA, Luxembourg, Hong Kong and Japan, with a total of 310 members of staff. It was purchased by Royal Bank of Canada in December 2010 in a deal which valued it at £963 million.

3. Mr Imam-Sadeque was employed by BlueBay from 1 July 2004 until 31 December 2011. By 2011 he was a senior employee and highly remunerated. He wanted to leave BlueBay following a meeting on 6 July 2011 at which management raised complaints made by other employees about his conduct at work, and informed him about the promotion of a colleague, Mattias Hojmark-Jensen. If he had resigned, however, this would have had adverse financial consequences. His remuneration over the years included being granted shares under the terms of Bonus Plans operated by BlueBay, which would vest at future dates. The shares were invested in fund units pursuant to Mr Imam-Sadeque's directions. Mr Imam-Sadeque had fund units which were due to vest in January and March 2012, which it was estimated would be worth approximately £1,700,000 ("the 2012 Fund Units"). If his employment were terminated before the vesting date, his entitlement to all unvested shares or fund units would depend upon whether he was a "Good Leaver" or a "Bad Leaver" as defined in the Plans. If he left voluntarily he would be a Bad Leaver and forfeit the right to his unvested fund units and shares.

4. Unknown to BlueBay, soon after this meeting Mr Imam-Sadeque agreed to join a new start up asset management company, Goldbridge Capital Partners LLP ("Goldbridge") whose business was to be the management of similar investments. Mr Imam-Sadeque was to become a partner of Goldbridge, and to be entitled to a profit share, as well as a guaranteed bonus and sign on payment.

5. BlueBay appreciated that Mr Imam-Sadeque wanted to leave and was prepared for him to do so on the terms of a compromise agreement, which was swiftly concluded. The compromise agreement, concluded on 22 July 2011, provided for Mr Imam-Sadeque to conduct a handover, and then be on garden leave until 31 December 2011; and for Mr Imam-Sadeque to be treated as a Good Leaver for the purpose of the vesting of the 2012 Fund Units, provided that he complied with the terms of the compromise agreement and his employment contract. Mr Imam-Sadeque was on garden leave from 22 August 2011 until the termination of his employment on 31 December 2011, during which he was paid his full salary by BlueBay. He then started working for Goldbridge.

6. BlueBay alleges that Mr Imam-Sadeque was in repudiatory breach of the terms of the compromise agreement and his employment contract between 6 July and 31 December 2011, as a result of which he is not entitled to be treated as a Good Leaver and is not entitled to the 2012 Fund Units. The principal complaints are (1) that Mr Imam-Sadeque assisted Goldbridge in setting up and launching its competitive business, and (2) that Mr Imam-Sadeque assisted Goldbridge in recruiting Damian Nixon, a BlueBay employee who had previously reported to Mr Imam-Sadeque, and is now part of his team at Goldbridge. Mr Imam-Sadeque denies the alleged breaches. He brings a claim for the 2012 Fund Units, denying that they have become forfeit by reason of any breach of the compromise agreement or his employment contract, and arguing in the alternative that any such forfeiture would be unenforceable as a penalty.

Approach to the evidence

7. Mr Imam-Sadeque gave oral evidence, and there was a written statement from his wife, whose evidence was not challenged. I heard oral evidence from Mr Hojmark-Jensen and Natalie Benitez-Castellano on behalf of BlueBay. Ms Benitez-Castellano was an impressive witness whose evidence I generally felt confident in accepting. Mr Hojmark-Jensen's evidence was of limited relevance to the issues which I have to decide. Mr Imam-Sadeque had the articulate fluency of a good salesman, but I felt unable to accept certain aspects of his evidence, as I explain more fully below.

8. Mr Goulding QC argued that I should draw adverse inferences against Mr Imam-Sadeque's case from his failure to call witnesses who were in a position to give important evidence. In particular, he submitted, Ms Germano, Mr Shewaram, Mr Midha, and Ms Sharpling, all of whom were part of the Goldbridge start up, where Mr Imam-Sadeque is now working, together with Mr Nixon, who was described by Mr Imam-Sadeque as a friend as well as a current work colleague at Goldbridge, could have been expected to have given evidence in support of Mr Imam-Sadeque's account of events if they were true.

9. The Court may draw adverse inferences from a party's failure to call a particular witness or witnesses: see Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340 and Karis v Lewis [2005] EWCA Civ 1637. Ms Germano and Mr Nixon were each party to critical conversations with Mr Imam-Sadeque, the content of which was at the heart of the dispute, and of which there was no written record. Mr Shewaram, Mr Midha and Ms Sharpling were also, in their different ways, parties to conversations and events which were disputed, and in respect of which I was left only with Mr Imam-Sadeque's word. The importance of these events and conversations will appear from the narrative of events set out in this judgment. I have no doubt that each of these individuals had important evidence to give, which would have assisted me in resolving the issues which arise in this case. There was no explanation in the evidence for their absence.

10. I do not, however, consider that their absence as witnesses should be held against Mr Imam-Sadeque. This point was taken on behalf of BlueBay for the first time in closing submissions. There was nothing in BlueBay's opening submissions to alert Mr Imam-Sadeque that such a point would be taken, and he was not cross examined about the current status, health or availability of these potential witnesses. Mr Goulding QC submitted that it was for Mr Imam-Sadeque to proffer an explanation for the absence of all these witnesses, irrespective of any warning that the point would be made. That would be to impose a burden which offends principles of fairness and would be contrary to the overriding objective in CPR Rule 1. It is incumbent upon a party who wishes to invite the Court to draw adverse inferences from the opposing party's failure to call witnesses, to give notice that he intends to do so, in a manner which affords the opposing party an opportunity of explaining the witnesses' absence. Unless otherwise agreed, such an explanation can only properly be received by the Court by evidence, not submission. Questions of waiver of privilege may arise, and associated waiver, upon which legal advice may well be required. It would be unfair to allow a party to rely upon there being no such explanation in evidence when the other party, who would have to adduce such evidence, has had no notice that the witnesses' absence is to be relied on against him. If he has no notice, he will not know, for example, the identity of any individual whose absence is to be relied on so as to call for an explanation.

11. Mr Goulding QC also submitted that I should draw adverse inferences from Mr Imam-Sadeque's failure to preserve evidence, particularly with respect to a new BlackBerry mobile phone he acquired on 14 July 2011 under a contract in his wife's name. This was the mobile phone used by Mr Imam-Sadeque to contact individuals connected with Goldbridge, and Mr Nixon, between 14 July and December 2011. It was taken to a Vodafone store by Mrs Imam-Sadeque on or about 27 March 2012, some two months after the commencement of these proceedings, where it was reset to factory settings. This had the result of rendering irretrievable all text messages on the device. In her witness statement produced during the course of the trial, which was not ultimately challenged, she explained that she had taken it to the store because she wanted to use it for family purposes, and to remove any of Mr Imam-Sadeque's contacts. She asked those at the store how to do so, and it was at their suggestion that this was achieved by resetting it to factory settings. Mr Imam-Sadeque said in evidence that in any event it was his practice to delete texts when the conversation string was finished, so that nothing had in fact been lost. It is fair to say that Mr Imam-Sadeque did not explain the position with clarity at the earliest opportunity and that there have been inconsistencies and inaccuracies in the accounts put forward before Mrs Imam-Sadeque's witness statement was served. I am not surprised that this gave rise to further suspicion; but I reject the submission made on behalf of BlueBay that "Mr Imam-Sadeque has gone to extraordinary lengths in his attempts to mislead BlueBay regarding his use of the BlackBerry and the destruction of documents on it." His attitude was understandably defensive, if unhelpful and misleadingly imprecise. The non preservation of the contents of the phone was not, in my view, a deliberate attempt to suppress evidence on Mr Imam-Sadeque's part. I do not regard what he has said and done about the phone as conduct which gives rise to any adverse inference against him.

The contract of employment and Bonus Plan terms

12. The terms of Mr Imam-Sadeque's contract of employment were set out in a letter providing that his salary was to be £100,000 plus a discretionary bonus in accordance with BlueBay's Bonus Plans. It provided for six months written notice of termination on either side, with an entitlement on BlueBay's part to require the notice period to be spent on garden leave. It provided that BlueBay would be entitled to terminate the agreement without notice in the event of any serious breach of the agreement, any gross misconduct, or any wilful neglect in discharge of Mr Imam-Sadeque's duties. It also incorporated, by reference to the Employee Handbook, express obligations of confidentiality (Clause 4 of the Employee Handbook) and non poaching and non competition covenants which were expressed to apply during his employment and for six months following its termination (Clause 5).

13. The non poaching covenant was in the following terms:

"5.2 You will not, whether as principal or agent, and whether alone or jointly with, or as director, manager, partner, shareholder, employee or consultant of any other person, directly or indirectly……

(a) approach, encourage, interfere with, solicit or endeavour to entice away the employment of, employ or attempt to employ or negotiate or arrange the employment or engagement by any other person, of any person who to your knowledge was, at the Termination Date or at any time during the 12 months period ending on the Termination Date ("the Relevant Period") in a managerial, investment management (i.e. portfolio manager), analyst, trading, core development or sales capacity and whose departure would damage BlueBay's legitimate business interests and with whom you had personal dealings during the Relevant Period;"

14. The relevant non competition covenants were in the following terms:

"5.2 You will not whether as principal or agent, and whether alone or jointly with, or as director, manager, partner, shareholder, employee or consultant of any other person, directly or indirectly……

(b) …..carry on, or be engaged, concerned or interested in any business which is similar to and competes with any business being carried on by BlueBay at the Termination Date and with which you were involved during the Relevant Period in a manner intended or reasonably intended to cause any client, investor or business partner of BlueBay to reduce the services currently provided by BlueBay or any company of which BlueBay is a subsidiary (its holding company) and any subsidiaries of BlueBay or of any such holding company ("Group Company"), or otherwise direct business from BlueBay or any Group Company or reduce or discontinue such relationship with BlueBay including reducing the amount of assets the client, investor or business partner has placed under the management of BlueBay or any Group Company;

(c) …..interfere with, tender for, canvass, solicit, deal with or endeavour to entice away from BlueBay the business of any person who at the Termination Date or during the Relevant Period was, to your knowledge, a prospective client or investor, client, investor, or agent of or who had dealings with BlueBay or any Group Company and with whom you had personal dealings in the normal course of your employment at that date or during the Relevant Period. This restriction will be limited to activities by you which will involve offering or providing services similar to those which you will have provided during the Relevant Period;

(e) …..solicit, interfere with, tender for or endeavour to entice away from BlueBay or any Group Company any contract, project or business, or the renewal of any of them, carried on by BlueBay or any Group Company which is currently in progress at the Termination Date or which was in the process of negotiation at that date and in respect of which you had contact with any prospective client, prospective investor, client, investor or agent of BlueBay or any Group Company at any time during the Relevant Period.

15. These covenants were qualified by the provision:

5.3 "These restrictions apply during your employment. None of the restrictions contained in this section shall prohibit any activities by you which are not detrimental to BlueBay's business and/or are not in direct or indirect competition with any business being carried on by BlueBay or any Group Company at the Termination Date."

16. Paragraph 4 of the contract of employment provided:

"You must devote your full time attention and abilities to your job duties during working hours and act in the best interests of [BlueBay] at all times. You must not, without [BlueBay's] written consent, be in any way directly or indirectly engaged or concerned in any other business where this is or is likely to be in conflict with [BlueBay's] interests or where this may adversely affect the efficient discharge of your duties."

17. The Bonus Plans, which governed that part of his bonus awarded in restricted shares, which were then invested in fund units, were on materially identical terms which included the following provisions:

"1.DEFINITIONS

"Award" means the award of Shares to the Participant, legal title to which is to be held by the Nominee, with the intention that the Participant's acquisition of the beneficial interest in the Shares shall fall within the provisions of section 425 of ITEPA and by virtue of that section shall not give rise to a liability for income tax for the Participant prior to the Vesting Date;

"Bad Leaver" means a person who:

(A) ceases to hold employment with the Group in any circumstances not covered by the definition of Good Leaver; or in the case of (B) and (C) below, subject to the discretion of the Grantor (and, in the case of the Trustee, following consultation with the Board):

(B) gives notice to any member of the Group of his resignation from employment with the Company; or

(C) receives notice from any member of the Group of his termination of employment with the Group as a result of his serious misconduct;

"Good Leaver" means a person whose employment with the Group ceases in any of the following circumstances:

(A) death;

(B) because he suffers, in the view of the Board, from permanent ill-health or permanent disability;

(C) as a result of redundancy (within the meaning of the Employment Rights Act 1996); or

(D) as a result of termination by the Company other than because of his serious misconduct;

"Restricted Shares" means those Shares held by the Nominee on behalf of the Participant during the period that those Shares are subject to the forfeiture and transfer restrictions set out in this Plan;

TERMS UPON WHICH SHARES ARE HELD

3.1 Upon the making of an Award, the Grantor shall transfer, or shall procure the transfer, of legal title to the Shares to the Nominee…..

3.2 Shares held by the Nominee shall, subject to Rule 3.5, be held for the benefit of the Participant….

3.3 All Shares when awarded are Restricted Shares and, save where Rule 3.5 or Rule 3.6 applies, the Shares shall cease to be Restricted Shares on the dates and in the proportions set out in Rule 3.4 below.

3.4 At the Date of Award the Grantor shall determine (and, in the case of the Trustee, following consultation with the Board):

3.4.1 the Vesting Date(s) applicable to the Award, on which date(s) Shares shall cease to be Restricted Shares; and

3.4.2 the proportion of the Shares that are subject to an Award which shall cease to be Restricted Shares on such Vesting Date(s).

3.5 Any Shares which are, at such time, Restricted Shares shall, upon the date (the "Trigger Date") that:

3.5.1 the Participant becomes a Bad Leaver; or

3.5.2 at the discretion of the Grantor (and, in the case of the Trustee, following consultation with the Board), the Participant breaches any of his obligations under this Plan,

3.7 Subject to the terms of this Plan, prior to the Trigger Date, and whilst the Shares are registered in the name of the Nominee, the Participant shall be entitled to all dividends and/or other financial benefits of ownership of, and shall further be entitled to direct the Nominee with respect to voting, the Shares.

Schedule1

8.1 Subject to [certain paragraphs] or as is necessary for the performance of the Nominee's obligations under this Plan……., neither the Company, the Trustee, the Nominee nor the Participant may… directly or indirectly disclose to any other person……. the terms of this Plan.

Narrative

18. In 2007 and 2008, part of Mr Imam-Sadeque's bonus comprised the 2012 Fund Units, worth at the time of their award approximately £300,000. On 19 February 2010 his basic salary was increased to £150,000 per annum. His total compensation for 2009 was £700,000. On 2 July 2010 he was promoted to Head of Sales, UK, Middle East and Australia. By mid 2011, Mr Imam-Sadeque's annual salary was £200,000, but this was not the major part of his remuneration. Partly as a result of the purchase by Royal Bank of Canada paying cash for his unvested stock in December 2010, his total gross remuneration in the tax year 2010/11 was about £2,450,000.

19. In mid 2011 the relevant structure and personnel within BlueBay were as follows:

(1) Apart from administrative operations and support, there were two sides to the business. One was investment. The other was sales, marketing and client relations.

(2) On the sales side, there was a Head of Sales for each of three regions for the credit/fixed income products, and in addition a Head of Sales for Alternatives (which encompassed a sales responsibility). Mr Imam-Sadeque was Head of Sales for UK Middle East and Africa. The two other regional Heads of Sales were Mr Hojmark-Jensen (Northern Europe) and Roberto Valescchi Oliva. The Head of Alternatives was David Burnside. Each Head of Sales, including Mr Imam-Sadeque, reported to Alberto Francioni as BlueBay's Global Head of Sales. He in turn reported to Mr Willis as CEO and Mr Poole as Chief Investment Officer.

(3) Mr Imam-Sadeque's role as regional Head of Sales involved responsibility within that region for selling BlueBay's fixed income and credit products to investors, mostly pension funds, sovereign wealth funds and insurance funds, dealing with those clients at a senior level, and seeking to ensure client retention. It also involved building and maintaining relations with various consulting firms within the UK, such as Aon Hewitt, Mercer, and Towers Watson, who provide recommendations to investors such as pension funds for BlueBay's products and services. He headed a sales team with one person directly reporting to him. In 2011, this was Cenk Turkinan, Director, Sales – UK & Ireland, Middle East, who had joined BlueBay in about December 2010. Prior to that, Damian Nixon had occupied this role, reporting to Mr Imam-Sadeque from when he joined BlueBay in mid 2008 until about July 2010. Thereafter Mr Nixon had been moved internally to David Burnside's team and reported to him. Mr Imam-Sadeque had been responsible for recruiting Mr Nixon when the latter joined BlueBay in 2008.

(4) Natalie Benitez-Castellano, who is a qualified solicitor and a Partner of BlueBay, has acted at all material times as its Head of Human Resources.

6 July meeting Mr Imam-Sadeque/BlueBay

20. At a meeting on 6 July 2011 between Ms Benitez-Castellano, Mr Francioni and Mr Imam-Sadeque, Mr Francioni raised a number of complaints which had been made by other employees about Mr Imam-Sadeque's behaviour. The complaints included that Mr Imam-Sadeque had been aggressive, threatening and intimidatory towards more junior colleagues; had been giving the impression that he could make or break someone's career; had been making derogatory comments about David Burnside, Head of Alternatives; and had been bragging about his equity vesting in January 2012 in a way that made other employees uncomfortable. Mr Francioni also told Mr Imam-Sadeque that they were aware that Mr Imam-Sadeque had behaved inappropriately and unprofessionally towards a female employee ("Employee A"). Mr Imam-Sadeque said that he recognised that he had behaved badly, and told Mr Francioni and Ms Benitez-Castellano that he had been concerned for the last few years that he would be dismissed because of his conduct towards Employee A.

21. Mr Francioni informed Mr Imam-Sadeque that, since his (Mr Francioni's) role was based in Hong Kong from June 2011, and he would therefore be in London less frequently, a decision had been made to create the new role of Head of Sales Europe, Middle East and Asia (EMEA), and that it had been decided that Mr Hojmark-Jensen would be appointed to the role. Mr Imam-Sadeque was upset by this decision and asked if he had been considered for the role. Mr Francioni explained to him that he had been considered but, using Mr Imam-Sadeque's own words uttered earlier in the meeting, Mr Imam-Sadeque had "screwed it up", a reference to Mr Imam-Sadeque's inappropriate behaviour towards Employee A and other employees. Mr Francioni told Mr Imam-Sadeque that it was BlueBay's intention to set up a new sales committee which they wanted Mr Imam-Sadeque to be involved in, and that he and Mr Hojmark-Jensen would need to work out a way of working together. Ms Benitez-Castellano ended the meeting by saying that they knew that Mr Imam-Sadeque had been having a difficult time on a personal level, and that they were happy to arrange for external support if he would find that helpful.

22. Ms Benitez-Castellano explained to Mr Imam-Sadeque at the meeting that BlueBay had chosen to deal with his conduct issues informally rather than under the formal disciplinary procedure. Some criticism was levelled at Ms Benitez-Castellano for the conduct of this meeting, and in particular for dealing with it in this way without prior notice of the issues to be raised. I do not regard that criticism as justified. Given the nature of the complaints, she and Mr Francioni were entitled to take the view that to embark on a formal disciplinary process was not the most constructive approach. They handled the matter in a reasonable, thoughtful and sensitive way.

23. Following the meeting Ms Benitez-Castellano updated Mr Willis, who contacted Mr Imam-Sadeque that evening to suggest they meet the following week when his diary allowed; Mr Imam-Sadeque responded suggesting the 14 or 15 July.

24. It was argued on behalf of Mr Imam-Sadeque that he had effectively been demoted, and that the decision had not been properly based on a fair assessment of their respective merits. Ms Benitez-Castellano did not accept that suggestion, and nor do I. She explained that Mr Hojmark-Jensen was "more highly valued in performance terms" than Mr Imam-Sadeque, and that this was reflected in his higher remuneration: £300,000 more than Mr Imam-Sadeque in 2010 and £200,000 more than Mr Imam-Sadeque in 2009. Those compensation decisions were, she said, taken by Mr Francioni, who thought they were both very good salesmen but that Mr Hojmark-Jensen was viewed as "the better sales person, the better performer all round". Mr Imam-Sadeque was not demoted, nor was he disciplined. The restructuring involved a new and more senior job being created, to which Mr Hojmark-Jensen was promoted ahead of Mr Imam-Sadeque.

