- Employers Should Reserve Position in Connection with Suspected Misconduct
- September 9, 2009 | Author: Alex Denny
- Law Firms: Faegre & Benson LLP - London Office; Faegre & Benson LLP - Minneapolis Office
In Cook v MSHK Limited and Ministry of Sound Recordings Limited  EWCA Civ 624, it was held by the Court of Appeal that an employer should reserve its position in relation to facts which it wished to rely on subsequently as grounds for an employee's summary dismissal. By not doing so, it had accepted the employee's repudiatory breach and could therefore not justify the employee's dismissal on this basis.
Mr Cook was employed by MSHK Limited (MSHK) and was also a de facto director of Ministry of Sound Recordings Limited (MSRL). Mr Cook resigned from MSHK on 18 May 2007 as he had accepted a job with a competitor company. He assured MSHK that he would not be undertaking any activities that competed with MSHK or MSRL. However, during Mr Cook's 6 month notice period, a dispute arose over whether he was being honest about this. Mr Cook was summarily dismissed on 3 August. One of the reasons for his dismissal was that he had lied about his new employment not being competitive. This amounted to a breach of the duty of trust and confidence and a breach of his fiduciary duties. Mr Cook's appeal against the decision to dismiss him failed and he commenced work for his new employer at the end of August.
MSHK and MSRL issued a claim seeking a declaration in the High Court of the lawfulness of Mr Cook's dismissal, as well as damages and compensation for breach of his fiduciary duties. Mr Cook sought summary judgment. The Court of Appeal held that it was clear that MSHK and MSRL had known of Mr Cook's intention to compete with MSHK and MSRL for over two months before his dismissal. Once MSHK and MSRL knew that the breach had occurred, they had to decide what to do about it and by not reserving their position, it was taken that they had accepted Mr Cook's repudiatory breach and could therefore not rely on it to justify his dismissal.