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Soc Generale V. Geys Notes

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SOC GENERALY V. GEYS FACTS The appellant, Raphael Geys, is a Belgian national. He is in dispute with his former employer, Societe Generale, London Branch ("the Bank"), about the amount due to him following his summary dismissal from his employment. His case is that he was dismissed on 6 January 2008, and that he is entitled to a sum contractually due to him in the form of a termination payment amounting to more than EU12.5m and to damages for breach of contract. The Bank's case is that the appellant is entitled to a termination payment of no more than EU7m, as he was dismissed on 29 November 2007 or at the latest 18 December 2007. On 29 November 2007 the appellant was called to a meeting at which he was handed a letter which had been written on the Bank's behalf and was in these terms: "Termination of Employment I am writing to notify you that Societe Generale, London ('SG') has decided to terminate your employment with immediate effect. In accordance with the terms of your employment contract with SG dated 28 January 2005, SG will arrange for the appropriate termination documentation to be provided to you and your legal adviser." QUESTION Does a repudiation of a contract of employment by the employer which takes the form of an express and immediate dismissal automatically terminate the contract or - as was held in Gunton v Richmond-upon-Thames London Borough Council [1981] Ch 448 and Boyo v Lambeth London Borough Council [1994] ICR 727 - does the normal contractual rule that the repudiation must be accepted by the other party apply equally to that case?
HOLDING LORD HOPE For the reasons given by Lord Wilson, I too would hold that the elective theory is to be preferred - that a party's repudiation terminates a contract of employment only if and when the other party elects to accept the repudiation. I am persuaded by his careful analysis of the authorities that provide support for the view that repudiation of a contract of employment terminates the contract without the necessity of acceptance by the other party was not as authoritative or as consistent as Lord Sumption indicates in para 128 below. I also think that there are cases, of which this case

is a good example, where it really does matter which of the two theories is adopted. The automatic theory can operate to the disadvantage of the injured party in a way that enables the wrongdoer to benefit from his own wrong. The law should seek to avoid such an obvious injustice. Where there is a real choice as to the direction of travel, the common law should favour the direction that is least likely to do harm to the injured party. I agree that we should be very cautious before reaching a conclusion whose result is that a breach is rewarded rather than its adverse consequences for the innocent party negatived: see para 66. The fact that an application of the automatic theory may produce an injustice is, for me, the crucial point. The question that Sir John Donaldson asked himself in Sanders v Ernest A Neale Ltd [1974]
ICR 565, 571 is at the heart of the issue: why should the employee not sue for wages if it is the act of the employer which has prevented his performing the condition precedent of rendering his services? There may be grounds for thinking that the court is less reluctant than it once was to give injunctive relief in such cases, but I would not rest my decision on that point. It is the objection that the party who is in the wrong should not be permitted to benefit from his own wrong that is determinative. The timing of the repudiation may be crucial, and if the automatic theory were to prevail an employer may well be tempted to play this to his advantage - by getting in first before a rise in pay or pension entitlement takes place or, as in this case, a rise in the entitlement to bonuses. The essential difference between the two theories may be said to be that under the automatic theory the decision as to whether the contract is at an end is made beyond the control of the innocent party in all circumstances, whereas under the elective theory it is for the innocent party to judge whether it is in his interests to keep the contract alive. Manifest justice favours preferring the interests of the innocent party to those of the wrongdoer. If there exists a good reason and an opportunity for the innocent party to affirm the contract, he should be allowed to do so. LORD WILSON In the absence of any direct authority of real weight at this level, the court is required to make a difficult and important choice between a conclusion that a party's repudiation (albeit perhaps only an immediate and express repudiation) of a contract of employment automatically terminates the contract ("the automatic theory") and a conclusion that his repudiation terminates the contract of employment only if and when the other party elects to accept the repudiation ("the elective theory"). It is common ground that, whichever theory be chosen, it should apply equally to

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