25. Nevertheless Mr Imam-Sadeque was, understandably, very disappointed. Mr Hojmark-Jensen had been promoted over him. The incident with Employee A had damaged his standing, as he had long feared it might. He felt that his career at BlueBay had hit a brick wall. He quickly formed the view that he should immediately set about finding another job.

26. That evening he emailed Dipankar Shewaram, and the following day he emailed Gina Germano, suggesting he would like to meet to "catch up" with them. His purpose was to explore the possibility of joining their new start up business, which was to become Goldbridge. Mr Imam-Sadeque knew them both because they were each former employees of BlueBay. Ms Germano had been a Principal and Co-Head of the Distressed Debt team at BlueBay before leaving on 30 October 2010. Mr Shewaram had been a senior portfolio manager in the Investment Grade team at BlueBay before leaving on 30 November 2008. Mr Imam-Sadeque had heard of their proposed new start up from Mr Hojmark-Jensen, and knew that Mr Hojmark-Jensen had himself been exploring the possibility of joining it since the previous December. With the news of Mr Hojmark-Jensen's promotion at BlueBay, Mr Imam-Sadeque realised that Mr Hojmark-Jensen might no longer be pursuing the opening, and he thought there might be an opportunity to take his place.

7 July Towers Watson dinner

27. On 7 July 2011 Mr Imam-Sadeque met Damien Loveday of Towers Watson for dinner. Towers Watson is a consultant whose recommendations are relied on by institutional clients when deciding whether to invest in BlueBay. Mr Loveday was a personal friend of Mr Imam-Sadeque as well as an important client contact. The dinner was a work dinner, entered on BlueBay's "Satuit" system as such, and paid for by BlueBay by Mr Imam-Sadeque claiming the cost as expenses. Mr Imam-Sadeque emailed Mr Loveday before the dinner saying that he needed "some advice/pep talk" and after the dinner saying "thanks for all the advice". Mr Imam-Sadeque's evidence was that he had told Mr Loveday that Mr Hojmark-Jensen was being promoted above him, that he was having a tough time at work, and that he felt he had come up against a brick wall at BlueBay.

13 July Mr Imam-Sadeque lunch with Ms Germano

28. On 13 July 2011 Mr Imam-Sadeque met Ms Germano for lunch. She brought a non disclosure agreement ("NDA") to the lunch, which he initialled. This was prescient of her, because Mr Imam-Sadeque's evidence was that it was only at the lunch itself that he revealed that he had got in touch because he was interested in her new venture; and that the text traffic between them prior to that time had simply been to set up the lunch which he had described in his 7 July email as being for a "catch up". Whether or not they had previously broached the subject, both must have been intending to have discussions about Mr Imam-Sadeque's potential involvement in the new start up. That was what happened. At the lunch they discussed whether Mr Imam-Sadeque would be interested in joining Goldbridge as Head of Sales and Mr Imam-Sadeque made clear that he would be keen to do so. Mr Imam-Sadeque's evidence was that the discussions resulted in a strong likelihood of his joining Goldbridge as Head of Sales. Ms Germano was keen that he should join as soon as his contractual obligations to BlueBay allowed.

29. Ms Germano revealed at the lunch that she proposed to recruit a number of former BlueBay employees on the investment side, including in particular Nick Thompson, Samantha Wessels and David Levenson. Nick Thompson had been Head of Trading in the Distressed Debt team at BlueBay and had left on 28 April 2010. Samantha Wessels and David Levenson were credit analysts in that team who had left BlueBay on 5 July 2009 and 3 December 2010 respectively.

30. Mr Imam-Sadeque accepted in evidence that Ms Germano said she was planning recruitment on the sales side, and that they discussed a proposed business plan for Goldbridge. Mr Imam-Sadeque maintained, however, that they had had no specific discussions about names of individuals for possible recruitment on the sales side, nor even the number of sales staff to be recruited. He said that he was not interested in who Ms Germano was recruiting for the sales team, and just trusted her judgment to do what was appropriate in that respect. I found this implausible. It is most improbable that Mr Imam-Sadeque could have made clear he wanted the role of Head of Sales, as he says he did, if he had not been given some idea of the size of the sales team; and it would have been unnatural for him to have allowed Ms Germano to say that she was planning to recruit on the sales side, as he says she did, without asking her whom she had in mind. This was to be his side of the business, the team for whom he would be responsible, and with whom he would have to work. The success of the sales team would likely affect his remuneration, whether by way of commission on assets under management, or under a profit share in the success of the whole business. I accept the evidence of Mr Hojmark-Jensen that the most important point for a Head of Sales would be to have the right people on the Sales Team. Mr Imam-Sadeque's description of asset management as a "people business" with "people being very important" runs contrary to his assertions that he had no interest in the composition of the sales team he would be leading at Goldbridge. His evidence was that there was specific discussion of the names of recruits on the investment side, which would have been of lesser relevance to Mr Imam-Sadeque's involvement than recruits on the sales side. I have little doubt that Ms Germano would have identified for discussion anyone she was at that stage hoping to recruit on the sales side.

31. When Mr Hojmark-Jensen had been negotiating to be the Head of Distribution at Goldbridge, Ms Germano had agreed that he could choose his sales team. She may not have offered the same autonomy to Mr Imam-Sadeque. But if she were keen on Mr Imam-Sadeque being Head of Sales, and that had become a strong likelihood by the end of the lunch (as Mr Imam-Sadeque says was the case), she would at the very least have been interested in hearing from Mr Imam-Sadeque his views about potential recruits on the sales side. I infer that discussions must have taken place on those lines.

32. By this stage Ms Germano had already been given Mr Nixon's name as a potential recruit by Mr Hojmark-Jensen back in May 2011, at a time when Mr Hojmark-Jensen was in the frame to be Head of Distribution. Mr Hojmark-Jensen had taken Mr Nixon out to dinner on 25 May 2011 and learned that he was looking to move from BlueBay. He had told Ms Germano of this, and suggested to her that Goldbridge move quite quickly to recruit him. By the time of Ms Germano's lunch with Mr Imam-Sadeque on 13 July 2011, Mr Nixon was someone whom she was planning to recruit on the sales side. Given that Ms Germano required Mr Imam-Sadeque to sign an NDA before she continued her discussion with him about Goldbridge, there was no reason for her not to mention the name of Mr Nixon, as well as the other individuals she referred to. Indeed there was good reason for her to identify Mr Nixon as an intended recruit, given that Mr Nixon had previously reported to Mr Imam-Sadeque, and was someone for whom Mr Imam-Sadeque would be responsible at Goldbridge, and with whom he would have to work, if recruited. She would have wanted to know Mr Imam-Sadeque's views as to his merits and abilities, as well as whether they would get on.

33. Mr Imam-Sadeque's evidence was that the first time Ms Germano mentioned to him that she was planning to recruit Mr Nixon was in late August. He was unable to suggest any reason why she should mention the plan to recruit Mr Nixon in August, as opposed to July. It is far more likely that she mentioned his name to Mr Imam-Sadeque at this lunch and that they discussed his merits as a potential recruit.

34. If there was a discussion about recruiting Mr Nixon, as I find there was, Mr Imam-Sadeque must have been enthusiastic about his being recruited. If he had not been, it is unlikely that the recruitment would have been pursued. Mr Imam-Sadeque said in his evidence that at least by the time he had lunch with Mr Nixon two days later, on 15 July 2011, he was keen to have him on his team at Goldbridge. His attitude is unlikely to have been different on 13 July.

35. Moreover, if there was a discussion about recruiting Mr Nixon, as I find there was, it is likely that there was also discussion of the timescale and procedure for recruiting him. Mr Imam-Sadeque knew him well from having recruited him to BlueBay and having been his boss for two years. They were still fellow employees at BlueBay, albeit no longer working in the same team. Mr Imam-Sadeque knew that Mr Nixon was unhappy in Mr Burnside's team at BlueBay and had been looking for other jobs. They were, according to Mr Imam-Sadeque, friends as well as work colleagues.

36. BlueBay made a further allegation in relation to this lunch which arose out of an email sent by Mr Imam-Sadeque to Cenk Turkinan at 1301 on 13 July headed "Urgent". In the email Mr Imam-Sadeque requested a list of male investment grade analysts at BlueBay. The allegation was that since Mr Imam-Sadeque was due to meet Ms Germano that day, and Mr Shewaram the following day, it is reasonable to infer from the timing and content of his request, and his desire for Ms Germano and Mr Shewaram to have confidence in him, that he requested this list for the purpose of being able to provide Ms Germano and/or Mr Shewaram with the names of potential recruits for Goldbridge, and that he did so. Mr Imam-Sadeque's explanation was that he could not recall why the request had been made but that it had nothing to do with Goldbridge. The likely explanation was either that he wanted to put an analyst forward for a pitch and wanted to be reminded who was in the team; or that an issue had arisen which he needed to raise with their manager but that he couldn't remember their name. I am not persuaded that this request had anything to do with Goldbridge. If the information was required for the lunch with Ms Germano it would have been requested earlier than 1301; and if Mr Imam-Sadeque's thinking was that which BlueBay alleges he could and would have obtained the information earlier. The investment grade analyst whom Goldbridge in fact approached was not on this list. The explanations put forward by Mr Imam-Sadeque are more probable.

15 July lunch between Mr Imam-Sadeque and Mr Nixon

37. On 14 July 2011 Mr Imam-Sadeque met Mr Shewaram at the offices of Northill Capital LLP ("Northill") in Piccadilly. Northill were the financial backers of what was to become Goldbridge, although the start up had not at this stage taken form as a legal entity. These were the offices from which Ms Germano, Mr Shewaram and the other prospective participants in the proposed start up were operating, and were for those reasons referred to in the evidence as Goldbridge's offices. I shall use the same terminology. At this meeting Mr Imam-Sadeque signed another copy of the NDA. It may be that he also met Ms Germano again whilst he was there.

38. Mr Imam-Sadeque arranged to have lunch with Mr. Nixon on the next day, 15 July 2011. On his own evidence, he had not had lunch with Mr Nixon since about April or May 2011.

39. Mr Imam-Sadeque had not mentioned this lunch until his first witness statement was served in September 2012. In particular he had not mentioned it at the meeting on 23 November 2011 with Mr Willis and Ms Benitez-Castellano (see below), or in his response to the Request for Further Information dated 5 April 2012 in which he was specifically asked to state all occasions from 6 July 2011 until 31 December 2011 in which he had arranged to meet Mr Nixon.

40. His explanation for arranging this lunch at this time was not plausible. In his witness statement he sought to suggest that the lunch had been initiated by Mr Nixon because of Mr Imam-Sadeque's humiliation at a sales meeting on 15 July 2011 at which Mr Hojmark-Jensen's promotion was announced by Mr Francioni. In evidence in chief, and having seen further disclosure from BlueBay by way of calendar entries, Mr Imam-Sadeque said that the meeting at which Mr Francioni announced Mr Hojmark-Jensen's promotion had not been on 15 July 2011 but had been on 7 or 8 July. This was an attempt to continue to link the 15 July 2011 lunch to Mr Imam-Sadeque's claimed humiliation at the meeting at which Mr Hojmark-Jensen's promotion was announced, and Mr Nixon's sympathy for Mr Imam-Sadeque. An email from Mr Imam-Sadeque to Mr Turkinan dated 21 July 2011 refers to the announcement of Mr Hojmark-Jensen's promotion having been made at the sales meeting on 20 July, and refers to Mr Imam-Sadeque's own attendance at that meeting, as a result of which in cross examination Mr Imam-Sadeque was constrained to accept that he had been wrong about the announcement being made before 15 July; and that the formal announcement of Mr Hojmark-Jensen's promotion had been made at a sales meeting held on 20 July 2011 at which he had been present. Thus the explanation for fixing the lunch could not have been Mr Nixon wanting to comfort Mr Imam-Sadeque following the announcement at the sales meeting (which took place 5 days later). In the end Mr Imam-Sadeque accepted in cross-examination that the suggestion for lunch with Mr Nixon on 15 July 2011 originated with him.

41. Mr Imam-Sadeque's evidence was that there was no discussion at this lunch about the possibility of Mr Nixon joining Goldbridge. I am unable to accept that evidence. The following point towards the contrary being the case:

(1) The lunch came immediately after Mr Imam-Sadeque's meetings on 13 and 14 July 2011 with Ms Germano and Mr Shewaram. Mr Imam-Sadeque and Mr Nixon had not had lunch together for several months before that.

(2) As I have found, the lunch with Ms Germano involved a discussion about recruiting Mr Nixon and must have involved a discussion about the intended procedure and timetable for doing so. There was at this time, as Mr Imam-Sadeque perceived it, a strong likelihood that he was to become Head of Sales at Goldbridge, for whom Mr Nixon would be working if he joined Goldbridge. Mr Imam-Sadeque had recruited Mr Nixon to BlueBay and been his boss for two years. They were friends as well as work colleagues. Mr Imam-Sadeque was the obvious candidate for making the first approach to him, to sound him out and to talk to him in a way best suited to secure his ultimate recruitment, which was the desired objective of both Mr Imam-Sadeque and Ms Germano.

(3) Mr Imam-Sadeque gave a false explanation for why the lunch was arranged, falsely suggesting that it was instigated by Mr Nixon out of sympathy.

(4) Mr Imam-Sadeque initially failed to disclose that he had had this lunch. I do not accept his explanation that this was "a foolish oversight". In my view he sought to conceal it because he knew that it had involved conduct which damaged his case.

(5) Mr Imam-Sadeque accepted that, at this lunch, he discussed with Mr Nixon his own unhappiness at BlueBay and the possibility of his leaving, and that he had been in talks about a new job. Mr Imam-Sadeque accepted that by the time of this lunch he was excited about a likely offer from Goldbridge for the Head of Sales position. He accepted that he would have been keen for Mr. Nixon to join him. He knew that Mr Nixon was also unhappy at BlueBay and had been looking for jobs. The natural thing to do would have been to encourage Mr Nixon to join him, unless Mr Imam-Sadeque felt constrained by his obligations to BlueBay not to do so. Legal or moral obligations towards BlueBay do not appear to have played a significant part in his thinking generally; but more specifically these were not the reasons advanced by him as his explanation for why he claimed not to have discussed recruitment with Mr Nixon at the lunch. Instead he gave the explanation that it was because "My mind was focused on myself at the time……… I wasn't thinking about recruiting staff. I was just thinking of my own position"; and because he had signed nothing with Goldbridge so that it was "all theoretical…nothing concrete". I found this implausible.

(6) On 15 July Mr Imam-Sadeque sent 9 text messages to Ms Germano. I do not know the content of those messages, nor the time at which they were sent, nor the number of messages in the opposite direction. It is a reasonable inference from the timing that the text traffic involved discussion between Mr Imam-Sadeque and Ms Germano about the lunch meeting with Mr Nixon, how it had gone, and whether Mr Nixon was still a good target for recruitment. Although Mr Imam-Sadeque denied in cross examination that this was their content, he did not proffer any other explanation for this volume of communication at this time.

42. I find that at the lunch on 13 July 2011, Mr Imam-Sadeque and Ms Germano discussed Goldbridge's interest in recruiting Mr Nixon and that Mr Imam-Sadeque encouraged Ms Germano to target him. I also find that they discussed the timescale and procedure for doing so, which was that Mr Imam-Sadeque would meet him in the near future to sound him out and encourage him to join Goldbridge. That was the purpose of the lunch which Mr Imam-Sadeque arranged to have with Mr Nixon on 15 July, and that is what happened at that lunch.

New phone and records of Mr Imam-Sadeque's contact with Goldbridge and Mr Nixon

43. It was on 13 or 14 July that Mr Imam-Sadeque told his wife he needed a new phone and asked her to obtain one. She went to the Vodafone shop and set up the new BlackBerry on her account. Thereafter it was this phone which Mr Imam-Sadeque used in his communications with Goldbridge and Mr Nixon. As explained above, that phone was reset to factory settings in 2012. The surviving records of Mr Imam-Sadeque's conversations over the relevant period are limited. The Vodafone records in respect of the BlackBerry allow a reconstruction of when outgoing calls were made, to whom and for how long. They also record the day on which texts were sent, the number of texts and to whom, but usually not at what time. The records cannot identify the content of texts. The records only identify one side of the phone traffic, that going from Mr Imam-Sadeque to those at Goldbridge. In addition, information of a similar character was available from Mr Nixon's mobile phone records. The content of text messages was not available to be retrieved from Mr Nixon's mobile phone itself because, according to Mr Nixon, he lost it on a beach in France in June 2012. But some of the contents were retrievable from a back up of the phone on his computer, which provided the content of some texts, and also captured a number of voicemails which Mr Imam-Sadeque left on his phone. I refer below to the nature or content of texts or calls where the information is available and of relevance.

18 July 2011 Mr Imam-Sadeque's offer from Goldbridge

44. On 18 July 2011 Scott Sanderson, Goldbridge's prospective Chief Financial Officer, emailed Mr Imam-Sadeque to invite him to meet the following day. This was in order to go through an offer of terms of engagement with Goldbridge and the mechanics of his remuneration. In the event they arranged to meet later that afternoon. Mr Imam-Sadeque was content in broad terms with the outline offer which Mr Sanderson talked him through, and it was agreed in principle. The financial terms being offered involved a guaranteed annual sum, together with a percentage profit share and an advance on that profit share; in addition he would earn a sales commission as a percentage of the performance fee earned by the firm on assets under management. In order to protect Goldbridge's confidentiality, the evidence about these amounts was given in private during the hearing and I will not set them out in this judgment. It is sufficient to say that if the figures in the Business Plan were achieved, Mr Imam-Sadeque would expect to receive very substantial sums over the course of the following 5 years. Those sums are such as to belie Mr Imam-Sadeque's claim that the £1.7 million value of his 2012 Fund Units was a "life changing" amount which he did not expect to have the opportunity of earning again, and which he would never have put at risk. If Goldbridge were successful, what he was being offered would potentially earn him the sort of sums to which more senior employees or partners in successful City hedge funds are accustomed, and for which they are sometimes reviled. Those sums were such that he might well have been willing to jeopardise receipt of his 2012 Fund Units if he thought it necessary to promote the success of Goldbridge in general, and of himself and his future sales team, including Mr Nixon, in particular.

45. Mr Sanderson showed Mr Imam-Sadeque the Goldbridge Business Plan and they discussed it. It made specific provision for three sales staff, which was, according to Mr Imam-Sadeque, "touched on" in the course of the conversation. Mr Imam-Sadeque maintained that he did not ask and was not told who the other two people were whom Goldbridge had in mind as the sales staff. I found this implausible for the reasons I have already identified.

46. Mr Imam-Sadeque did not inform his superiors at BlueBay of this offer from Goldbridge, nor of Goldbridge's business plan.

19 – 22 July 2011 Compromise Agreement between Mr Imam-Sadeque and BlueBay

47. By email of 19 July 2011 Mr Imam-Sadeque wrote to Mr Willis, copied to Mr Francioni, stating that, in light of the meeting on 6 July 2011, he could not see circumstances in which he would be happy to remain at BlueBay, that he wanted to be able to leave, and that he looked forward to BlueBay's proposals for a way in which they could agree an amicable way forward. The letter was carefully drafted so as not to amount to a resignation, whilst sending a message making it clear that he wanted to leave.

48. Mr Willis responded to Mr Imam-Sadeque's email to say that there was now no point in the meeting they had planned for the following day, given that Mr Imam-Sadeque had decided to leave, and that Ms Benitez-Castellano would be in touch. Ms Benitez-Castellano ascertained the amount of Mr Imam-Sadeque's unvested stock and put a proposal from BlueBay to him on 20 July 2011 in response to his request. The proposal was that he ensure a smooth handover to Mr Turkinan, which she expected to be completed by mid October or earlier, and then be on garden leave until 31 December 2011, when his employment would terminate. In that email she explained to Mr Imam-Sadeque that BlueBay's proposal included that he would be released from his post-termination covenants, except for the covenant relating to poaching employees, and that if he cooperated and there was a smooth handover, and he did not breach any of the terms of the proposed compromise agreement, he would be treated as a Good Leaver for the purposes of the 2012 Fund Units that were due to vest in January and March 2012, but that fund units due to vest in subsequent years would be forfeit. The email offered to pay £1,000 for Mr Imam-Sadeque to take legal advice on the compromise agreement.

