ICAP successfully resists garden leave irrationality claim

14 December, 2017

On Wednesday 6 December 2017, judgment was handed down by Mrs Justice Moulder in Faieta v ICAP, dismissing a breach of contract claim brought by a former employee of ICAP who alleged that ICAP had acted unlawfully by putting him and keeping him on garden leave for 15 months so as to avoid paying him bonuses. The High Court held, following Braganza, that both limbs of the Wednesbury rationality test applied to an employer’s discretion to put an employee on garden leave – and this is the first case to have considered this issue. But it held that ICAP had not acted irrationality, either in its decision or in the factors that it took into account. Mr Faieta had been asked to give up his guaranteed minimum bonus of £200,000 per annum in the light of the declining fortunes of the Desk on which he worked and his declining revenues, which meant that his guaranteed bonus was not sustainable. ICAP gave the claimant a choice to accept a change in his contract so as to give up the guaranteed minimum bonus or to leave. As he was unwilling to accept a change in his contractual terms, he was placed on garden leave whilst ICAP sought to negotiate a settlement package with him. The Court held that that was not irrational. Nor was it a breach of the implied term of trust and confidence as ICAP had reasonable and proper cause for their decision. The Court also rejected the Claimant’s claim for damages that he would have earned hundreds of thousands of pounds of additional bonuses had he remained in employment for the full term of the contract.

David Craig QC acted for the defendant, instructed by Jonathan Arr of Macfarlanes.