Thomas v Fort Knox Bermuda Ltd (No 2)

• Jurisdiction: Bermuda
• Judgment Date: 01 October 2010
• Date: 01 October 2010
• Docket Number: Commercial Jurisdiction 2006 No. 31
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Commercial Jurisdiction 2006 No. 31

BETWEEN:

Allison Thomas

Plaintiff

and

Fort Knox Bermuda Limited

Defendant

Mr M Diel for the Plaintiff

Mr B Adamson for the Defendant

The following cases were referred to in the judgment:

Wise Group v MitchellICR [2005] ICR 896

Attorney General of Belize v Belize TelecomUNK [2009] UKPC 10

Abstract:

Termination of employment - Claim for deferred salary -Amendment of Statement of Claim - Damages for breach of contract

JUDGMENT of Kawaley, J

Introductory

1. The Plaintiff claims $205,000 in respect of deferred salary and $67,500 representing nine months salary allegedly due for breach of an implied term that the termination of his employment was subject to the giving of reasonable notice, both claims arising out of the termination of his employment with the First Defendant by letter dated November 1, 2005.

2. The claims against the Second and Third Defendant were struck out by consent on July 12, 2010. Paragraph 8 of the Statement of Claim provided as follows:

"Further and in the alternative the termination of the Plaintiff's employment is in breach of the Employment Act 2000". By Summons dated September 24, 2009, the Defendants applied to strike out paragraph 8 of the Statement of Claim. Bell J acceded to this application on December 3, 2009: Thomas v Fort KnoxBDLR[2009] Bda LR 67. The Court of Appeal upheld Bell J's decision that the only remedy for a breach of the Employment Act 2000 was to pursue the statutory remedies for unfair dismissal before the Employment Tribunal: Thomas v Fort KnoxBDLR[2010] Bda LR 17.

3. At the commencement of the trial, the Plaintiff applied to amend his Statement of Claim to (non-controversially) delete the original paragraph 8 and to (controversially) add the following new averments:

"8. (a) Alternatively the termination of the Plaintiff was in breach of contract in purporting to do so without any or any proper cause or without compliance with the provisions of the Employee Handbook.

(b) The Plaintiff was unemployed from the date of termination to April 2006 when he commenced working for himself with no income for forty-eight months."

4. The prayer was also amended to claim damages for breach of contract in the amount of $90,000 per annum, apparently for the four year period pleaded in draft paragraph 8(b) of the draft Amended Statement of Claim. I reserved until the present Judgment my decision on the application for leave to amend. Accordingly, the main issue at trial on the un-amended pleadings was whether the Plaintiff could establish that his employment was terminated in breach of an implied term that he was entitled to be given reasonable notice (the express contractual notice provisions notwithstanding). Assuming leave to amend could properly be granted, the secondary (but related) question was whether the First Defendant ("the Company") was entitled to terminate

the Plaintiff's contract without cause and/or in a procedurally impermissible manner and, if not, whether this rendered the termination unlawful at common law (as opposed to constituting a statutory claim which could only be pursued before the statutory tribunal).

5. The key averments in the Company's Defence were the following. Firstly, it was denied that no sums "covered by the Company's Deferred Payment/Work for Shares scheme" were actually due and payable (paragraph 4). Secondly it was averred that the parties had agreed that the minimum notice of termination the Company had to give was one month's notice so that no breach of contract had occurred.

The contract of employment: key documents

6. A letter evidencing the Plaintiff's contract of employment dated February 27, 2002 was sent to him by Shari Poe and apparently signed by the Plaintiff on February 14, 2002. The letter confirms his position as Chief Operating Officer, his monthly salary as $7500 of which $4500 was deferred. The letter expressly incorporated into the contract of employment the terms of the Employee manual including "Notice periods". The Plaintiff's signature appeared on page 3 of the letter underneath a caption which read as follows:

"I have read and understand the terms of employment set out in the above letter. I have also been given a copy of the Fort Knox Bermuda handbook, which covers in detail all areas of my employment with Fort Knox Bermuda. I have read the Handbook and agree to the terms and conditions stated therein."