49. Mr Imam-Sadeque responded to this email within an hour, saying that he was happy with the general terms of BlueBay's proposal and asking for a compromise agreement to be sent to him for his lawyers to review. Mr Imam-Sadeque's evidence was that it took him only about three minutes to decide to accept this proposal. It was an attractive proposal from his point of view. He could start with Goldbridge at the beginning of January 2012 and get his £1.7m worth of 2012 Fund Units, and moreover could enjoy several months paid garden leave with his family; whereas if he had resigned he would only have been able to get the 2012 Fund Units by giving 6 months notice at the end of March 2012 to expire at the end of September 2012, and would thereafter have been subject to the 6 month non competition covenant (which would be reduced by whatever period was spent on garden leave), which would have prevented him starting at Goldbridge until towards the end of 2012 at the earliest, or more probably 2013; and would have potentially left him unemployed and unpaid for up to 6 months. Whilst the evidence was that Goldbridge was willing to keep the offer open for him to join in 2012, if necessary, it was obviously more attractive for him to be able to be part of the start up as soon as possible after its launch. It was not clear that the post would have been open to him if he had been unable to start until 2013.

50. The proposed terms also held obvious attractions for BlueBay. Mr Imam-Sadeque was a disaffected senior employee, in a client facing role, who was no longer committed to BlueBay and wanted to leave. If BlueBay terminated his employment, there would be a risk of an unfair and/or constructive dismissal claim and such termination by BlueBay would have involved his being a Good Leaver for the purposes of the vesting of all his fund units in subsequent years, not just the 2012 Fund Units. If he was intent on earning his 2012 Fund Units, the best BlueBay could hope for would be that he would give 6 months notice at the end of March 2012 to expire at the end of September 2012; and from BlueBay's point of view there was no certainty he would do it then, given that BlueBay were at this stage unaware of his future employment prospects elsewhere. It would be advantageous for BlueBay if amicable terms could be agreed to ensure a swift and smooth transition of his clients and consultant contacts to his direct report, Mr Turkinan; and for him then to be out of the office on garden leave, rather than remaining at work until at least the end of September and quite possibly thereafter, with the obligation to pay him until at least the end of March 2012 and quite possibly thereafter.

51. A draft Compromise Agreement was sent by BlueBay that day, and Mr Imam-Sadeque reviewed it with his solicitors, Doyle Clayton, on the following day, 21 July 2011. He asked BlueBay for copies of extracts of the Employee Handbook and relevant Deferred Remuneration Plan documentation, which were provided. Mr Imam-Sadeque emailed Ms Benitez-Castellano to say that, having spent most of the day with his lawyers reviewing the draft, he was very confident that the lawyers would be able agree on a final settlement agreement shortly, subject to a few minor changes.

52. The Compromise Agreement, still dated 21 July 2011, was signed by the parties on 22 July 2011 ("the Compromise Agreement"). Its essential terms remained those put forward in BlueBay's initial proposal explained in Ms Benitez-Castellano's email. I will return to its exact terms later in this judgment.

27 July 2011 Mr Imam-Sadeque forwards details of BlueBay's internal restructuring to Goldbridge

53. On 27 July 2011, Mr Francioni sent an internal email to the firm entitled "Update on Global Sales Team", announcing the restructuring at BlueBay. This referred to Mr Hojmark-Jensen's appointment to the new role of Head of Sales, EMEA, and to Mr Imam-Sadeque's departure at the end of the year, as well as the creation of a new sales committee, and the promotion of Charmian Wan to Head of Sales, Non Japan Asia & Australia. Mr Imam-Sadeque forwarded this email to Ms Germano and Mr Shewaram, but chose to do this indirectly by forwarding it first to his personal email address, and then from that email address to Ms Germano and Mr Shewaram, rather than directly from his BlueBay email address.

29 July 2011 Mr Imam-Sadeque's visit to Goldbridge's offices

54. On 29 July 2011 Mr Imam-Sadeque went to Goldbridge's offices to sign his offer letter from Goldbridge. Mr Imam-Sadeque had initially disclosed that letter in heavily redacted form, but during the trial it was disclosed in a less redacted form. Apart from the remuneration structure as offered on 18 July, which I have already described, it shows substantial additional benefits including £20,000 per annum into a personal pension scheme. It also identifies that the factors taken into account by the Remuneration Committee in allocating Sales Team Profit Pool included the overall performance of the business and the nature of the clients. It confirms that Mr Imam-Sadeque could expect to be very highly remunerated at Goldbridge if the business was a success, and that his remuneration would be increased by the success of the business in general, and that of his sales team in particular. Mr Imam-Sadeque was at this stage required to make a capital contribution of only £5,000 to Goldbridge.

55. He arrived at about noon and met Ms Germano. Reto Jauch, a headhunter, also had a briefing meeting with Ms Germano at Goldbridge's offices on the same day. This was to discuss, amongst other things, targeting Mr Nixon for a sales position at Goldbridge. Ms Germano introduced Mr Imam-Sadeque to Mr Jauch. Mr Imam-Sadeque maintained in his evidence that there was no mention of Mr Jauch approaching Mr Nixon on this occasion, and that he was unaware of Ms Germano's intention to do so until late August 2011. Again I found this implausible. Both Ms Germano and Mr Jauch would have wanted to know from Mr Imam-Sadeque whether he wanted Mr Nixon to be in his sales team of two or three (the business plan had identified a team of three including Mr Imam-Sadeque, but in the event it was just Mr Imam-Sadeque and Mr Nixon); and they would have wanted to know what he could tell them about how receptive Mr Nixon was likely to be, and how best to persuade him to come, and on what terms. It is simply not credible that nothing would have been said about Mr Nixon's recruitment, even if Mr Imam-Sadeque and Ms Germano had not discussed it before, when one of the very reasons for Mr Jauch's visit was to discuss the recruitment of Mr Nixon. Mr Imam-Sadeque had signed an NDA with Goldbridge and had signed an offer letter from Goldbridge. There was no reason, so far as Ms Germano was concerned, to keep this information from Mr Imam-Sadeque and every reason to discuss it with him and receive his input.

56. Mr Imam-Sadeque was unable to provide any coherent explanation as to why Ms Germano would have felt unable to tell him about wanting to recruit Mr Nixon on or before 29 July 2011 but suddenly felt able to mention this to him in late August 2011. The evidence was that Mr Jauch first approached Mr Nixon on 8 August 2011, so it would have made no sense for Ms Germano to have said, in late August, that she planned to use Mr Jauch to make an approach to Mr Nixon, which was Mr Imam-Sadeque's evidence. It is simply not plausible that Ms Germano would have given a headhunter the go ahead, as she must have done before 8 August 2011, to try to recruit Mr Nixon to Mr Imam-Sadeque's small sales team without even mentioning the idea when they were in the office together with the headhunter having come to meet her for the very purpose of discussing Mr Nixon's recruitment. Such discussion must have included a consideration of how best to achieve their shared objective of persuading Mr Nixon to leave BlueBay and join Goldbridge. It is likely to have included discussion of what terms he would need to be offered, as well as the process and timing of how best to approach him.

57. I find that on this occasion Ms Germano, Mr Jauch and Mr Imam-Sadeque did discuss Mr Nixon's recruitment; and that they discussed how best to achieve their shared objective of persuading him to leave BlueBay and join Goldbridge.

1 & 2 August 2011 Mr Imam-Sadeque informs Towers Watson he has an agreement with BlueBay

58. In an email sent on 1 August 2011 Mr Imam-Sadeque notified his nine contacts at Towers Watson, including Mr Loveday and Mark Horne, that he would be leaving BlueBay at the end of the year. It explained that he expected to be in the office until September handing over to Mr Turkinan, and asked them to route further business contacts through him. This was an appropriate communication, of which no complaint is made; but BlueBay alleges that Mr Imam-Sadeque was in breach of duty in his follow up to the response he received from two of the recipients, by revealing the fact that he had entered into a compromise agreement. Mr Loveday responded that he was sorry to hear that Mr Imam-Sadeque was leaving and asked "Do you have anything lined up?" Mr Imam-Sadeque emailed back on 1 August: "I have a settlement in place with BlueBay which means I can't really discuss anything for now but I'll be in touch in the new year I'm sure". Mr Horne's email asked "Where are you off to?" to which Mr Imam-Sadeque sent the email response: "Can't say anything as I'm subject to an agreement with BBay. However I will be in touch in the new year".

2-4 August 2011 Mr Imam-Sadeque meets Mr Nixon

59. On 2 August 2011 Mr Imam-Sadeque attended a Northill summer drinks event with Ms Germano, Mr Shewaram and Mr Midha. Afterwards he and his wife went for dinner with them to celebrate his decision to join Goldbridge. Early the following morning, Mr Imam-Sadeque emailed Mr Nixon suggesting they meet that afternoon. Emails were exchanged between them about when to meet, resulting in Mr Imam-Sadeque suggesting putting it off to the following day because he had been held up. What had held him up was a visit to Goldbridge's offices where he had met Jon Little of Northill. The next day, 4 August 2011, Mr Imam-Sadeque again emailed Mr Nixon in the morning to arrange to meet, and they met for lunch.

60. Mr Imam-Sadeque's evidence was that he arranged to meet Mr Nixon because he (Mr Imam-Sadeque) was about to go on holiday, and was intending to procure that he be allowed to go on garden leave as soon as he got back. His explanation for arranging the lunch was that "I wanted to just catch up and say goodbye to the two guys I'd recruited to BlueBay: Cenk and Damian." He said of Mr Nixon: "I wanted to make sure I could say goodbye to him because I didn't know when I'd see him next." This explanation made little sense to me. He had met Mr Nixon for lunch as recently as 15 July. They were good friends and lived quite close to each other. There was no reason to "say goodbye". In fact they kept in touch by text whilst Mr Imam-Sadeque was on holiday in Greece during the following two weeks, and Mr Imam-Sadeque contacted Mr Nixon on 6 September to arrange another lunch. He knew he would have ample opportunity to lunch with him as often as he wished, and at any time, during his four and a half months of garden leave.

61. An alternative explanation is that Mr Imam-Sadeque was to make contact with Mr Nixon as part of the process of recruitment, which was to be formally conducted by using the headhunter, Mr Jauch. That this is the true explanation is suggested by the timing of the approach, coming immediately after the drinks and dinner with Goldbridge on the evening of 2 August, and by the fact that Ms Germano was waiting to give Mr Jauch the final go ahead to approach Mr Nixon. Emails between Ms Germano and Mr Jauch reveal that at some stage during the day on 3 August, Mr Jauch was attempting to contact Ms Germano to check if she was happy to give the "final green light" to initiate the process with Mr Nixon. The obvious reason for a delay in giving the final green light was to have Mr Imam-Sadeque's feedback from having discussed it with Mr Nixon.

62. Mr Imam-Sadeque sent 11 text messages to Ms Germano on this date. At 1608 he emailed Mr Nixon, again trying to meet him: "come and see me – I'm in the office". There was no email response, which suggests that Mr Nixon may well have gone to see Mr Imam-Sadeque. At 1953 that evening Mr Imam-Sadeque phoned Mr Shewaram and spoke to him for over 23 minutes.

63. It was at 1316 on 4 August that Ms Germano emailed Mr Jauch to give him the green light in these terms:

"It is a good idea for you to launch the process on Damian please…Please recall that BBAM is a strange culture and when Damian resigns (and he is motivated as he is unhappy and has been actively looking) they will: (a) try to get a lot of detail as to where he is going; (b) keep him. We need to ensure that neither of these happen. Let me know how you get on".

64. The information that Mr Nixon was motivated to join Goldbridge because he was unhappy and had been actively looking to move is likely to have come from Mr Imam-Sadeque. The timing suggests that Mr Imam-Sadeque was most likely at lunch with Mr Nixon when Ms Germano sent this email to Mr Jauch. The records contain no call or text from Mr Imam-Sadeque to her at about this time, but she may have called him to get this information; or it may have been passed to her and/or Mr Shewaram as a result of Mr Imam-Sadeque meeting Mr Nixon in the office on the afternoon/evening of 3 August.

65. At Mr Nixon's disciplinary hearing held by Mr Francioni on 23 November 2011, Mr Nixon denied having met Mr Imam-Sadeque for lunch in August. In an email dated 15 December 2011 Mr Nixon claimed this meeting did not take place on 4 August as he was on holiday. His denial that the lunch took place, taken together with what I find to be Mr Imam-Sadeque's false explanation for arranging it, supports the conclusion that this was part of the recruitment process.

66. I find that Mr Imam-Sadeque's purpose in making arrangements on 2 and 3 August to meet Mr Nixon was to further Mr Nixon's recruitment to Goldbridge, and to report back to Ms Germano in order to enable her to give the final green light to Mr Rauch to approach Mr Nixon. Mr Imam-Sadeque encouraged Mr Nixon to move to join him at Goldbridge, or at the least sounded him out about the terms on which he would be prepared to do so, either at a meeting in the office on 3 August or at lunch on 4 August, or both. He reported back favourably to Ms Germano and/or Mr Shewaram so that the headhunter could be given the final go ahead to approach Mr Nixon.

5–22 August 2011 communications between Mr Imam-Sadeque and Goldbridge during his holiday

67. On 5 August 2011, before leaving on holiday to Greece, Mr Imam-Sadeque attended Goldbridge's offices to see Ms Germano to talk about an increase in his shareholding and profit share. The result of the conversation was that he secured a larger profit share.

68. On 8 August 2011 Mr Jauch contacted Mr Nixon and they agreed to meet.

69. Mr Imam-Sadeque sent 2 text messages to Ms Germano on the following day. It is likely that he was asking about progress in respect of the recruitment of Mr Nixon. I was unconvinced by his suggestion that he felt the need to contact Ms Germano to tell her of his safe arrival in Greece.

70. Whilst Mr Imam-Sadeque was on holiday in Greece he sent 15 texts to Ms Germano and tried to call her 3 times, and sent 6 texts to Mr Shewaram. Mr Imam-Sadeque's evidence is that these communications were about jockeying for position with Mr Shewaram and discussing broadly how they might work together from January. I found it implausible that texts would have been used for these sort of discussions, which would require lengthier exposition than that medium was suited to. During this time Mr Jauch spoke to Mr Nixon several times. It seems to me likely that in at least some of these communications, Mr Imam-Sadeque sought, and was given, a report on progress in recruiting Mr Nixon. He knew the process had been put in train and would have been interested in progress in recruiting the man who would become the only other member of his sales team at Goldbridge.

6 September 2011 arranging lunch with Mr Nixon

71. Whilst Mr Imam-Sadeque was away on holiday he asked BlueBay if he could start his garden leave earlier than had been planned, having effectively concluded his handover to Mr Turkinan. BlueBay agreed to this, on the basis that he would remain available to come into the office if his help were needed on some particular aspect of the buiness. On the Monday after he returned from holiday, 22 August, he went into the office to clear his personal directories, and thereafter was on garden leave.

72. Mr Jauch met Mr Nixon on 31 August, and was in touch with him on the morning of 6 September to arrange to meet him again on 8 September. On 6 September Mr Imam-Sadeque arranged to have lunch with Mr Nixon on 16 September. In his evidence he suggested this was just to catch up and because he had time on his hands. This explanation was difficult to reconcile with his explanation that his lunch on 4 August had been to say goodbye. Their email exchange reveals that they arranged to meet somewhere "close to home" (Kensington) because they did not want to be seen together in Mayfair. Mr Nixon texted Mr Imam-Sadeque at 1154: "Next week we will have plenty to talk about". Mr Imam-Sadeque replied at 1155: "I'm sure we will – keep your head down". Even on Mr Imam-Sadeque's own account, he knew by this stage that Goldbridge were seeking to recruit Mr Nixon and would be using a headhunter to do so. These exchanges were references to Mr Nixon's forthcoming talks with Mr Jauch, of which Mr Imam-Sadeque must have been aware.

73. Given the timing of the intended lunch, and that they both knew that Mr Nixon was being headhunted to come to Goldbridge, it is probable that its purpose was in order to discuss his recruitment. Mr Imam-Sadeque was keen for Mr Nixon to come and join him at Goldbridge. In the event Mr Nixon cancelled the lunch by text on 15 September.

13 September 2011 Mr Imam-Sadeque sends confidential documents to Goldbridge

74. According to Mr Imam-Sadeque, towards the end of August 2011, after his return from his family holiday in Greece, he was told by Ms Germano that the plan was to launch Goldbridge in late September or early October.

75. On 13 September Mr Imam-Sadeque sent an email to Mr Midha, Goldbridge's prospective compliance officer, in order to give him the terms of the restrictive covenants by which he was bound. He did so by forwarding the email which his solicitors, Doyle Clayton, had been sent by BlueBay's solicitors when finalising the Compromise Agreement. This involved sending all the attachments to Mr Midha, including a late draft of the Compromise Agreement, and the Employee Handbook and Bonus Plans.

15-30 September concluding the recruitment of Mr Nixon to Goldbridge

76. On 15 September Mr Nixon went to Goldbridge's offices with Mr Jauch, where he met Michelle Sharpling and then Ms Germano. Ms Sharpling was employed by Kedge Capital Services Ltd, who provided administrative services to Northill, and was essentially performing a Human Resources role for Goldbridge.

77. On 14 September Mr Imam-Sadeque sent two texts to Ms Germano, one to Mr Shewaram and three to Ms Sharpling. On 15 September 2011 he called Ms Germano shortly before her meeting with Mr Nixon.

78. On 19 September Mr Rauch again met Mr Nixon. On that day Mr Imam-Sadeque called Ms Sharpling and texted her 8 times.

79. Mr Imam-Sadeque's explanation for the communications with Ms Sharpling was that they were concerned only with the administrative arrangements for his joining in due course. This was unconvincing. He was not going to join until January. The volume and timing of the communications with the individual at Goldbridge who was meeting Mr Nixon in a human resources capacity strongly suggest that the communications were about Mr Nixon's recruitment. Mr Imam-Sadeque would have wanted to do anything he could to encourage the success of the recruitment process, and I find that this is what he was doing in his communications with Ms Sharpling on 14 and 19 September.

80. Ms Germano met Mr Nixon on 20 September to conclude his recruitment. Their discussions finished shortly before 1500. Mr Imam-Sadeque tried to call Ms Germano at 1454 that afternoon. He sent her 4 texts that day. They spoke for about 24 minutes later that afternoon at 1820. Those communications are likely to have been about the meeting which Ms Germano had with Mr Nixon to finalise his recruitment.

81. Mr Nixon was provided with an offer letter dated 26 September 2011 which he signed but did not date. The evidence suggests that he returned it, signed, to Goldbridge on 28 September.

30 September 2011 Mr Imam-Sadeque signs Goldbridge Shareholder Agreement

82. According to Mr Imam-Sadeque, towards the end of August 2011, after his return from holiday in Greece, Ms Germano told him that the plan was to launch Goldbridge in late September or early October. Mr Imam-Sadeque was involved in discussions about the press release in the second half of September.

83. In the last week or two of September, Ms Germano offered Mr Imam-Sadeque the chance to be a Founding Partner of Goldbridge, and he was pleased to accept. Mr Imam-Sadeque's evidence was that he signed a Shareholders Agreement on 30 September. No document of that date has been disclosed, but there is such an agreement dated 10 November. If a document was signed on 30 September in identical terms, it provided that it was to take effect immediately. I return to the terms of the Agreement when dealing with the 10 November document.

30 September Mr Nixon resigns and Mr Imam-Sadeque's contact with Mr Nixon

84. On 30 September 2011 Mr Nixon resigned from his employment with BlueBay. Mr Jauch, the headhunter, charged Goldbridge almost £100,000 for his part in the recruitment of Mr Nixon, which, apart from discussions between himself and Goldbridge, had involved contact with Mr Nixon on 8, 15 August (phone) 31 August, 8, 15, 19, 22 September (meetings) and 28 September (phone).

85. BlueBay considered that Mr Nixon's departure would be a big loss and wanted to try to talk him into staying.

86. Mr Nixon forwarded a substantial client and prospective client list to his personal email address on Friday 30 September, but this, and other breaches of confidence by Mr Nixon, were not discovered by BlueBay until Monday 3 October 2011. On the afternoon of 30 September 2011, Mr Imam-Sadeque and Mr Nixon attended a drinks reception hosted by Northill or Goldbridge at a pub in Chelsea, to celebrate the launch of Goldbridge the following week.

87. Mr Hojmark-Jensen called Ms Germano and said that he was aware that Mr Nixon had resigned to go to a new employer. He asked her if she was aware of this, and knew where he was going. Mr Hojmark-Jensen did not want Mr Nixon to leave BlueBay and thought that it would be helpful to know as much as possible about where he might be going in order to help him convince Mr Nixon to stay at BlueBay. Ms Germano declined to comment. Ms Germano rang Mr Imam-Sadeque. Mr Imam-Sadeque then rang Mr Nixon and left a voicemail message which included the following:

"Damian its Fahim here. Umm I've just had a call from Gina and she said she's said a bit too much about Mattias [Hojmark-Jensen] to you, and she called me up and she was in a bit of a tizz/panic about it that she'd said too much and she wanted me to have a word with you about it. Now, it turns out, as I suspected, that little weasel Mattias has already called up Gina 'cos he's been told by Alberto[Francioni] that you've left …… So he's already called her up and asked if you'd joined her, and she had to say no comment. So it's highly likely he will call you, say fucking nothing, just say 'no comment' and…… be very…circumspect, ……..and run it past me …….and at some point I'll explain the whole context to you and why it's all so sensitive. Bye"

88. Mr Nixon responded by sending a text to Mr Imam-Sadeque :

"Hi. Got your message. I am on guard and know what's at stake. Thought Gina probably said more than she should. Don't worry. I am not such a weak link and no one can get to me before Tuesday cos I am unreachable in the sticks! D".

89. Mr Imam-Sadeque responded to Mr Nixon saying "Good". Mr Imam-Sadeque then left a further voicemail message for Mr Nixon:

"Damian, thanks for your text. Let's do…Let's have one rule of thumb between us: No texts. You've got a duty of care to BlueBay. So no text, no email, even personal. Just phone calls and phone messages. No text, no email. Alright, bye"

90. Mr Imam-Sadeque's evidence was that he told Mr Nixon not to speak to Mr Hojmark-Jensen because he was concerned that Mr Hojmark-Jensen would "try to weasel his way back into the Goldbridge project" and that Mr Imam-Sadeque wanted to avoid this. This seemed to me unlikely, given the commitment which Goldbridge had made to Mr Imam-Sadeque. A far more likely explanation is that Mr Imam-Sadeque was trying to ensure that Mr Nixon did not speak to BlueBay because of the two concerns which had been articulated in Ms Germano's email on 4 August 2011: "when Damian resigns ..[BlueBay] will: (a) try to get a lot of detail as to where he is going; (b) keep him. We need to ensure that neither of these happen." Mr Imam-Sadeque was encouraging Mr Nixon not to engage in any conversation with Mr Hojmark-Jensen or anyone else at BlueBay in order to thwart any attempt to try to persuade Mr Nixon to stay at BlueBay. I find that Mr Imam-Sadeque was calling Mr Nixon, at Ms Germano's instruction and on behalf of Goldbridge, in order to do all he could to ensure that Mr Nixon did not change his mind about leaving BlueBay and joining Goldbridge; and for this reason told him that he should not engage in conversation with Mr Hojmark-Jensen or tell him about his intention to join Goldbridge.

3 October Goldbridge launch and press release

91. On Monday 3 October 2011 Northill made an announcement, in the form of a press release, of the launch of Goldbridge as "a newly established European credit asset management company" with up to $100 million of equity and seed capital to be provided by Northill at the outset. The 15 strong management and operational team were identified individually, including reference to Mr Imam-Sadeque and Mr Nixon in these terms: "Goldbridge has also put an experienced institutional distribution team in place led by Fahim Imam-Sadeque and Damian Nixon (both formerly with BlueBay Asset Management)." The words "led by" appeared as a result of a mistake. They had been amended in a draft prior to 28 September so as to read "which will be led by", but the wrong draft had been sent for publication. The words "formerly with BlueBay Asset Management" were not part of that error. Mr Imam-Sadeque and Mr Nixon were not the only individuals whose BlueBay experience was highlighted. All of Ms Germano, Mr Shewaram, Samantha Wessels, David Levenson, Thomas Naess and Nick Thompson were described as having gained their experience with BlueBay. Their credentials as ex BlueBay employees were being used to help promote the new business.

92. Mr Imam-Sadeque's evidence, which I accept, was that he had initially been unwilling for his name to be used in the press release, but had ultimately given up his objection when it appeared that he would be unable to prevent it. He also said that he had not seen the wording of the passage referring to him before it went out, and was told no more than that his name would be used. He said that he was not involved at all in agreeing the content of the announcement and had asked for, but been refused, a copy of it prior to its release. I found this implausible. He had in fact asked Mr Midha on about 28 September for his job title "Head of Distribution" to be added to the release, which suggests he was aware of the terms of the draft at that stage. As a founding partner he would be likely to have been allowed an opportunity for input at the very least. He would have been expected to give his specific input in relation to the references to him and his team. My conclusion is that he was aware of the terms of the press release as intended to be published, and had approved and agreed to the terms in which it was released, save for the "led by" error: he thought it was to use the language "which will be led by". He knew, however, that it would describe himself and Mr Nixon as "formerly with BlueBay Asset Management". He was aware of, and approved, the references which emphasised the credentials of many of the senior management as former BlueBay employees.

93. Although the announcement was referred to as a launch, Goldbridge was not in fact yet ready to commence doing business. The legal documentation had not been finalised and it awaited FSA approval, which took some little time.

Mr Imam-Sadeque's responses to questions following the announcement

94. On 3 October 2011 Mr Midha sent an email to Mr Imam-Sadeque and others with a suggested text for them to use in giving responses to inquiries. It warned those serving their notice period or on garden leave to be extremely careful about what they said or implied. It suggested that the response if called by BlueBay should be: "I'm very excited to be part of the Goldbridge team. We've all worked extremely hard and look forward to future opportunities. I cannot comment further than that". Mr Imam-Sadeque followed this script in his response to Mr Hojmark-Jensen on 4 October. Describing himself as part of the Goldbridge team might have suggested to the uninitiated that he was already employed at Goldbridge in that team, rather than that he would in the future be in that position; but Mr Hojmark-Jensen would not have read it in this way because he knew the true position. Mr Goulding QC relied on the words "We've all worked extremely hard" as evidence that Mr Imam-Sadeque had been heavily involved in devising Goldbridge's plans and preparations. I do not think they will bear that weight. Mr Imam-Sadeque was merely using a formula for general use, not specific to him, as recommended by his future Head of Compliance. I will address below the true extent of his involvement in Goldbridge's plans and preparations.

3 November 2011 lunch with Mr Nixon

95. On 3 October 2011, BlueBay discovered that Mr Nixon had forwarded confidential information (including an extensive list of BlueBay's clients and prospective clients) to his personal email address on the day of his resignation. It therefore suspended Mr Nixon's email account and locked him out of his BlackBerry. Suspicion naturally fell also on Mr Imam-Sadeque, and BlueBay suspended his email account and his work BlackBerry.

96. Ms Benitez-Castellano asked Mr Nixon to meet her and Mr Willis the following day. That evening Mr Imam-Sadeque called Mr Nixon and they talked for over 5 minutes. It is likely they spoke about Mr Nixon's situation with BlueBay, and about what he should or should not say at his meeting the following morning.

97. On 4 October 2011 Mr Imam-Sadeque texted Mr Nixon immediately after Mr Nixon's meeting with Mr Willis and Ms Benitez-Castellano: "How r u". Mr Nixon responded: "Not great. They accuse me of stealing information. This is not going to be very nice. Mishcon are dealing with it". Mr Imam-Sadeque suggested meeting up, but subsequently thought better of it (at Ms Germano's suggestion, so BlueBay alleged but Mr Imam-Sadeque denied).

98. In the following weeks Mr Nixon was involved in a disciplinary process at BlueBay. During this period Mr Imam-Sadeque had numerous communications with those at Goldbridge.

99. On 3 November 2011 Mr Imam-Sadeque had lunch with Mr Nixon, with Mr Midha present. This was organised by Mr Imam-Sadeque. His evidence was that the purpose of the lunch was to show Mr Nixon support as a friend and that this was purely a social occasion. I found this unconvincing. If this had been a purely social occasion, Mr Midha would not have been invited by Mr Imam-Sadeque to join them. Mr Midha was not a friend of either; he was the prospective Chief Compliance Officer at Goldbridge. It is more likely that he was there to provide advice and support for Mr Nixon in his disciplinary proceedings and to give advice about his FSA registration, which on Mr Imam-Sadeque's evidence was one of the things they discussed. Mr Imam-Sadeque's denial that they discussed Mr Nixon's disciplinary proceedings at this lunch is not credible. It was the very context in which this lunch was arranged. I infer that Mr Imam-Sadeque was concerned about the risk of Mr Nixon being unable to join Goldbridge, either when planned, or at all, as a result of his disciplinary proceedings; and the risk to his FSA registration. Mr Imam-Sadeque and Mr Midha were both there to provide advice and support to Mr Nixon in relation to his dispute with BlueBay, and did so. In doing so they were seeking to look after Goldbridge's interests as Mr Nixon's prospective employer.

100. Given my findings about Mr Imam-Sadeque's involvement in Mr Nixon's recruitment, I would also expect him to have been concerned whether Mr Nixon would implicate him and put his 2012 Fund Units at risk. It is likely that Mr Imam-Sadeque and Mr Nixon discussed what they were each going to say to BlueBay about Mr Imam-Sadeque's part in Mr Nixon's recruitment to Goldbridge.

10 November 2011 execution of the Shareholders Agreement

101. On 10 November 2011 the final form of the Shareholders Agreement was executed. It reflected a group structure involving a Jersey limited liability company as the holding company for a group of three English partnerships including Goldbridge. It was signed by Mr Imam-Sadeque who was named in it as one of the four Founders together with Ms Germano, Mr Shewaram and Mr Levenson. It was to take immediate effect. Amongst other things it provides:

(1) by Clause 2.3.1, a representation and warranty by each Founder that he has full power and capacity, is not constrained by any contract or arrangement that would prevent him being, and has unconditionally obtained all requisite approvals necessary for him to be engaged as an Executive and to enter into and perform his obligations under the Agreement;

(2) by Clause 6.2, that each Shareholder and Founder shall use all reasonable and proper means in his power to maintain, improve and extend the business of the Group and to further the reputation and interests of the Group in accordance with the Business Plan and Budget;

(3) by Clause 6.4, that no Shareholder and no Founder shall, directly or indirectly, divert or participate in causing to be diverted away from the Group any business or opportunity that belongs to any Member of the Group (being business or an opportunity that such Shareholder (or any of its directors, shareholders, partners or employees) or Founder came upon by virtue of his position as an Executive or director of any Member of the Group);

(4) by Clause 6.9.1, that each of the Parties undertakes with the others to perform and observe and (so far as each party is able by the exercise of voting rights or otherwise to do so) to procure that the Company and each Member of the Group will perform and observe all (and that the Affiliates of any Party will not breach any of) the provisions of this Agreement;

(5) By clause 7 the terms of the Agreement were to be effective from 10 November 2011.

102. BlueBay alleged that in signing this Agreement and undertaking the obligations contained in it, Mr Imam-Sadeque was undertaking to further the interests of Goldbridge, and participate with others in promoting Goldbridge, with immediate effect.

23 November 2011 Mr Nixon's and Mr Imam-Sadeque's meetings with BlueBay

103. On 23 November 2011, Mr Nixon attended a disciplinary meeting held by Mr Francioni. Mr Hojmark-Jensen attended as his companion. So far as his recruitment to Goldbridge was concerned, he said that the process was very quick and that he had been hired two weeks before the announcement was made. He said that he had not known prior to his resignation that Mr Imam-Sadeque was to be involved in Goldbridge. He denied that he had had lunch with Mr Imam-Sadeque in August, and said that they were going to have lunch in September but that he had cancelled it as result of signing an NDA at his first meeting with Goldbridge because he did not want inadvertently to let anything slip to a BlueBay employee. These were not truthful or frank answers.

104. On the same day Mr Imam-Sadeque attended a meeting at BlueBay with Mr Willis and Ms Benitez-Castellano at the latter's invitation. Ms Benitez-Castellano's note of the meeting records the following. Mr Willis outlined BlueBay's concerns that there had been a coordinated exercise to promote Goldbridge, and concerns over inaccurate references to BlueBay employees in the press release. When he raised concerns about Mr Imam-Sadeque's involvement in Mr Nixon's recruitment, Mr Imam-Sadeque's initial reaction was "show me your proof". Later in the meeting Mr Imam-Sadeque said that he didn't know anything about it in advance, that Mr Nixon had acted independently, that the only contact he had had with Mr Nixon was by text, and that they had been going to have lunch but had decided not to. Ms Benitez-Castellano asked him to confirm that he was saying that the only contact he had had with Mr Nixon was that he had texted him. Mr Imam-Sadeque confirmed that that was the case, and said he had not contacted him until after he had resigned. All this is recorded in Ms Benitez-Castellano's note of the meeting.

105. Mr Imam-Sadeque's evidence was that whilst a good deal of what is in the note was said at some stage of the meeting, the note was not an accurate record. The meeting soon deteriorated into a "bun fight" and was very unruly because he was not going to let Mr Willis bully him. He did not accept Ms Benitez-Castellano's note as an accurate record of what he said in relation to his contacts with Mr Nixon. He said he was asked whether he had met Mr Nixon whilst he was on garden leave, to which he said no, which was true vis a vis the lunches in July and August which occurred before he went on garden leave. In her evidence, Ms Benitez-Castellano described Mr Imam-Sadeque as being "very defensive and very aggressive", but said that the matters were raised with Mr Imam-Sadeque at this meeting in a professional way and that he had a full opportunity to make comments but that he didn't take it. She said that her note was accurate. I accept her evidence in this respect.

106. What Mr Imam-Sadeque said about his contacts with Mr Nixon was on any view less than a full and frank explanation. He did not explain that he had been introduced to Reto Jauch, the headhunter involved in Mr Nixon's recruitment to Goldbridge or that he had known that Ms Germano had wanted to recruit Mr Nixon to Goldbridge. He did not tell them about his lunches with Mr Nixon on 15 July and 4 August and the arrangement made on 6 September for a further lunch, nor about seeing him at the launch drinks on 30 September 2011. He did not tell BlueBay about the messages he had left for Mr Nixon on 30 September, about avoiding contact from Mr Hojmark-Jensen. Mr Imam-Sadeque's explanation for not doing so was that the meeting was very brief and it was clear to him that BlueBay were not going to listen to anything he said.

107. I accept that the meeting soon became confrontational, and that for those reasons Mr Imam-Sadeque was not inclined to volunteer information. Nevertheless, what he said about not having contacted Mr Nixon except by text was simply untrue. He had had lunch with him twice prior to his recruitment, and had arranged a further lunch on 6 September when even on his own evidence he knew Goldbridge were seeking to recruit Mr Nixon, and when he was already on garden leave. His denial of any involvement in recruiting Mr Nixon to Goldbridge was untrue.

December 2011 and January 2012

108. By letter dated 12 December 2011, Mr Nixon was informed of the outcome of his disciplinary hearing which was that he was dismissed.

109. By a detailed letter of 22 December 2011, Mr Imam-Sadeque was notified by BlueBay of the outcome of his meeting. The points made included the alleged inaccuracy in the Goldbridge press release, and that "you were working for a competitor" (i.e. Goldbridge). The letter alleged that the resignation of Mr Nixon was coordinated to damage BlueBay and that Mr Imam-Sadeque's claim at the 23 November meeting that he had only contacted Mr Nixon by text, and after Mr Nixon's resignation, was untrue because they had lunched together on 4 August. It alleged, amongst other things, breach of the non poaching terms of the Compromise Agreement. It concluded that as a result of the matters raised in the letter, Mr Imam-Sadeque would not have the status of a Good Leaver for the purposes of the vesting of his 2012 Fund Units.

110. On 31 December 2011 Mr Imam-Sadeque's employment came to an end pursuant to the Compromise Agreement. On the same day he signed a Re Affirmation letter as required by the Compromise Agreement warranting that he had not been in material breach of his duties, and this was sent to BlueBay.

111. The dispute quickly crystallised, and on 31 January 2012 Mr Imam-Sadeque commenced these proceedings seeking a declaration of his entitlement to his 2012 Fund Units and specific performance of their allotment to him and/or damages.

The terms of the Compromise Agreement

112. The Compromise Agreement included the following terms:

1.1 Subject to the provisions of clause 7.1 below and on the completion of a detailed and smooth handover to the reasonable satisfaction of [BlueBay], you will be placed on Garden Leave by [BlueBay] until [31 December 2011]

2.1 Subject to your compliance with clause 7.1 below and the other Terms, and on the condition that the BlueBay receives the following:

………….

(c) receipt by the Company of a letter from you and signed by your legal advisor in the form attached at Schedule 2 (Form of Re-Affirmation Letter) on or shortly after [31 December 2011] the provisions of clause 2.2 will apply.

2.2 You will be treated as a Good Leaver for the purposes of the fund units… which are due to vest in 2012 under the provisions of the [Bonus Plans] [which were then identified.] … You will not forfeit those fund units by reason of termination of your employment……..You will forfeit all awards that vest in 2013 and 2014….

6.1 Save as may be required by law or regulatory authority, you will not without the consent in writing of [BlueBay] divulge to any person, or use for your own benefit or the benefit of any person, any information of a confidential nature concerning the business of [BlueBay]….which has come to your knowledge during the course of your employment with [BlueBay]

6.3 You agree that you will keep the circumstances surrounding the termination of your employment and the fact and contents of these Terms strictly confidential and you have not and will not disclose or divulge the same to anyone (save to your professional advisers or otherwise as may be permitted or required by law or by the relevant tax and/or regulatory authorities and, to your immediate family)..

6.5 Subject to any legal or regulatory requirement, you will not make any statement which may have the effect of damaging or lowering the reputation of, or any untrue statement about, [BlueBay], or any of its employees, officers or agents….

6.6 In addition to the above …….you acknowledge and agree that the non poaching of employees clause set out in 5.2 (a) of the Employee Handbook and referenced in clause 20 of your contract of employment with [BlueBay] shall remain in force.

7.1 Prior to being placed on Garden Leave in accordance with clause 1.1 above, you will attend work and continue to carry out your duties properly and provide all reasonable assistance in ensuring that a detailed and smooth handover is completed to the satisfaction of [BlueBay]…..

8. You acknowledge and agree that [BlueBay] has agreed these Terms in reliance on the undertakings, representations and warranties referred to in these Terms and that, in the event of any breach thereof, you acknowledge and agree that any payments made to you as a result of the treatment of the fund units that vest in 2012 as detailed at clause 2.2 above (and any payments made to you pursuant to these Terms) must be repaid to [BlueBay] immediately and will be recoverable by [BlueBay] as a debt.

10. WARRANTY

10.1 You warrant as a strict condition of these terms that:

(a) to the best of your knowledge and belief you have not withheld or failed to disclose any fact which is in your view a material fact concerning the performance of your duties with [BlueBay], or in your view, a breach of any material term (express or implied) of your contract of employment with [BlueBay];

(b) to the best of your knowledge and belief there are no circumstances of which you are aware or of which you ought reasonably to be aware which would amount to a repudiatory breach by you of any express or implied term of the contract of employment with [BlueBay] which would entitle (or would have entitled) [BlueBay] to terminate your employment without notice;

10.2 You acknowledge and agree that these Terms are conditional upon the matters warranted by you in this clause 10.

113. The Re Affirmation Letter required to be provided on or shortly after 31 December 2011 was required to be in the following terms:

"… I am writing to reaffirm and repeat the terms and effect of clauses 10 and 12 of the Agreement. Accordingly I hereby confirm that…

1.1 I warrant that:

(a) I have not withheld or failed to disclose any fact which is in my view a material fact concerning the performance of my duties with [BlueBay], or in my view, a breach of any material term (express or implied) of my contract of employment with [BlueBay];

(b) there are no circumstances of which I am aware or of which I ought reasonably to be aware which would amount to a repudiatory breach by me of any express or implied term of the contract of employment with [BlueBay] which would entitle (or would have entitled) [BlueBay] to terminate my employment without notice;

1.2 I acknowledge and agree that [BlueBay] has entered into the Agreement on the condition that the matters warranted by me in this clause are true. "

The alleged breaches

114. Mr Goulding QC argued that in order to justify forfeiture of the 2012 Fund Units under the terms of the Compromise Agreement, it was necessary for BlueBay to establish that Mr Imam-Sadeque's breaches were of a repudiatory character, or (if it were different), serious misconduct such as would justify summary dismissal; and that BlueBay assumed that burden. This was not so much a concession as an argument which was designed to assist BlueBay when it came to the penalty issue. If the effect of the provisions is that forfeiture of the shares depends upon repudiatory breaches, it can hardly be regarded as penal, even if the doctrine is applicable. In the absence of the Compromise Agreement, BlueBay would be entitled to terminate the contract of employment for repudiatory breach, and if they did so Mr Imam-Sadeque would not be a Good Leaver under the Plans and his unvested fund units would not vest. There would therefore be nothing penal in provisions in the Compromise Agreement that he should forfeit his 2012 Fund Units in the event of repudiatory breach of his employment contract. Such forfeiture would ensue, at BlueBay's election, absent any such provisions. Conversely if the penalty doctrine were applicable, the forfeiture of the 2012 Fund Units for any breach, however minor, might more readily be seen as penal.