7. The Employee Handbook dated May, 2001 states at page 13 as follows:

"Should it become necessary for the company to terminate employment for reasons other than cause...monthly paid employees will receive one month's notice or payment in lieu of notice...

If an employee feels that he has been terminated for improper reasons, he shall have the right to appeal that decision through the employee complaint procedure..."

8. In addition to the termination provisions relating to notice, the issue of deferred compensation was evidenced by the following documents. Firstly, by a Memorandum dated September 1, 1999 and signed by Troy Symonds, Allison Thomas, Hugh Hollis and Ricardo Swan, it was contemplated that full time staff would be paid $4000 monthly of which $2000 would be in cash and $2000 would be deferred. This agreement was approved by the Board on December 12, 2001 for the period May 1 to August 31, 2000. On February 15, 2002, when the Board also accepted the resignation of Hugh Hollis, a February 11, 2002 "Deferred Payment/Work for shares-Scheme" was approved by the Board. This document was signed by the three remaining employees, and provided for: (a) the Plaintiff (COO) to be paid $90,000 per year at the rate of $3000 per month in cash and $4500 deferred (September 1, 2001-August 31, 2002), and (b) for the Plaintiff to be issued 49,600 shares in respect of deferred salary for the period September 1, 2000 to August 31, 2001. The 2002 agreement stated as follows:

"...The Board of Directors reserve the right to award either the deferred cash value, common shares, or a combination of the two for the total deferred value outstanding for the period."

9. Thirdly, the issue of deferred compensation was referred to in the Company's unaudited accounts. Although it was unclear what relevance the accounts had to the Plaintiff's claims in the present action (as opposed to his separate pending minority shareholder oppression petition), Mr. Symonds was cross-examined extensively on various aspects of the accounts. These records clearly show, and the Company does not deny, that the deferred compensation claimed by the Plaintiff is still due and owing to him and others, totalling $407,398.35.

Termination of employment - key documents

10. In an Interim Report to the Board dated October 17, 2005, the CEO under "Operations" asserted as follows:

"A.T., whilst very capable is the most despondent member of the team and is progressively less involved in the management of FK. He has expressed a need to sell his stock and move on. He has been directly involved with all of the major losses of the company...It is my observation that whilst able to discuss future opportunities, he is not willing to commit to the implementation of the any plan.

It is my recommendation that we explore ways of allowing A.T. to exit the company as Vice-President and Chief Operations Officer."

11. The Board met on October 24, 2005 when a lawyer's letter sent on behalf of the Plaintiff and another director was tabled. After these two directors left the meeting, the Board accepted the CEO's October 17, 2005 recommendations and revoked the appointment of the Plaintiff as Vice-President of the Company. On November 1, 2005, the CEO on behalf of the Company wrote the Plaintiff in the following diplomatic terms:

"Fort Knox Bermuda Ltd. is now at a critical period in its development. The company is challenged with the need to raise capital and deliver upon a business plan in a very competitive environment. The next 12 months will require a team that is focused, cohesive, communicative and highly accountable.

In reflection of the past years' accomplishments and failures, I have concluded that you are not positioned to serve the company adequately moving forward. Over the past few years the inefficiencies that have been caused by our inability to work cohesively have caused the company tremendous loss both in terms of revenue and opportunity. As I prepare for the upcoming challenges, I am charged with installing a team of professionals who can deliver upon the business plan and the demands of this highly competitive environment. I do not believe that you are suited for this team.

As a result, I have decided that it is in the best interests of all concerned to terminate your employment with effect from today. You will be paid salary and benefits up to and including 1 months' salary in lieu of notice in accordance with your entitlement under the Employment Act 2000 and your health insurance will remain in effect for forty five (45) days following the date of termination.

I wish to personally thank you for the efforts that you have...