115. I shall consider below whether Mr Goulding QC is correct in his construction of the Compromise Agreement, and the effect on the arguments on the penalty issue if he is not. But it is right that BlueBay should be held to its case that it must establish a breach or breaches of a repudiatory character, or (if it be different) amounting to such serious misconduct as would justify summary dismissal; and that if it has failed to do so, Mr Imam-Sadeque's claim should succeed.

116. In this context the test for whether conduct is repudiatory is that set out by Etherton LJ in Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168 at [61], endorsed in Tullett Prebon Plc v BGC Brokers LP [2011] IRLR 420 at [20]:

"...So far as concerns repudiatory conduct, the legal test is simply stated, or, as Lord Wilberforce put it, 'perspicuous'. It is whether, looking at all the circumstances objectively, that is from the perspective of a reasonable person in the position of the innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contract."

117. The alleged breaches are relied on as being individually repudiatory, or as repudiatory when taken together. They fall into three categories:

(1) Mr Imam-Sadeque assisted Goldbridge in establishing, planning and launching its competitive business; he failed to disclose to BlueBay that Goldbridge had the necessary funding, resources, staff and infrastructure in place to do so; and he failed to disclose that it intended to announce its launch on 3 October.

(2) Mr Imam-Sadeque encouraged and assisted Goldbridge to recruit Mr Nixon.

(3) Mr Imam-Sadeque committed other breaches by:

(a) requesting and obtaining the names of BlueBay Investment Grade analysts on 13 July 2011 so that he would be able to pass on details to Goldbridge of possible recruits, and by doing so;

(b) disclosing to Mr Loveday of Towers Watson at dinner on 7 July 2011 his dissatisfaction with BlueBay; and details of Mr Hojmark-Jensen's promotion;

(c) disclosing to Goldbridge on 27 July 2011 the internal restructuring at BlueBay;

(d) disclosing to Mr Loveday and Mr Horne of Towers Watson on 1 and 2 August 2011 the fact that he had a settlement agreement with BlueBay;

(e) sending to Goldbridge on 13 September 2011 a draft of the Compromise Agreement and copies of BlueBay's Employee Handbook and Bonus Plans.

(1) Assisting Goldbridge to set up and launch a competitive business

The duties

118. The duties relevant to this allegation derive from the express and implied terms of the contract of employment.

119. Under paragraph 4, Mr Imam-Sadeque was under an express duty (a) to act in the best interests of BlueBay at all times and (b) not to be directly or indirectly engaged or concerned in any other business where this was, or was likely to be in conflict with BlueBay's interests.

120. Under clauses 5.2(b), (c) and (e) of the Employee Handbook, Mr Imam-Sadeque was under an obligation not to engage in competitive activity in the way proscribed by those covenants.

121. By reason of implied terms of the contract of employment, Mr Imam-Sadeque owed BlueBay (a) a duty of good faith and fidelity ("the duty of fidelity") and (b) a duty not, without reasonable and proper cause, to act in such a way as was calculated or likely to destroy or seriously damage the relationship of trust and confidence between him and BlueBay ("the duty of trust and confidence").

122. As applied to an employee, the duty of trust and confidence adds little to the duty of fidelity: see Malik v Bank of Credit & Commerce International SA [1998] AC 20 per Lord Steyn at 46C, Ranson v Customer Systems PLC [2012] IRLR 769 per Lewison LJ at [38].

123. The duty of fidelity, sometimes referred to in more everyday language as the duty of loyalty, is owed by all employees. It is to be distinguished from a fiduciary duty which is additionally owed by some employees. The difference was articulated again recently by Lewison LJ in Ranson at [41]-[43]:

"41. As Elias J pointed out in Fishel the hallmark of a fiduciary is a single-minded duty of loyalty. The duty of loyalty in that context has a precise meaning: "namely the duty to act in the interests of another". As mentioned, this is not a feature of an employment relationship. In the employment context the duty of loyalty, although given the same label, "is one where each party must have regard to the interests of the other, but not that either must subjugate his interests to those of the other." Again it is, perhaps, unfortunate that conceptually different things have been given the same label.

42. Likewise in Helmet Integrated Systems Ltd v Tunnard Moses LJ said (paragraph 36):

"An employee owes an obligation of loyalty to his employer but he will not necessarily owe that exclusive obligation of loyalty, to act in his employer's interest and not in his own, which is the hallmark of any fiduciary duty owed by an employee to his employer. The distinguishing mark of the obligation of a fiduciary, in the context of employment, is not merely that the employee owes a duty of loyalty but of single-minded or exclusive loyalty."

43. Helmet Integrated Systems Ltd v Tunnard also shows that the obligation of loyalty is no more than an obligation loyally to carry out the job that the employee agreed to do. This, too, is the result of Fishel. ..."

124. Mr Goulding QC accepted that Mr Imam-Sadeque did not owe BlueBay a fiduciary duty as such. The content of the duty of fidelity is determined in the first instance by the terms of the employee's contract of employment (see Ranson at [35]). Although Mr Goulding QC emphasised that the wording of paragraph 4 of the contract of employment required Mr Imam-Sadeque to act in BlueBay's best interests, not just to have regard to them, I did not understand him to argue that the express terms imposed a duty equivalent to the single minded duty of loyalty imposed upon a fiduciary which requires him to subjugate his own interests to those of his employer; but rather that because the obligation in paragraph 4 involved more than just having regard to BlueBay's interests, the content of the duty of fidelity was "more akin" to a fiduciary duty.

125. Mr Oudkerk QC argued that the duty of fidelity, and of trust and confidence, required no more, essentially, than that Mr Imam-Sadeque act honestly towards BlueBay. I can not accept that submission, which has no support in the authorities. The duty is one of loyalty. An honest but misguided disloyalty is no less a breach than a dishonest one.

Competition and preparation for competition

126. In general terms it can be said that the duty of fidelity requires an employee not to engage in competitive activity. Nevertheless it is legitimate for him to undertake competitive activity as soon as he ceases the employment (in the absence of effective post termination covenants), and not all preparation for such future competitive activity will be a breach of his duty of loyalty. Where the boundary is to be drawn, in any particular case, between legitimate preparatory activity and illegitimate competitive activity, is often a difficult question.

127. In Helmet Integrated Systems Limited v. Tunnard and others [2006] EWCA Civ 1735, [2007] IRLR 126, Moses LJ said [26]:

"26. ... An employee must act with good faith towards his employer (see e.g. Robb v Green [1895] 2 QB 315 at 317). An employee must receive and obey the instructions of his employer, and devote his time and talents to his employer's business. But whilst he must not compete with his employer during the course of his employment, the duty of fidelity imposes no inhibition on his competing against his former employer once he has left. He is entitled to take the skill he has acquired and developed during the course of his employment and apply it for his own benefit once he has left, even if that involves competing against his former employer. He may also take with him and use knowledge and information which he has acquired, provided he does not use or disclose information properly described as a trade secret (see e.g. Faccenda Chicken Ltd v Fowler [1987] Ch 117 at 136).

27. This freedom to compete, once an employee has left, unrestrained by any enforceable covenant, carries with it a freedom to prepare for future activities, which the employee plans to undertake, once he has left. In Robb v Green (q.v. supra) Hawkins J concluded that a manager who had copied a list of customers was liable in damages for breach of an implied term not to use such information to the detriment of his employer. But he observed, in words echoed frequently thereafter, that each case would depend upon its own circumstances and there will be cases where an employee may legitimately canvass, issue circulars, have a place of business ready and hire employees (see page 15). The Court of Appeal made no observation suggesting disagreement when it affirmed Hawkins J's conclusion.

The Legitimacy of Preparatory Activity

28. The battle between employer and former employee, who has entered into competition with his former employer, is often concerned with where the line is to be drawn between legitimate preparation for future competition and competitive activity undertaken before the employee has left. This case has proved no exception. But in deciding on which side of the line Mr Tunnard's activities fall, it is important not to be beguiled into thinking that the mere fact that activities are preparatory to future competition will conclude the issue in a former employee's favour. The authorities establish that no such clear line can be drawn between that which is legitimate and that which breaches an employee's obligations."

128. Moses LJ went on to give examples of cases in which preparatory activity was not a breach of the duty (Balston v Headline Filters Ltd [1990] FSR 385) and in which it was (Shepherds Investments Ltd v Walters [2007] IRLR 110). In the latter case Etherton J held that when former directors and employees set up a competing business, they were in breach of their obligations of fidelity the moment they procured the services of attorneys in the Cayman Islands to set up the rival business.

129. Both parties referred me to authorities in which the activity had been held to fall on one or other side of the line, and to dicta about the activity in those cases, and urged upon me that Mr Imam-Sadeque's conduct in this case was more or less akin to that of the employees in such cases.

130. Mr Oudkerk QC on behalf of Mr Imam-Sadeque relied upon Robb v Green [1895] 2 QB 1; Balston Ltd v Headline Filters Ltd [1990] FSR 385; Saatchi & Saatchi Co Plc v Saatchi, unreported, February 13, 1995; Foster Bryant Surveying Limited v Bryant [2007] IRLR 425; Helmet Integrated Systems Limited v. Tunnard and others [2007] IRLR 126; Pennwell Publishing (UK) Ltd v Ornstien [2007] IRLR 700; Tullett Prebon Plc v BGC Brokers LP [2010] IRLR 648; and Ranson v Customer Systems PLC [2012] IRLR 769.

131. Mr Goulding QC on behalf of BlueBay relied upon Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] 1 Ch 169; Lancashire Fires Ltd v SA Lyons & Co Ltd [1997] IRLR 113; Sanders v Parry [1967] 1 WLR 753; British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523; Shepherds Investments Ltd v Walters [2007] FSR 15; Kynixa Ltd v Hynes [2008] EWHC 1495 (QB); UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008] IRLR 965; Clear Edge UK Ltd v Elliot [2011] EWHC 3376; QBE Management Services (UK) Ltd v Dymoke [2012] IRLR 458.

132. I found limited assistance to be gained from that approach. These authorities provide helpful guidance as to the application of the principles in particular cases; but, as has repeatedly been emphasised in this context, the precise scope and content of the duty of fidelity, and whether it has been breached, is a question of fact which depends on the particular circumstances of each case. In Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] 1 Ch 169 Lord Greene MR said at 174

"It has been said on many occasions that an employee owes a duty of fidelity to his employer. As a general proposition that is indisputable. The practical difficulty in any given case is to find exactly how far that rather vague duty of fidelity extends. Prima facie it seems to me on considering the authorities and the arguments that it must be a question on the facts of each particular case."

Reporting competitive threats

133. The duty of fidelity may also require an employee to report to his employer a competitive threat of which he becomes aware, irrespective of whether he or any fellow employees are involved in that competitive threat. So too may an express term to act in the best interests of the company (cf Swain v West (Butchers) Ltd [1936] 3 All ER 261). Whether it does so is again fact sensitive, and will depend upon the terms of his contract of employment, the nature of his role and responsibilities, the nature of the threat, and the circumstances in which he becomes aware of it. A senior manager who becomes aware of a competitive threat to an aspect of the business for which he is responsible will normally come under such a duty, whereas a junior employee without such responsibility would not. The manager of a branch of a supermarket in the high street would normally be obliged to tell his superiors if he learned that a rival supermarket chain was proposing to open a store next door; whereas a junior employee working in the unloading bay would not.

Factual circumstances which inform the scope and content of the duty in this case

134. In my view there are five matters of importance which form the context in which the scope and content of Mr Imam-Sadeque's duty of fidelity in relation to the launch of Goldbridge falls to be judged.

135. First, the terms of paragraph 4 of the contract of employment are restrictive. They required Mr Imam-Sadeque to act in the best interests of BlueBay at all times. In addition, they impose a restriction expressed in wide terms on any activity which might be contrary to BlueBay's interests. The paragraph requires that Mr Imam-Sadeque must not be "in any way directly or indirectly", "engaged or concerned", "in any other business", "where this is or is likely to be in conflict with [BlueBay's] interests" or "where this may adversely affect the efficient discharge of your duties". These are words of considerable breadth, which reflect his seniority and concomitant responsibility. They are broader than the non competition restrictive covenants in clause 5.2 of the Employee Handbook which apply to all employees and continue after termination of the employment for the period of the covenant, and which are qualified by clause 5.3. They leave very little room for any activity which might potentially threaten BlueBay's interests.

136. Secondly, Goldbridge was to be a direct competitor of BlueBay, targeting similar clients and offering similar investment products. There can be no real doubt about this. Ms Benitez-Castellano so described it in an email at the time of the launch, and in her evidence to the Court, which I accept. It was heavily staffed by former employees of BlueBay, who were no doubt recruited because their expertise and experience acquired at BlueBay was valuable for the business of the new venture. When Mr Willis sent a copy of the press release of Goldbridge's launch to his superior, the CEO of RBC Global Asset Management, he referred to it as the announcement of a "new BlueBay" and as an example of the competitive pressures in the London market. Mr Oudkerk QC relied in particular upon an email sent about 10 minutes earlier by Mr Willis to Mr Robertson, a portfolio manager, suggesting that "we need have no competitive concerns". The difference in content and tone is readily explained by Mr Willis' email to Mr Robertson being designed to play down the threat so as to encourage and reassure the workforce. When Mr Oudkerk QC was cross examining Mr Hojmark-Jensen, it was on the basis that when he was involved in the plan to set up Goldbridge, prior to July 2011, he was involved in setting up a business that would be in competition with BlueBay. Mr Oudkerk QC frankly conceded in final submissions that when Goldbridge started trading, it was in competition with BlueBay.

137. Mr Oudkerk QC submitted, however, that at 3 October 2011, when the press release was issued, Goldbridge was not a competitive threat because it was not "open for business", it had no FSA authorisation, it had no track record and it had few employees. This is not a complete answer to this aspect of BlueBay's case. So far as clause 5.2 (b) of the Employee Handbook is concerned, I am prepared to assume, without deciding, that it is to be confined to business which is already being carried out in a competitive manner, and has no application to a threat of future competition. Nevertheless, the express obligation in paragraph 4 of the contract of employment, and the implied duty of fidelity, are applicable to activity which assists a business to compete in the future. It was contrary to BlueBay's interests for Goldbridge to be being set up and launched, notwithstanding that the effect of the competition was not already being felt and would only be felt in the future. Goldbridge was a serious venture backed by $100 million of capital, aiming itself at offering similar investment products to those which BlueBay were offering, to similar clients to BlueBay's clients. It was a competitive threat from the moment that it became a serious and viable project. At that stage it attracted the obligations which a duty of fidelity attaches to an employee in relation to a business which threatens to compete. The supermarket manager who learns of the rival store to be built next door can not wait until it has been completed, and started trading, before revealing his knowledge of it; he can not assist in its building and claim no breach of his duty of fidelity because it has not yet started trading when he provides the assistance. Moreover prior to Goldbridge commencing trading, an employee of BlueBay who assisted in its set up and launch would not be acting "in the best interests of [BlueBay]" and would be "concerned in …[a] business" which was "likely to be in conflict with [BlueBay's] interests" in the words of paragraph 4 of Mr Imam-Sadeque's contract of employment, and which might "adversely affect the discharge of [his] duties": cf Ward Evans Financial Services Ltd v Fox [2002] IRLR 120 at [22].

138. Thirdly, Mr Imam-Sadeque was a senior employee of BlueBay and was highly remunerated. Whilst it would be over simplistic to say that the more senior an employee, the greater the degree of loyalty and diligence required of him, the scope of the duty imposed on someone at high managerial level in a multi million pound business will involve a heavy burden not to do anything which might result in damage to the interests of that business.

139. Fourthly, Mr Imam-Sadeque's senior role was in an aspect of the business which was of very considerable importance to the success and profitability of BlueBay, as it would be to Goldbridge. That was why he was so highly remunerated. Mr Imam-Sadeque had responsibility for targeting and retaining clients, which was an aspect of the investment and asset management business which was important to its success. Success was to be measured by the size of assets under management, which is what governed the fees charged by the firm. The size of assets under management depended not only on the nature and investment performance of its investment products, but also on the ability of those on the sales side to attract and keep clients so as to retain and increase assets under management.

140. Fifthly, Mr Imam-Sadeque was in a position to exert influence on the structure and operational implementation of Goldbridge's business plans in relation to this important area of activity. He described Goldbridge, at the time he approached Ms Germano, as a big ship which was ready to sail; and his own part as a passenger coming on board at the last minute. This is not an accurate reflection of his participation. It is true that Ms Germano and others had been putting the venture together, with the assistance of Mr Hojmark-Jensen, since at least the end of 2010, and already had a business plan with capital backing. Nevertheless the business was not "launched" until several months after the approach which had led to him being brought on board as prospective Head of Sales almost immediately; and it did not start trading for months after that. During that period, he was in a position as someone senior enough to be one of the four Founders, to influence which clients should be targeted, and how best to do so, as well as choosing the staff to do so and how they would be organised. If the metaphor is to be maintained, he is better described as joining a ship whose hull had been built but whose fitting out, trading pattern and ports of call were not yet determined. These were matters over which he could exert his influence as one of the senior officers.

Attenuation of the duties whilst on garden leave

141. Mr Oudkerk QC submitted that Mr Imam-Sadeque's obligations were significantly attenuated in the period from 22 August 2011, because Mr Imam-Sadeque was thereafter on garden leave. He relied on the observations of Maurice Kay LJ in Tullett Prebon at [41]:

"In his helpful book Employee Competition: Covenants, Confidentiality and Garden Leave (OUP), Mr Paul Goulding QC suggests (at paragraph 4.111) that ... as had been previously indicated in Balston v Headline Filters Ltd, (1987) 13 FSR 330, "the duty of fidelity or good faith may be attenuated during the period of garden leave depending on the factual circumstances". I think this is the correct analysis of a garden leave case. ...".

142. In this context Mr Oudkerk QC relied upon Lewison LJ's statement in Ranson at [41] that "the obligation of loyalty is no more than an obligation loyally to carry out the job that the employee agreed to do". He submitted that if the duty of fidelity was only loyally to do the job which the employee was employed to perform, it followed that once he was put on garden leave and had no positive duties left to perform, he could not be in breach in being involved with a potential competitor whom he planned to join when free to do so.

143. I do not accept that the scope of Mr Imam-Sadeque's duties with which this case is concerned changed in any relevant respect when he went on garden leave, for a number of reasons. Paragraph 16 of the contract of employment provides expressly that the contractual terms are to apply during garden leave: "[BlueBay] may at its discretion require you not to work during your notice period. In such circumstances you will remain bound by the terms of this contract of employment during the period of notice." This applies to the express terms in paragraph 4 of the contract, the incorporated terms of the Employee Handbook, and the implied duty of fidelity. They are to continue to apply, save only to the extent that Mr Imam-Sadeque is relieved of the obligation to work during the garden leave period.

144. To some extent it is right to say that the content of the duty of fidelity is attenuated when an employee is put on garden leave: he is relieved of the duty to carry out the work activities for which he was employed, and owes no duty to pursue those activities loyally, or indeed at all. It is in this sense that the dictum of Lewison LJ is applicable. But the same can not be said of the obligations which are imposed by the duty of fidelity and are of relevance in this case, which are obligations to refrain from acting in a particular way. Such negative obligations remain part of his duties for so long as he is employed. During garden leave the employee has the benefit of being paid in full without having to carry out any positive work obligations. The employer is paying for the continued right to insist upon the employee performing his negative obligations.

145. Moreover, one of the common purposes of putting an employee on garden leave is to secure his loyalty to the current employer during the notice period, and to delay the transfer of his loyalty to a new employer until after its expiry. An employer may thereby legitimately seek to restrict the impact of any competitive activity by the employee, and protect the integrity of the employer's workforce. There is no reason in principle, or authority, why the aspects of the duty of loyalty which touch upon competitive activity, or the enticing away of employees, should be attenuated so as to interfere with these legitimate purposes of garden leave.

146. Maurice Kay LJ's comment that the duty of fidelity may be attenuated during garden leave "depending on the factual circumstances" emphasises that whether and to what extent it is attenuated is once more dependent on the particular factual circumstances in which the question arises. He did not endorse the dicta of Sir Richard Scott V-C in Symbian Ltd v Christensen (unreported, 8 May 2000), to the effect that the duty of good faith and fidelity did not subsist during garden leave, a point with which the Court of Appeal did not deal in Symbian, and which counsel for the employee had "some difficulty" in justifying: see Tullett Prebon at [40]. The factual circumstances which I have identified above as important to the content and scope of the duty of fidelity are of almost equal importance during the period of Mr Imam-Sadeque's garden leave.

Third party obligations

147. Mr Oudkerk QC also submitted that any duty to report to BlueBay on Goldbridge competitive activity which might otherwise exist could not be any part of Mr Imam-Sadeque's duty of fidelity, in circumstances where he had signed an NDA with Goldbridge. It was submitted that such agreements would commonly be required if an employee was to be free to explore the possibility of moving to a new employer before leaving his current employer, as he was entitled to do; and that to hold him obliged to disclose to his current employer what he learned as part of the job interview elsewhere would be to undermine that entitlement. Reliance was placed on what was said by Maurice Kay LJ in Tullet Prebon [42]:

"Take, for example, a man who goes for a job interview and accepts an offer of employment on being told confidential details of the prospective employer's business plan. He then returns to his current employer, intending to hand his notice in, but is persuaded not to move, whereupon he divulges the confidential details of the now rejected employer's business plan to his present and future employer, a competitor. In those circumstances, it seems to me that he would be in breach of an obligation of trust and confidence vis-à-vis the rejected employer."

148. I am unable to accept this submission. Whether the content of the duty of fidelity is such as to require disclosure to the employer of a competitive threat depends upon the circumstances of each case. I accept that it is capable of being affected in some cases by the particular factual circumstances in which the employee learns of the competitive threat. Nevertheless, if a senior employee, who is seeking to join what he knows to be a potential rival, learns of a competitive threat from that source, of which he would otherwise be under a duty to warn his employer, he can not relieve himself of that obligation by virtue of having entered into a contractual duty towards the rival not to fulfil it. If he could, the duty of fidelity in such cases could be bypassed or severely emasculated by the expedient of entering into an NDA with the competitor. It is not unusual for parties to undertake mutually inconsistent contractual obligations. The existence of one does not excuse non performance of the other: see Hilton v Barker Booth & Eastwood [2005] 1 WLR 567 per Lord Walker at [34], [35], [46]. There is nothing in the employment context in which Mr Imam-Sadeque was operating to detract from this fundamental principle.

149. The argument derives no real support from the dictum of Maurice Kay LJ in Tullet Prebon at [42]. He was there addressing the argument of BGC that a forward contract of employment did not contain an implied duty of trust and confidence before the employment started. He rejected the argument, holding that obligations of trust and confidence can arise under a forward contract "as appropriate, taking account of the circumstances" [41]. That is the context in which he gave the example upon which Mr Oudkerk QC relies. He was not saying that the fact that disclosure by an employee to his employer of a planned poaching raid on its staff by a competitor would amount to a breach by the employee of a confidentiality agreement entered into with the competitor would exonerate the employee from liability for the non-disclosure. He did not address the question of the employee's duty to his current employer, nor the issue of conflicting duties. The purpose of the example was merely to demonstrate how a duty of trust and confidence can arise under a forward contract.

Conclusion on the content of Mr Imam-Sadeque's duties vis a vis Goldbridge activity

150. Applying these principles, I conclude that paragraph 4 of the contract of employment, and Mr Imam-Sadeque's duty of fidelity, each required him not, prior to 31 December 2011, to provide any assistance to Goldbridge in setting up and launching its business, save by (a) agreeing that he would join Goldbridge thereafter and negotiating the terms on which he would do so and (b) making and cooperating in the legal, administrative and regulatory arrangements necessary to enable him to do so in January 2012.

151. The duty of fidelity also required him to tell BlueBay that Goldbridge intended to launch a start-up competitive business; that it had the necessary funding, resources, staff and infrastructure in place to do so; and that it intended to launch on 3 October.

Breaches in assisting Goldbridge to set up and launch a competitive business and associated failure to disclose

152. Mr Imam-Sadeque was in breach of these duties in various respects.

153. The Vodafone records give a one-sided picture of the timing and volume of Mr Imam-Sadeque's telephone communications with Goldbridge because they do not record the existence or timing of any incoming texts or calls. Nevertheless even on this one sided basis they indicate extensive communication:

(1) Between 14 and 29 July when he concluded his terms of engagement with Goldbridge, Mr Imam-Sadeque sent 99 texts to Ms Germano and made 4 phone calls to her (ignoring those of short duration which suggest no answer or a message left). One lasted over an hour. He sent 24 texts and made 3 effective calls to Mr Shewaram.

(2) Between 30 July and 3 October 2012, when the Goldbridge launch was announced, there were a further 88 texts and 11 substantive calls to Ms Germano, 37 texts and 8 substantive calls to Mr Shewaram, 7 texts and 5 substantive calls to Mr Midha, and 15 texts to Michelle Sharpling.

(3) Between 3 October and 31 December there were a further 22 texts and 15 effective calls to Ms Germano, 12 texts and 4 effective calls to Mr Shewaram, 43 texts and 7 effective calls to Mr Midha and 17 texts and one effective call to Ms Sharpling.

(4) In addition there were the face to face meetings which I have referred to in the narrative.

154. Mr Imam-Sadeque was unspecific about the content of most of these communications and discussions. He characterised them as being about "philosophy" or "culture" or being "administrative" in nature. He talked of discussions about "broad ideas on how the business might develop" and "the philosophy and culture of the firm" but was unable to give any clear examples of what he meant by this.

155. I do not find it credible that this volume of communication can be explained by discussions of such vagueness. Any discussion about "how the business might develop," or its "philosophy" would likely be a breach of duty because it would assist Goldbridge in the formation of the shape and direction of the business. The volume of communications makes it probable that there was discussion of aspects of the venture in considerable detail. The volume can not be explained by the purely administrative arrangements of negotiating and documenting his terms of joining, and arranging for the practicalities of his arrival in January 2012. I accept the evidence of Ms Benitez-Castellano, who is experienced in this field of recruitment, that the volume of communication was significantly more than could be explained on this basis.

156. That there was detailed discussion of specific aspects of the venture is made all the more likely by the circumstances of the start up, and Mr Imam-Sadeque's position in it. With a start up of this nature, once seed capital has been secured, its success will depend upon getting and keeping funds under management from investors. An important part of the launch of any such business will be the plan for attracting and keeping such clients. That was the area of expertise which Mr Imam-Sadeque possessed as prospective Head of Sales, and which was missing from the other prospective Goldbridge personnel with whom he was having discussions. What Mr Imam-Sadeque was bringing to the venture were his existing relationships with potential clients, and his abilities to foster and maintain good relationships with potential clients. His contacts were a valuable asset to Goldbridge. So also was his expertise in this area. I do not see how Goldbridge could sensibly have gone about finalising a business model, and deciding how to implement it, without seeking and taking account of Mr Imam-Sadeque's views on this aspect of how the business would be developed. Quite apart from questions of staffing the sales team, on which Mr Imam-Sadeque's views would be bound to have been sought and given (as I have held they were), the business plan would require an assessment in at least general and strategic terms of which clients might be persuaded to come to Goldbridge and invest in its products. To put it in crude terms, the questions "what clients are we going to attract?", "how much will they invest?" and "how are we going to capture and keep them?" must have been important questions to be addressed. They were the topics which Mr Imam-Sadeque's prospective position and experience made him particularly well placed to address. It would have been very surprising if he had not discussed the specifics of this aspect of the business, which he was going to head up.

157. I have little doubt that Mr Imam-Sadeque was involved in substantial discussions from no later than 18 July 2011 with Ms Germano, Mr Shewaram and others at Goldbridge, about specific aspects of the proposed business, in order to assist in setting up the venture and prepare it for its launch. These discussions were directed to important aspects of the structure and operational implementation of the venture. They included the way in which the venture should approach the sales side, including client acquisition and retention. In these respects he provided real and valuable assistance in the creation of Goldbridge in a form in which it would compete with BlueBay. This was a serious breach of his duties to BlueBay.

158. Mr Imam-Sadeque was also in breach of duty in providing assistance to Goldbridge in relation to the announcement of its launch on 3 October 2011. I have concluded that he was aware of the terms of the intended press release, and had approved and agreed to the terms in which it was in fact released, save for the "led by" error. This was a breach which has a general and particular aspect. Its general aspect is that the announcement was part and parcel of the launch of Goldbridge as a competitive business; and Mr Imam-Sadeque's involvement in review and approval constituted assistance in that process, irrespective of the particular terms of the announcement. The particular aspect, upon which BlueBay's allegations focussed more heavily, is that he had input into, or at least approved, the drafting of those terms of the press release which referred to himself and Mr Nixon as former BlueBay employees; and those which,so far as they and others were concerned, emphasised their credentials as ex BlueBay employees in order to promote the business. This was a particular breach of the duty of fidelity because it was an aspect in which the press release was seeking to promote Goldbridge as a competitor to BlueBay.

159. Mr Imam-Sadeque was also in breach of duty in failing to disclose to BlueBay the Goldbridge project from 18 July 2011 at the latest, when he discussed the business plan with Mr Sanderson. He was in breach in failing to tell BlueBay that Goldbridge intended to launch a start up competitor; that it had the necessary funding, resources, staff and infrastructure in place to do so; and that it intended to launch on 3 October.

160. Mr Oudkerk QC argued that there was no breach in failing to tell BlueBay of the proposed launch because it was not a surprise. It was well known to Mr Hojmark-Jensen because of his previous involvement; and indications of industry rumours that Ms Germano and Mr Shewaram were putting something together meant it was no surprise to Mr Willis when the announcement came on 3 October. This is no answer to the breach by Mr Imam-Sadeque. Mr Hojmark-Jensen had not revealed the venture to his superiors and Mr Imam-Sadeque had no reason to believe, and did not believe, that he had. Nor did Mr Imam-Sadeque believe that BlueBay was aware of the venture from any other source, and he was careful to keep his contacts with Goldbridge people away from his employers. For example he used the newly acquired BlackBerry from 14 July 2012 for his communications with Goldbridge.

161. The allegation that Mr Imam-Sadeque was in breach of his duties to BlueBay in signing the Shareholder Agreement on 30 September and 10 November does not materially assist BlueBay's case. In signing this Agreement, and undertaking the obligations contained within it, Mr Imam-Sadeque was not giving an absolute undertaking to further the interests of Goldbridge and participate with others in promoting Goldbridge with immediate effect, but only, in the words of clause 6.2, to use all reasonable and proper means in his power to do so. If promoting Goldbridge would involve breach of his existing obligations under his duty of fidelity to BlueBay, the clause would impose no obligation on Mr Imam-Sadeque to do so. I do not read the terms of the Shareholders Agreement as being inconsistent with the duty of fidelity, and therefore the undertaking of those obligations was not a breach of duty. If I were wrong in this view, the allegation would not be a breach of any great significance in the event that Mr Imam-Sadeque had not in fact done anything to fulfil an obligation to promote Goldbridge during his garden leave. This aspect of BlueBay's case rests on his activity in promoting Goldbridge during that time, irrespective of whether he was fulfilling an obligation towards Goldbridge in doing so.

162. I have little doubt that Mr Imam-Sadeque was aware that his conduct in assisting in the set up and launch of Goldbridge in the way he did was a serious breach of his obligations and would have warranted instant dismissal. That was why he kept it secret, and why he has tried to minimise it in the course of these proceedings.

(2) Recruitment of Mr Nixon

Recruitment Duties

163. Mr Imam-Sadeque owed the express duties contained in Clause 5.2(a) of the Employee Handbook not to assist others to recruit BlueBay employees. This was confirmed as a continuing obligation in clause 6.6 of the Compromise Agreement.

164. Moreover paragraph 4 of his contract of employment, and his duty of fidelity, obliged him not to take any steps to assist the recruitment of Mr Nixon by Goldbridge. Such duty arose in circumstances where:

(1) Mr Imam-Sadeque was a senior manager at BlueBay.

(2) Mr Imam-Sadeque was in a position to exert considerable influence over Mr Nixon's decision whether to join Goldbridge. Although Mr Nixon no longer reported to him at BlueBay, nevertheless Mr Imam-Sadeque had originally recruited Mr Nixon to BlueBay, had been his immediate superior at BlueBay until relatively recently, and was a close friend.

(3) The recruitment of Mr Nixon was for him to become Mr Imam-Sadeque's number two as part of a small sales team at Goldbridge.

(4) Goldbridge was to be a competitive business.

165. Mr Oudkerk QC argued that any restraint imposed by the duty of fidelity could not be wider, by way of implied obligation, than that imposed by the express terms of clause 5.2(a); the express term provided the exclusive definition of the scope of the duty in this respect, leaving no room for implication of anything wider. This submission ignores the context of clause 5.2(a). It is a restriction applying to all employees at whatever level of seniority who are bound by the terms of the Employee Handbook and applies after termination of employment as well as during its currency. There is nothing inconsistent between such a term and a more restrictive duty arising from the duty of fidelity owed by one particular senior employee towards another particular employee during the currency of their employment.

166. The duty of fidelity includes a duty of honesty, such that Mr Imam-Sadeque was under an obligation at the meeting on 23 November 2011 not to tell untruths about his meetings with Mr Nixon or the extent of his involvement in the latter's recruitment to Goldbridge (cf Fulham Football Club (1987 Ltd) v Tigana [2004] EWHC 2585 (QB), [2005] EWCA Civ 895). The same obligation arose under paragraph 4 of the contract of employment.

167. Mr Goulding QC argued that the duty of fidelity also placed upon Mr Imam-Sadeque a positive obligation to seek to dissuade Mr Nixon from leaving BlueBay. I do not need to decide whether the duty extends so far.

Recruitment breaches

168. For the reasons set out earlier in this judgment, I reject Mr Imam-Sadeque's evidence that he played no role in Mr Nixon's recruitment. I attach no weight to the statement in the letter dated 6 October 2011 from Mishcon de Reya on behalf of Goldbridge that "the search which led to his appointment was conducted entirely through external headhunters", because it was not supported by any witness from Goldbridge giving evidence to me. I am satisfied that Mr Imam-Sadeque played a substantial role in assisting Goldbridge to recruit Mr Nixon. That assistance included the following:

(1) At lunch on 13 July 2011, Mr Imam-Sadeque and Ms Germano discussed Goldbridge's interest in recruiting Mr Nixon and Mr Imam-Sadeque encouraged Ms Germano to target him. They discussed the timescale and procedure for doing so, which was that Mr Imam-Sadeque would meet him in the near future to sound him out and encourage him to join Goldbridge.

(2) That was the purpose of the lunch which Mr Imam-Sadeque arranged to have with Mr Nixon on 15 July 2011, and that is what happened at that lunch.

(3) On 29 July 2011 Mr Imam-Sadeque discussed Mr Nixon's recruitment with Ms Germano and Mr Jauch, including discussing how to achieve their shared objective of persuading him to leave BlueBay and join Goldbridge.

(4) Mr Imam-Sadeque made arrangements on 3 and 4 August 2011 to meet Mr Nixon in order to further Mr Nixon's recruitment to Goldbridge, and to report back to Ms Germano in order to enable her to give the final green light to Mr Jauch to approach Mr Nixon. Mr Imam-Sadeque encouraged Mr Nixon to move to join him at Goldbridge, or at the least sounded him out about the terms on which he would be prepared to do so, either at a meeting in the office on 3 August or at lunch on 4 August, or both. He reported back favourably to Ms Germano and/or Mr Shewaram so that the headhunter could be given the go ahead to approach Mr Nixon.

(5) Mr Imam-Sadeque made arrangements on 6 September 2011to meet Mr Nixon for lunch on 16 September in the knowledge that the latter was in discussions with Mr Jauch with the intention of encouraging him to leave BlueBay for Goldbridge.

(6) Mr Imam-Sadeque communicated with Ms Sharpling on 14 and 19 September 2011 in order to do all he could to encourage the success of the recruitment process.

(7) On 30 September 2011 Mr Imam-Sadeque called Mr Nixon and told Mr Nixon not to say anything to Mr Hojmark-Jensen in order to thwart any attempt by Mr Hojmark-Jensen or anyone else at BlueBay to try to persuade Mr Nixon to stay at BlueBay. He did so at Ms Germano's instruction, and acting in Goldbridge's interests.

(8) Mr Imam-Sadeque arranged to have lunch with Mr Nixon and Mr Midha on 3 November 2011 because they were concerned about the risk of Mr Nixon being unable to join Goldbridge, either when planned, or at all, as a result of his disciplinary proceedings; and about the risk to his FSA registration. Mr Imam-Sadeque and Mr Midha were both there to provide advice and support to Mr Nixon in relation to his dispute with BlueBay, and did so. In doing so they were seeking to look after Goldbridge's interests as Mr Nixon's prospective employer. Mr Imam-Sadeque was taking Mr Nixon's side against BlueBay because of his loyalty to Goldbridge. He was looking after the interests of Goldbridge and his own future at Goldbridge, ahead of the interests of his current employer, BlueBay.

169. In these respects Mr Imam-Sadeque was in serious breach of paragraph 4 of his contract of employment, of clause 5.2(a) of the Employee Handbook, of clause 6.6 of the Compromise Agreement, and of his duty of fidelity.

170. He was also in breach of paragraph 4 of his contract of employment, and his duty of fidelity, in telling untruths at the meeting on 23 November 2011 about his meetings with, and recruitment of Mr Nixon.

171. Again I have little doubt that Mr Imam-Sadeque was aware that his conduct in assisting in the recruitment of Mr Nixon was a serious breach of his obligations and would have warranted instant dismissal. That was why he kept it secret, and why he has tried to conceal and minimise it in the course of these proceedings.

(3) Other alleged breaches

(a) 13 July 2011 requesting and obtaining names of BlueBay Investment Grade analysts

172. As I have explained, I am not persuaded that this request had anything to do with Goldbridge and I reject the allegation of breach.

(b) 7 July 2011 Towers Watson Dinner

173. It is alleged by BlueBay that Mr Imam-Sadeque's conduct at this dinner was inappropriate behaviour which breached Mr Imam-Sadeque's contract of employment, in particular by revealing Mr Hojmark-Jensen' promotion, which was confidential and had not yet been announced; and by expressing disappointment or disillusionment with his own career at BlueBay, whereas it was part of Mr Imam-Sadeque's function to present BlueBay in the best possible light.

174. There is some force in the criticism that Mr Imam-Sadeque ought not to have revealed the promotion of Mr Hojmark-Jensen before it had been formally announced by BlueBay, but it is entirely understandable that he should have done so in the context of a discussion about his own future. Mr Imam-Sadeque and Mr Loveday were good friends with a long standing personal relationship. If this was a breach of contract it was of a minor character and not sufficient, on its own, or taken together with any other breaches, to advance BlueBay's case. Expressing disappointment that his own career had hit a brick wall would not necessarily involve any disparagement of BlueBay by Mr Imam-Sadeque or any breach of his contract of employment, and I am not prepared to infer that he did so.

(c) 27 July 2011 sending restructuring email to Goldbridge

175. The email which Mr Imam-Sadeque forwarded to Goldbridge referred to Mr Hojmark-Jensen's appointment to the new role of Head of Sales, EMEA and to Mr Imam-Sadeque's departure at the end of the year, as well as the creation of a new sales committee, and the promotion of Charmian Wan to Head of Sales, Non Japan Asia & Australia. This was confidential information, as Mr Imam-Sadeque accepted in cross examination. His explanation for sending it was that he wanted to show Goldbridge that "the die was cast" so far as he personally was concerned, and that he didn't think the recipients would be interested in the other content. Mr Imam-Sadeque knew that he ought not to have been passing it to Goldbridge: he routed it via his private email address in order to prevent BlueBay knowing he had sent it. His motivation was to prevent BlueBay learning of his involvement with Goldbridge, rather than because he appreciated that it was a breach of his confidentiality obligations in relation to the content as a whole. Nevertheless this was a breach of his contract of employment, and in particular the express confidentiality obligations set out at clause 4 of the Employee Handbook and 6.1 of the Compromise Agreement. I do not, however, regard this as sufficiently serious to give rise to a repudiatory breach, either on its own, or as a factor of any significance in contributing to an accumulation of breaches reaching the repudiatory threshold.

(d) 1 & 2 August 2011 informing Towers Watson of a settlement agreement

176. Clause 6.3 of the Compromise Agreement included an obligation to keep "the fact and contents of these Terms strictly confidential and ….not disclose or divulge the same to anyone". What Mr Imam-Sadeque said in the email of 1 August 2011 to Mr Loveday of Towers Watson was that he had "a settlement agreement in place". What he said to Mr Horne the following day was "Can't say anything as I'm subject to an agreement with BBay". This was said by BlueBay to be a breach of clause 6.3 by revealing the "fact" of the Compromise Agreement, although not its content. It was argued that the reason for the specific inclusion of this clause was because if clients or consultants knew that there was a settlement agreement between BlueBay and Mr Imam-Sadeque, they might think there had been a dispute; by referring to a "settlement" or an "agreement", Mr Imam-Sadeque was disclosing the fact that there were terms of settlement and telling Towers Watson that there was a settlement in place could have led them to think there was some issue between Mr Imam-Sadeque and BlueBay which could have had an impact on the business relationship between BlueBay and Towers Watson.

177. I was unpersuaded by this argument. I would read the wording "fact ……of these Terms" as meaning something more than simply the revelation of the fact that there was a compromise agreement. The restraint is to prohibit revelation of the fact of the Terms, not the fact of the Agreement, which suggests an intention to restrain identification of specific topics on which there was a compromise, even if there were no revelation of the content. In any event I do not regard the terms in which Mr Imam-Sadeque referred to an agreement in his emails to Towers Watson as capable of conveying a message which could have caused damage to BlueBay's reputation or its relationship with the consultants. If there was a breach, which in my view there was not, it was of a minor and inconsequential nature and should be disregarded as de minimis.

(e) 13 September 2011 sending to Goldbridge a draft of the Compromise Agreement and copies of BlueBay's Employee Handbook and Bonus Plans

178. This was a breach of various confidentiality obligations:

(1) Sending a late draft of the Compromise Agreement was a breach of clause 6.3 of that Agreement;

(2) Sending the Employee Handbook and Bonus Plans was a breach of clause 6.1 of the Compromise Agreement;

(3) Sending copies of the Bonus Plans was a breach of Schedule 1 clause 8.1 of each Plan;

(4) Sending each of the documents was a breach of clause 4 of the Employee Handbook.

179. Mr Imam-Sadeque would not accept that this was a breach of his confidentiality obligations or that it involved any wrongdoing, but in cross examination was unable to articulate any reason for that stance. I regard this as a serious breach of obligation both as regards the Compromise Agreement and as regards the Employee Handbook and Plans. The last two would potentially be of considerable value to a rival start up who would need to draft its own contractual and corporate documents for employment terms and deferred employee bonuses.

The effect of the breaches under the terms of the Compromise Agreement

180. Under the terms of the Bonus Plans, Mr Imam-Sadeque would not be a Good Leaver unless clause 2.2 of the Compromise Agreement was effective to deem him to be so. He would not come within any of paragraphs (A) to (D) of the definition of Good Leaver; conversely he would come within paragraph (A) of the definition of Bad Leaver. Under Rule 3.5 of the Plans, his 2012 Fund Units would be forfeit at the date of the termination of his employment on 31 December 2012. Mr Imam-Sadeque's entitlement to the 2012 Fund Units therefore depends upon clause 2.2 being effective.

181. The breaches of duty I have identified above in relation to (1) assisting the set up and launch of Goldbridge, (2) assisting in the recruitment of Mr Nixon and (3) disclosing the draft Compromise Agreement, Employee Handbook and Bonus Plans to Goldbridge, were repudiatory breaches of duty, both singly and cumulatively. So far as (1) and (2) are concerned, Mr Imam-Sadeque knew them to be so.

182. Accordingly:

(1) Mr Imam-Sadeque was in repudiatory breach of the terms of his contract of employment between 13 July 2011 and 31 December 2011.

(2) Mr Imam-Sadeque was thereby in repudiatory breach of clause 7 of the Compromise Agreement in failing to carry out his duties properly prior to going on garden leave on 22 August 2011; and in repudiatory breach of clause 1 of the Compromise Agreement in breaching his contract of employment whilst on garden leave.

(3) Mr Imam-Sadeque was in breach of clause 10 of the Compromise Agreement as at 22 July 2011 because:

(a) the breaches which occurred before that date were, to Mr Imam-Sadeque's knowledge and belief, material facts concerning the performance of his duties to BlueBay and/or breaches of material terms of his contract of employment which he failed to disclose and withheld (clause 10.1(a)); and

(b) the breaches which occurred before that date were, to Mr Imam-Sadeque's knowledge and belief, repudiatory breaches of his contract of employment which would have entitled BlueBay to terminate his employment without notice (clause 10.1(b)).

(4) Mr Imam-Sadeque was in repudiatory breach of Clause 6.6 of the Compromise Agreement by breaching the non poaching covenant in clause 5.2(a) of the Employee Handbook.

(5) Mr Imam-Sadeque was in repudiatory breach of clause 6.3 of the Compromise Agreement in disclosing its terms to Goldbridge.

(6) Mr Imam-Sadeque was in repudiatory breach of clause 6.1 of the Compromise Agreement in disclosing to Goldbridge copies of the Employee Handbook and Bonus Plans.

(7) The Re Affirmation letter dated 31 December 2011 provided by Mr Imam-Sadeque was untrue in that:

(a) the breaches which occurred before that date were, in Mr Imam-Sadeque's view, material facts concerning the performance of his duties to BlueBay and/or breaches of material terms of his contract of employment which he failed to disclose and withheld (clause 1.1(a)); and

(b) the breaches which occurred before that date were, in Mr Imam-Sadeque's view, repudiatory breaches of his contract of employment which would have entitled BlueBay to terminate his employment without notice (clause 1.1(b)).

183. The result of these breaches is that the provisions of clause 2.2 of the Compromise Agreement, by which Mr Imam-Sadeque would be deemed to be a Good Leaver for the purposes of the vesting of his 2012 Fund Units, never came into effect because by clause 2.1 they were made conditional upon:

(a) compliance with clause 7.1; and

(b) compliance with the other Terms, including clauses 1, 6.3, 6.5 and 10; and

(c) receipt by BlueBay of a true Re Affirmation Letter.

184. As to (c), Mr Oudkerk QC argued that the condition was fulfilled by the Re Affirmation letter being provided, irrespective of the truth of its contents; if the letter were not true, the remedy would be a claim for damages for breach of the warranties given in the letter (which was not a claim advanced as such by BlueBay). I disagree. So to construe the provision would be to treat the truth of the warranties at the date of the Agreement under clause 10 in a different way from the truth of the warranties at the date of termination. The former would be a condition of the clause 2.2 deeming provisions by reason of clause 2.1; the latter would not but would give rise to a damages claim instead. I can see no reason to construe the Agreement in this illogical way. In my view the condition of provision of the Re Affirmation letter is plainly directed at the terms of the letter being true.

185. It follows that Mr Imam-Sadeque's claim fails unless the provisions which preclude 2.2 being operative are to be ignored by reason of the doctrine of penalty.

Penalty

186. Mr Oudkerk QC argued that the provisions of clause 2.1 of the Compromise Agreement, which made clause 2.2 conditional upon performance of the terms of the Compromise Agreement and the contract of employment, were unenforceable by reason of the penalty doctrine. The argument was as follows:

(1) The effect of the Bonus Plans which governed the 2012 Fund Units was that once they had been awarded to Mr Imam-Sadeque as Restricted Shares, they were transferred to the Nominee to hold on behalf of Mr Imam-Sadeque for his benefit (definition of "Award" and clauses 3.1, 3.2 and 3.7). The Nominee was Appleby Nominee (Jersey) Limited ("Appleby"). Mr Imam-Sadeque would be entitled to have the legal title transferred to him by Appleby on the vesting date (clause 3.8) unless they had been forfeited on his leaving BlueBay or on notice of resignation because he was a Bad Leaver (clause 3.5.1) or, at BlueBay's discretion, had breached any of his obligations under the Plan (clause 3.5.2). Accordingly at the date of the Compromise Agreement, Mr Imam-Sadeque held a beneficial interest in the 2012 Fund Units, and a contingent contractual right to the legal interest in them, each of which would be subject to forfeiture in the event he left BlueBay prior to the vesting dates at the end of January and March 2012 as a Bad Leaver.

(2) Although the form of the Compromise Agreement was to make the continued entitlement to these existing rights dependent upon performance of contractual obligations, in substance what it provided for was the forfeiture of these existing valuable rights upon any breach.

(3) As such, the forfeiture provision was designed to act "in terrorem". It applied upon any breach, however trivial, and therefore could not be a genuine pre-estimate of loss. As at 22 July 2012 BlueBay would not have paid £1.7m in return for the rights it secured under the Agreement; Mr Imam-Sadeque's interest in the 2012 Fund Units was being used as a "deposit" to govern the general provisions of the Compromise Agreement. His interest in the 2102 Fund Units was akin to future pension rights which were to be forfeit for any breach of his employment contract however trivial. The provisions which had this effect were penal and unenforceable.

The penalty doctrine

187. In its simplest form the penalty doctrine applies to render unenforceable a term in a contract by which a contract breaker is required to pay a sum upon breach which is to be regarded as a penalty. But the doctrine is not confined in its application to terms requiring the payment of money by the contract breaker. It is established that it can equally apply to a provision which requires the contract breaker to transfer property or money's worth: Jobson v Johnson [1989] 1 WLR 1026. Authorities which are binding on me establish that it extends to terms which provide that the contract breaker is to forfeit sums to which he is entitled, or would otherwise have been entitled, from the innocent party: Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689; Firma C-Trade SA v Newcastle Protection & Indemnity Association (The "Fanti" and The "Padre Island") [1989] 1 Lloyd's Rep 239; Else (1982) Ltd v Parkland Holdings [1994] 1 BCLC 130. Like Beatson J in General Trading Co (Holdings) Ltd v Richmond Corp Ltd [2008] 2 Lloyd's Rep 475, I do not regard it as open to me to hold that the doctrine does not apply to such forfeiture, and Mr Goulding QC did not argue to the contrary, although he reserved his position in a higher court.

188. The locus classicus for the doctrine is the speech of Lord Dunedin in Dunlop Pneumatic Tyre Company Ltd v New Garage & Motor Company Ltd [1915] AC 79. A modern and widely approved formulation of what amounts to a penalty is that of Colman J in Lordsvale Finance Plc v Bank of Zambia [1996] QB 752 at pp 762-3:

"...whether a provision is to be treated as a penalty is a matter of construction to be resolved by asking whether at the time the contract was entered into the predominant contractual function of the provision was to deter a party from breaking the contract or to compensate the innocent party for breach. That the contractual function is deterrent rather than compensatory can be deduced by comparing the amount that would be payable on breach with the loss that might be sustained if breach occurred. ..."

189. The dichotomy reflected in this formulation, and in many of the cases in which the doctrine is considered, is between deterrence and compensation. So far as deterrence is concerned, the formerly used expression "in terrorem" has been deprecated as archaic (see eg per Lord Radcliffe in Campbell Discount Co Ltd v Bridge [1962] AC 600, 622, and per Mance LJ in United International Pictures v Cine Bes Filmcilik ve Yapimcilik AS [2004] 1 CLC 401). Any clause which provides for payment of money on breach is likely to operate to some extent as a deterrent against breach, even if it fulfils a compensatory function. What is objectionable is a clause whose predominant function is to deter breach in contradistinction to any function it has by way of compensation. The fact that the provision will have some coercive effect in encouraging performance of the contract is not sufficient to render it unenforceable.

190. As has frequently been observed, the penalty doctrine is a derogation from the principle of the sanctity of contract, expressed in the Latin maxim pacta sunt servanda: parties who have freely negotiated contractual terms can expect their bargain to be enforced. The rationale for the law's interference with freedom of contract in this area, when it declines to interfere in others, is a matter of controversy. It has been said that the reasons for the exception may be pragmatic rather than principled: see Robophone Facilities v Blank [1966] 1 WLR 1428, 1446-7, Murray v Leisureplay Plc [2005] EWCA Civ 963 at [29]. As I understand it, the justification for the Court interfering in the parties' freedom of contract, in the limited class of case to which the doctrine applies, is that it regards as unconscionable a contract which enables a party to recover more than the amount of the loss which he has suffered by reason of the breach. The policy of the rule is aimed at a party stipulating to be paid more than his actual loss in circumstances in which he can fairly be compensated for such loss by being left to his remedy in damages.

191. Two consequences follow from this. The first is that the doctrine is confined in its application. It does not apply to cases in which the sum is payable (or forfeit) upon an event other than breach: Alder v Moore [1961] 2 QB 57. Nor does it apply to cases in which the sum is payable upon breaches by the other party of obligations owed to a third party: Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399. It does not apply to the forfeiture of instalments paid by a purchaser when a vendor is entitled to terminate for breach: Stockloser v Johnson [1954] 1 QB 476. Its application is confined to the class of case in which the policy underlying the doctrine is engaged, namely where the contract confers a right to a sum or equivalent on breach by the other party.

192. Because it is an interference with freedom of contract the application of the doctrine is not to be expanded more widely than its current limits: Philip Bernstein (Successors) Ltd v Lydiate Textiles Ltd, reported sub nom Sterling Industrial Facilities v Lydiate Textiles Ltd (1962) 106 SJ 669 per Diplock LJ; Else (1982) Ltd v Parkland Holdings [1994] 1 BCLC 130 per Evans LJ at 138d and Hoffmann LJ at 145c; Euro London Appointments v Claessens International [2006] 2 Lloyd's Rep 436 per Chadwick LJ at [17].

193. The second consequence is that the two-fold categorisation of deterrence or compensation is not a rigid test to be applied in all cases. In United International Pictures v Cine Bes Filmcilik ve Yapimcilik AS [2004] CLC 401 Mance LJ said at [15]:

"I have also found valuable Colman J's further observations in Lordsvale…. which indicate that a dichotomy between a genuine pre-estimate of damages and a penalty does not necessarily cover all the possibilities. There are clauses which may operate on breach, but which fall into neither category, and they may be commercially perfectly justifiable."

194. In Murray v Leisureplay [2005] EWCA Civ 963, the Court was concerned with a provision in a contract of employment under which a chief executive was entitled to one year's gross salary in the event of the termination of the contract by the employer without the contractual 12 months' notice. The trial judge held the provision to be a penalty. He conducted a comparison between the amount provided for by the clause and the amount which the employee would have been able to recover as damages; and treated as conclusive of the penalty issue the fact that the employee would never have been able to have recovered as much as one year's gross salary as damages because, quite apart from the duty to mitigate, his damages would be net of deductions for tax and national insurance. The Court of Appeal unanimously reversed the decision, although all three members expressed views as to the applicable principles in different terms. Arden LJ suggested that the approach should be to compare the amount payable under the agreement in the event of breach with the amount which would be recoverable by a damages claim; and if the comparison discloses a discrepancy, to conclude that the agreement will be a penalty unless the discrepancy can be justified, either as a genuine pre-estimate of damage or otherwise. In doing so she endorsed the dictum of Mance LJ in Cine Bes quoted above, and made clear that even where there was a discrepancy between the amount payable under the agreement and the amount recoverable at law, the party invoking the penalty doctrine had to show that there was no justification, which the employer failed to do in that case: see paragraphs 42, 46, 50, 54 and 69-75.

195. Buxton LJ, with whom Clarke LJ agreed in this respect, expressed the view that starting in every case by identifying a discrepancy between the amount payable under the agreement and the amount recoverable at law was too narrow and inflexible an approach. He said:

111. I venture to disagree with that approach because it introduces a rigid and inflexible element into what should be a broad and general question. It is also inconsistent with warnings by judges of high authority that, at least in connexion with commercial contracts, great caution should be exercised before striking down a clause as penal; and with the tests that they have postulated to that end. My Lady has cited in her paragraph 66 the observations of Diplock LJ in Robophone v Blank [1966] 1 WLR 1428 at p 1447. I would add the well-known passage of Lord Woolf in Philips Hong Kong v A-G of Hong Kong (1993) 61 BLR 49 at pp 58-59:

"Except possibly in the case of situations where one of the parties to the contract is able to dominate the other as to the choice of the terms of a contract, it will normally be insufficient to establish that a provision is objectionably penal to identify situations where the application of the provision could result in a larger sum being recovered by the injured party than his actual loss. Even in such situations so long as the sum payable in the event of non-compliance with the contract is not extravagant, having regard to the range of losses that it could reasonably be anticipated it would have to cover at the time the contract was made, it can still be a genuine pre-estimate of the loss that would be suffered and so a perfectly valid liquidated damages provision"

And exclusive concentration on the factual difference between the liquidated and the contractual damages overlooks a principal test formulated by Lord Dunedin to identify a penalty, [1915] AC at p 87, that

"It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach"

196. Clarke LJ too treated the question of whether the clause was extravagant or unconscionable as a touchstone of whether it was penal: see paragraph 106(viii). I do not regard this as a different test, in substance, from the requirement of an absence of commercial justification. If there is a commercial justification, the clause will not be unconscionable or extravagant; if there is no commercial justification, a clause which is predominantly deterrent rather than compensatory is to be regarded as unconscionable.

197. Two aspects relevant to the question of commercial justification are worth emphasising. The first is that it will be easier to justify a provision for the payment of a single sum, or equivalent, upon breach where the loss which might foreseeably be caused by breach may be difficult to quantify or prove; or where it may not be recoverable in law because, for example, it is too remote; or where financial recompense cannot fully compensate for such loss. Because the test requires a focus, albeit not an exclusive focus, on the relationship between the contractual sum and the loss which may foreseeably be caused by the breach, a clause may well be held to be a penalty if it provides for payment of a single amount upon the occurrence of any breach, where the breaches which can be contemplated at the time of the contract, and their consequences, may range from the serious to the trivial; and which may therefore involve payment of the same sum in circumstances where the innocent party has suffered loss which ranges from the serious to the trivial, or none at all. As Lord Dunedin expressed it in Dunlop Pneumatic Tyre Company at p 87:

"There is a presumption (but no more) that it is a penalty when "a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage" (Lord Watson in Lord Elphinstone v Monkland Iron & Coal Co 11 App Cas 332)."

198. Nevertheless care must be taken not to elevate what is no more than a presumption into a rule, and so subvert the rationale behind the penalty doctrine. It is a presumption because in the circumstances described by Lord Dunedin in the passage quoted, the innocent party will often be able to recover his loss as damages for breach of contract, so that there is no injustice to him in rendering the clause unenforceable. The corollary is that where it is foreseeable that it may be impossible or difficult for the innocent party to recover his true loss as damages, the Court will more readily uphold the clause. This was a theme of Lord Atkinson's speech in Dunlop (p95-6); see also Robophone per Diplock LJ at 1447 to the same effect. Provided that the amount payable under the clause does not exceed the greatest loss which could realistically be suffered as a result of foreseeable breaches, this is in my view a powerful factor for upholding the clause, because in such cases depriving the innocent party of his bargain and confining him to his remedy in damages involves injustice to that party.

199. The second aspect of commercial justification which requires emphasis is that the Court must take account of all the terms of the bargain, and of the circumstances of the contracting parties. What must be justifiable is the clause itself, but it is not to be looked at in isolation from the other terms of the contract. It is to be judged as one of the bundle of obligations undertaken by both parties to the contract, which must be looked at as a whole. The relative sophistication and bargaining power of the parties are also relevant considerations. The fact that the parties are of equal bargaining power does not itself displace the doctrine (see Lansat Shipping Co Ltd v Glencore Grain BV (The Paragon) [2009] 2 Lloyds Rep 688). But the Court should be reluctant to hold that there is no commercial justification for a term which has been freely negotiated by sophisticated parties with equal bargaining power and access to legal advice.

200. The predisposition of the Courts to uphold the sanctity of contract was expressed in these terms by Jackson J in Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005] BLR 271 at [48.3]:

"Because the rule about penalties is an anomaly within the law of contract, the courts are predisposed, where possible, to uphold contractual terms which fix the level of damages for breach. This predisposition is even stronger in the case of commercial contracts freely entered into between parties of comparable bargaining power."

201. In such circumstances the parties are the best judges of whether it is in their commercial interests to agree to all the terms of the contract, including the term for payment upon breach. The party who subsequently wishes to be relieved of his bargain, by asking the Court to treat one term as an unenforceable penalty, bears a heavy burden in seeking to establish that there is no commercial justification for such a term, when he has freely agreed to the term as part of the consideration for the benefits he secures under the contract. It must be rarely that such a clause can be described as unconscionable or extravagant when judged against the background that, at the time of the contract, the obligation was freely undertaken in consideration of the benefits to be gained under the contract, by a party who regarded it as in his commercial interests to do so.

202. With these considerations in mind, I would adopt as a succinct statement of the principle the formulation in The Interpretation of Contracts by Sir Kim Lewison at paragraph 17.01.

"A penalty clause is a clause which, without commercial justification, provides for payment or forfeiture of a sum of money, or transfer of property by one party to the other, in the event of a breach of contract, the clause being designed to secure performance of the contract rather than to compensate the payee for the loss occasioned through the breach."

Application of the doctrine

203. The terms of the Compromise Agreement do not provide that Mr Imam-Sadeque's interest in the 2012 Fund Units is to be forfeit upon breach. This is not of itself fatal to the application of the penalty doctrine. Whether a consequence is to be regarded as occurring on breach is a question of substance, not form: Clydebank Engineering & Shipbuilding Co Ltd v Yzquierdo y Castaneda [1905] AC 6, 15. It would not be possible to avoid the application of the doctrine by the simple expedient of making continued entitlement to a sum conditional on the absence of breach, if in substance what was achieved was forfeiture upon breach.

204. Looking at the provisions of the Compromise Agreement as a matter of substance, there are two separate and independent reasons why, in my judgment, they do not attract the application of the doctrine.

205. The first is that nothing in the Compromise Agreement causes Mr Imam-Sadeque to lose the benefit of the 2012 Fund Units upon breach of the Compromise Agreement. The forfeiture of the 2012 Fund Units occurred by reason of his being a Bad Leaver under the terms of the Bonus Plans when he left on 31 December 2011.

206. If the Agreement is put to one side, the position was that on 31 December 2011 Mr Imam-Sadeque had the contingent property and contractual rights to his 2012 Fund Units which were conferred by the Bonus Plans. By leaving on 31 December, those contingent rights disappeared under the terms of the Bonus Plans because he was not a Good Leaver. That was, in a sense, a forfeiture, but it was the forfeiture for which the terms of the Bonus Plans provided. It was not suggested by Mr Oudkerk QC that the terms of the Bonus Plans themselves were unenforceable as a penalty in that or any other respect.

207. What the Compromise Agreement did by clause 2.2 was to confer upon Mr Imam-Sadeque additional rights which he would not otherwise have had: he could leave on 31 December and be deemed to be a Good Leaver so as to enable his 2012 Fund Units to vest at the end of January and March 2012 when they would not otherwise have vested. This was an amendment to his existing rights under the Bonus Plans, and was more advantageous to him. In return for those rights, and as a condition of them accruing, he undertook the obligations in clause 2.1 of the Agreement, namely to perform the terms of his contract of employment and of the Compromise Agreement itself. He failed to perform those obligations, with the result that the condition upon which the deeming provisions in clause 2.2 were to come into effect was not fulfilled. The rights he held under the Bonus Plans remained unamended. The additional rights potentially conferred on Mr Imam-Sadeque by clause 2.2, which were conditional upon the fulfilment of the condition in clause 2.1, were not acquired by Mr Imam-Sadeque because he had not fulfilled the condition. The effect was not that the terms of the Compromise Agreement provided for the forfeiture of his shares by reason of breaches of that Agreement. The effect was that he never acquired the rights identified in clause 2.2, which were more beneficial than his existing rights under the Bonus Plans; and accordingly, without the benefit of the additional rights in clause 2.2, his 2012 Fund Units were forfeited under the terms of the Bonus Plans.

208. The Compromise Agreement did not provide for forfeiture of his interest in his 2012 Fund Units upon breach of that Agreement, either in form or in substance. It conferred a conditional benefit in relation to his interest in the Units which never accrued because he failed to fulfil the condition, namely performance of the Agreement.

209. In Euro London Appointments v Claessens International [2006] 2 Lloyd's Rep 436, the contract provided (in clause 3.1) that the introduction fee payable to an employment agency for finding suitable applicants was to be paid within seven days from the invoice date, and (in clause 4) that a proportion of the fee was refundable on a sliding scale if the applicant's employment terminated within 12 weeks and (by clause 4.1) if the client had paid the introduction fee within seven days of the invoice date. It was held that requiring the introduction fee to be paid within seven days so as to be entitled to the reduction was not an unenforceable penalty because clause 4.1 was no more than a condition precedent. Similarly, the fulfilment of the terms of clause 2.1 of the Compromise Agreement by Mr Imam-Sadeque was a condition precedent to the deeming provisions in Clause 2.2 coming into effect. The penalty doctrine has no application to such a case.

210. The second reason why the penalty doctrine is of no application is that even if the forfeiture were to be treated as occurring by reason of breach of the Compromise Agreement, what was forfeit were contingent future interests in the 2012 Fund Units. These are not to be treated as equivalent to the payment of a money sum by Mr Imam-Sadeque upon breach so as to come within the doctrine.

211. In 2011 Mr Imam-Sadeque's legal rights in relation to the 2012 Fund Units were two-fold. He had a present beneficial interest in them: they were expressly held for him by Appleby and he was entitled to any income or dividends from them. This was a property interest, but it was a defeasible one. It would either lapse upon his leaving as a Bad Leaver or other Trigger Date under clause 3.5, or would mature into a legal right at the vesting dates in January and March 2012. He also had a contractual right to the Units which was a contingent right, subject to the terms of the Plans, to the vesting of the Units at the vesting dates in January and March 2012. Again this right was subject to the contingency that he did not become a Bad Leaver prior to the vesting dates.

212. For the purposes of this case it is not necessary to distinguish between these interests. There is no claim for relief against forfeiture, and the claim does not seek to protect the present beneficial interest in the shares which existed at 31 December 2011. The penalty is said to be the loss of the right to have the legal title in the Units vested at the vesting dates in January and March 2012. Prior to Mr Imam-Sadeque leaving BlueBay on 31 December 2012, it remained a contingent right. It had not yet accrued or crystallised, and might never do so were he to become a Bad Leaver prior to the vesting dates. It was contingent upon his continued employment unless he left in circumstances in which he was a Good Leaver. I n effect, absent death, permanent ill health or termination without cause by BlueBay, his right to the 2012 Fund Units was conditional upon his continuing to fulfil his contract of employment until the vesting dates.

213. There was no authority cited to me in which contingent rights of that nature were treated as equivalent to the payment of a sum of money so as to bring them within the scope of the penalty doctrine. In Gilbert Ash the relevant clause allowed withholding by the contractor of "monies due or becoming due" to the sub-contractor. It therefore expressly covered monies which were presently already due to the contractor. The sums of money in issue in the case were sums which had been certified as due from contractor by the architect, and were accordingly present debts. No issue arose as to whether a clause which affected only future debts could attract the doctrine. The passages in the speeches which address the penalty issue are not directed to any such distinction. Lord Reid at p 698C-E, and Lord Salmon at p 723G-H appear to treat the withholding of current debts as what makes the clause fall within the doctrine. Lord Morris at p 703 G-H and Viscount Dilhorne at p 711D-E are ambivalent on the point.

214. In The Fanti, the cesser clause affected accrued rights: see per Stuart-Smith LJ at 260 col 2 and 262 col 1.

215. In Contractual Duties: Performance, Breach, Termination and Remedies by Professors Andrews, Clarke, Tettenborn and Virgo (2011), the authors say at paragraphs 25-050:

"Forfeiture of accrued benefits. Parallel to the court's power to relieve against forfeiture of property and analogous rights, referred to below, there is some authority that the law of penalties may affect a clause if its effect is to cancel a party's accrued claim to a particular benefit under it in the event of breach. Notably, in the insurance case of The Fanti it was held in the Court of Appeal that this applied to a clause in a policy whose effect was retrospectively to withdraw accrued rights to claim in the event of failure by the assured to pay later premiums. But to give rise to this rule, the benefits must have accrued: the withdrawal of the right to payment where performance is not complete is not penal."

216. The authority cited for the last proposition is the Australian case of Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292. In that case Interstar terminated loan origination and management agreements with the consequence that Integral were no longer entitled to certain income under the agreements. Integral claimed that the clause, which provided for the cessation of payments, was a penalty. The Court of Appeal of New South Wales rejected the argument. Allsop P (with whom Giles and Ipp JJA agreed), having reviewed the authorities on penalties said at [93]-[94]:

"Here the relevant fees were not fully earned. Integral's right to receive them was dependent upon fulfilling its responsibilities under the contract because it only accrued when it was earned. The right to receive them was conditioned, in part, on the management obligations under the contract. The determination of the contract put an end to that entitlement...There was no relevant forfeiture of fully earned property to engage the law of penalties, assuming that forfeiture of rights (as opposed to payment of money) could so engage that law."

217. Mr Oudkerk QC relied in this context on what Beatson J said at paragraph 113 of General Trading Co (Holdings) Ltd v Richmond Corp Ltd [2008] 2 Lloyd's Rep 475:

"It [the penalty rule] has been held to apply …… (see Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573) to a clause which requires a contract breaker to forfeit a deposit or sum of money due or to become due to the other party in the event of breach." (emphasis added)

218. I do not read this passage as referring to contingent rights held by the contract breaker. Workers Trust was a case involving the forfeiture of a deposit in a contract for sale of land and did not concern a sum yet to fall due from the innocent party.

219. Mr Oudkerk QC also relied on the decision of the Employment Appeal Tribunal in Giraud UK Ltd v Smith [2000] IRLR 763. In that case a driver's contract of employment required him to give 4 weeks notice, and provided that a failure to give such notice and work out the notice period would result in a deduction from his final payment equivalent to the days short. The driver terminated his employment without notice and refused to carry out any further work. The employer refused to pay him sums due at the date of termination, claiming an entitlement to claim from him, and set off, 4 weeks pay. The EAT held the provision to be a penalty. This case does not assist Mr Imam-Sadeque's argument. What was forfeit in that case was the driver's pay for work carried out prior to the date of termination. It was an accrued right to a sum of money.

220. Mr Imam-Sadeque's loss of his contingent interest in the 2012 Fund Units is not equivalent to the payment of a monetary sum as a matter of law. The mere fact that the rights were of substantial economic value to Mr Imam-Sadeque is not sufficient of itself to attract the application of the doctrine. There is a distinction between contingent rights and accrued rights. I would not extend the doctrine to apply to such rights in the light of the authority I have cited which dictates that because the doctrine is an interference with freedom of contract its application is not to be expanded more widely than its current limits. In this context I would echo what Hoffmann LJ said in Else (1982) Ltd v Parkland [1994] 1 BCLC 130 at 145c:

"If this seems a somewhat formal distinction I would answer that the penalty doctrine, being an inroad upon freedom of contract which is inflexible compared with the equitable rules of relief against forfeiture, ought not to be extended."

221. I did not find helpful Mr Oudkerk QC's characterisation of the rights as a "deposit" or his analogy with pension rights. The rights were not treated as a deposit in any real or commercial sense. Nor were they akin to pension rights, which involve accrued rights. Nothing I say should be taken as directed to the application of the penalty principle, or relief against forfeiture, in a case involving pension rights.

222. For these reasons the penalty doctrine has no application in this case.

Is the Compromise Agreement penal?

223. In case I am wrong in this conclusion, and the penalty doctrine is applicable in principle, I will consider whether the "forfeiture" provisions of the Compromise Agreement were penal so as to be unenforceable.

224. I reject Mr Goulding QC's submission that the Compromise Agreement must be construed or "read down" so as to make clause 2.2 conditional on the non occurrence of breaches which must be of a repudiatory character. The language of clause 10 draws a clear distinction between repudiatory breaches (clause 10.1(b)) and breaches of material terms (clause 10.1(a)). The latter must form a different category of breaches, which ex hypothesi are not necessarily repudiatory. Clause 8 provides for BlueBay to claw back payment of the 2012 Fund Units should it become aware, after their payment, of "any breach". The contrast with clause 10 makes it impossible to treat this as meaning repudiatory breaches; and it would be unnatural to construe more restrictively the breaches covered by clause 2.1 which govern the prospective conferring of the right to the same payment. Breaches which were trivial could be ignored as de minimis. But material breaches would prevent clause 2.2 being effective even if they were not repudiatory. Mr Oudkerk QC is correct to say that the effectiveness of clause 2.2 depends upon the absence of any breach which is more than de minimis.

225. It is material to the question under consideration that the Compromise Agreement was freely negotiated by sophisticated parties of comparable bargaining power. Mr Imam-Sadeque was an experienced and self assured senior employee well able to assess his own best interests in relation to his career and the potentially large sums of money associated with his future. He had spent his professional life in a commercial environment dealing with very large sums for his employers and earning considerable sums, measured in seven figures, for himself. He was well able to assess the relevant benefits of the options open to him vis a vis both BlueBay and Goldbridge. He understood the terms of the Compromise Agreement and regarded it as a very good deal. He was provided with the terms of the Employee Handbook and Bonus Plans and took legal advice on them and on the terms of the proposed agreement.

226. The Agreement contained a variety of rights and obligations which individually had a commercial justification for one or other or both sides. The Agreement contained a bundle of benefits and burdens, the value of which for each party could not easily be expressed in monetary terms. The benefits for Mr Imam-Sadeque were that he could leave much earlier than he would otherwise have been able to, but still get the 2012 Fund Units to which that early leaving would not otherwise have entitled him (31 December 2011 rather than 27 September 2012); he was released from his post employment non competition obligations, and so enabled to start with Goldbridge early in its launch (1 January 2012 rather than towards the end of 2012, or possibly 2013 when the post might not still have been available for him); he could spend several months at home with his family on full salary and need do no work during that period (22 August to 31 December 2011); he did not need to face the difficulties of working in an environment where he had been passed over for promotion and had had problems with some of his work colleagues. All he had to do in return was to confirm that there were no existing grounds on which BlueBay would have been entitled to discipline or dismiss him summarily (clause 10 and the Re Affirmation Letter) and to abide by the terms of his contract of employment and the Compromise Agreement, which were largely negative obligations of a conventional and reasonable scope.

227. There were benefits to BlueBay, too, which I have identified. Of relevance here are Mr Imam-Sadeque's continuing duty of fidelity and his obligation not to be involved in competing with BlueBay, poaching BlueBay's employees, or enticing away BlueBay's clients. The financial effect on BlueBay of a failure by Mr Imam-Sadeque to perform these obligations under the Agreement and his contract of employment would be difficult to quantify. A breach might be more or less serious. The financial effect on BlueBay would be difficult to predict. For example, competition in conjunction with others might cause BlueBay substantial loss; but the precise effect of his competition in conjunction with others would be difficult to assess and proving it would very likely raise complex and difficult issues of causation, remoteness and quantification. Breaches comprising poaching of BlueBay employees give rise to similar considerations. So too would diverting away BlueBay clients. It is by no means fanciful to suppose that the financial consequences for BlueBay of hypothetical breaches by Mr Imam-Sadeque might exceed the value of the 2012 Fund Units. If Mr Imam-Sadeque were to persuade clients to switch their business to a competitor, or entice away personnel who were important for BlueBay's business, the latter's loss might easily exceed £1.7m.

228. This is not, therefore, a case in which it can be said that the value of the rights forfeited exceeds the greatest loss which could conceivably be suffered from the breach. Moreover the true loss to BlueBay from such activity might be impossible to establish and for BlueBay to recover by a damages claim; and such a claim would in any event likely be difficult and expensive to seek to prove, involving further uncompensatable loss by having to have management time and resources devoted to it.

229. It would be an injustice to BlueBay if Mr Imam-Sadeque could escape his bargain, and confine BlueBay to a claim in damages for loss which, although real and substantial, might be irrecoverable in full by a damages claim. It can not be said that confining BlueBay to a damages claim would adequately and fairly compensate BlueBay for the consequences of whatever foreseeable breach Mr Imam-Sadeque might commit.

230. A further consideration is the commercial objective of the Bonus Plans themselves. Deferred remuneration schemes are commonplace throughout the City of London and elsewhere. Following the financial crisis of 2007-2008, FSA regulated entities are required to provide variable remuneration to certain staff on a deferred basis containing provisions for malus adjustment (prior to vesting) and clawback (after vesting or payment). The Bonus Plans operated by BlueBay are in accordance with industry practice and regulatory requirements. It is an important feature of such deferred remuneration plans that there is no vesting unless the employee is in employment on the vesting dates, or has not resigned, or received notice of termination for serious misconduct. It would be contrary to the commercial objectives underlying the Bonus Plans for Mr Imam-Sadeque to be able to take the benefits of the Compromise Agreement (including an extended period of garden leave, and joining Goldbridge earlier than otherwise would be the case if he had resigned), if he could act in serious breach of his contractual duties as an employee, and yet still enjoy the benefits of vested Fund Units. In the absence of the Compromise Agreement, he would not have enjoyed that outcome had he remained at work and been guilty of serious misconduct; in those circumstances he would have been liable to be dismissed for serious misconduct and his Units would not have vested under the terms of the Bonus Plans. He should be in no better position because of the Compromise Agreement, from which he has additionally derived other benefits.

231. I have not lost sight of the fact that this is the consequence of his having breached the Compromise Agreement in a way which was repudiatory, as events have happened; and that the same consequences would follow if he had been in non repudiatory breach. But this illustrates that the Compromise Agreement contained a bundle of rights and obligations which might operate to the advantage or disadvantage of either party, and to which each freely agreed. It is not irrelevant to the question under consideration that the effect of Mr Imam-Sadeque's argument would be to enable him to retain the benefits of the Compromise Agreement and his 2012 Fund Units in circumstances in which, as I have found, his interest in the Units would have been liable to forfeiture quite apart from the Compromise Agreement because of his repudiatory breaches of his contract of employment.

232. It is true that the treatment of the 2012 Fund Units in the Compromise Agreement provides a strong incentive for Mr Imam-Sadeque to fulfil the obligations he undertakes pursuant to that Agreement. It can properly be said, without abuse of language, that such treatment was a deterrent to breach by Mr Imam-Sadeque. But I do not think it would be right to categorise the terms of the Compromise Agreement, taken as a whole, as using the possibility of the Units not vesting in a way which is predominantly intended as a deterrent against breach. Their treatment is one element of a bundle of rights and obligations which must be viewed as a whole and is commercially justifiable.

233. Accordingly, had I found that the penalty doctrine were applicable in principle, I would not have regarded the provisions of the Compromise Agreement as penal so as to be unenforceable.

234. There is another factor which reinforces this conclusion. When the Compromise Agreement was concluded, Mr Imam-Sadeque's rights to the 2012 Fund Units were subject, quite apart from the terms of the Compromise Agreement, to his not committing any serious misconduct justifying dismissal before their vesting dates at the end of January and March 2012. Significantly, I have found that at the date of the Agreement, Mr Imam-Sadeque was already in repudiatory breach of his contract of employment. He could have been summarily dismissed for gross misconduct if BlueBay had known then what it knows now. That would have made him a Bad Leaver under the terms of the Bonus Plans and prevented any vesting. It could therefore be said that the value to Mr Imam-Sadeque of the 2012 Fund Units at the time of the Compromise Agreement was not £1.7 million, but zero. They would have been forfeit had Mr Imam-Sadeque revealed the true position, as he was bound to do by clause 10 of the Agreement.

Conclusion

235. Mr Imam-Sadeque is not entitled to his 2012 Fund Units and the claim fails.