Grant David Vincent Williams v. Jefferies HK Ltd, Court of First Instance (HCA 320/20110)

An investment banking firm, Jefferies HK Ltd (Defendant), summarily dismissed the Head of Equity Trading Asia, Mr. Williams (Plaintiff) for “unacceptable and entirely inappropriate misconduct” in December 2010. The Court of First Instance (“CFI”) ruled that there was no justification for the dismissal and that the Defendant had breached the implied duty of trust and confidence, leaving the Plaintiff “high and dry”. The Plaintiff was awarded damages in excess of HKD15.8 million and Deputy High Court Judge Seagroatt ordered the Defendant to pay the Plaintiff’s costs on an indemnity basis as it was held that the Defendant’s case at trial disclosed some “extremely unpleasant features”. Although this case is quite unusual on its facts, it does have characteristics shared by many cases of wrongful dismissal where the employer jumps to a conclusion in a pressured situation, fails to verify the basic facts, proceeds to terminate without giving an opportunity to the employee to explain resulting in significant liability and, in this case, a critical judgment where the decision is described as a “hysterical reaction”.

Background

The Plaintiff commenced employment with the Defendant on August 26, 2010. He initiated the creation of a daily newsletter of which he was the editor. The newsletter had an edgy and colloquial tone and content and was used by the Defendant as a marketing tool. The Defendant set up a protocol for approval of the contents which resulted in the Plaintiff sending his draft to the London office which then gave the New York office confirmation that the newsletter could be distributed to clients. As a result of an administrative error in New York, the newsletter was published on December 7, 2010, without approval being received from London on its contents. This was problematic for the Defendant as the Plaintiff had included a link in his editorial to a video depicting Hitler with subtitles that were derisive about the CEO of another bank.

The Defendant issued an apology to its clients in the following terms

“Please be aware that we inadvertently distributed Grant Williams’ December 7, 2010 edition of ‘Things That Make You Go, Hmmm …’ before it was properly vetted. That piece contained third-party material from a website that we do not condone. To the extent that piece is still in your inbox, we would ask you to delete it. We seriously apologize for the inadvertent distribution of this material.”

The Defendant’s Hong Kong CEO met with the Plaintiff on December 8 and advised him verbally that he was being dismissed for gross misconduct and handed him a letter confirming this decision. The meeting was found to have taken just over two minutes and although the Plaintiff pointed out that he had sent the draft for approval to London and had not sent it out himself, no further discussion was held. The Plaintiff brought claims in the High Court for wrongful termination by way of summary dismissal and for breach of the implied term of trust and confidence. The CFI awarded judgment in the Plaintiff's favor and made an unusual order for indemnity costs against the Defendant.

Aggravating features leading to liability and costs being awarded on an indemnity basis

Awards of costs are in the discretion of the court and, generally, they “follow the event” - in other words, the losing party pays. Usually, costs are awarded on a “party and party” basis, meaning that all necessary and proper costs are recoverable by the losing party, but only on the court scales, which are considerably lower than commercial rates. This generally results in a successful party only being able to recover around 55-60 percent of his actual costs. The court may award costs on an indemnity basis where proceedings are scandalous or vexatious or have been initiated maliciously or in an oppressive manner or where the events leading up to the proceedings justify such an award. The dual intention is to punish the oppressing party and compensate the aggrieved party to a greater degree than a party and party award. The event that led the court to award indemnity costs in this case were manifold:

  1. Corporate publication

The CFI held that the newsletter was a corporate publication which had an approval/review process designed by the Defendant. The Plaintiff was the editor but not the publisher and he collated and edited it in the course of his employment. In these circumstances the email sent out by the Defendant sought to shift all accountability to the Plaintiff without taking any responsibility for it being a corporate publication.

  1.  Facts not verified

A number of the Defendant’s senior managers incorrectly believed that the Plaintiff was the author or creator of the subtitles in the ‘Hitler video’ and failed to verify their beliefs. The Defendant disclosed to clients of the Defendant the fact of and reason for the Plaintiff’s dismissal, and is likely to have disclosed their misconception about the video, which may have led to the Plaintiff being virtually unemployed for over two and half years. The email that the Defendant issued to its clients following the publication of the newsletter was also incorrect in that it stated that third party material had been included in the newsletter, which was not the case.

  1. Inadequate evidence

The Defendant was criticized for failing to call the principal decision makers in the US, who were responsible for the dismissal, to give evidence and submit to the court for cross-examination. The witnesses who gave evidence were remote from the decision-making process, so their testimony was of limited value.

The Defendant also failed to give full disclosure of correspondence which went to the heart of the matter.

  1. Real reason for dismissal

The CFI held that the dismissal was motivated by panic at offending the business partner/competitor targeted in the video but the Defendant sought to “taint and smear the Plaintiff with tags of racism and anti-semitism” in its defense. It was also admitted in evidence that had the newsletter not been distributed, the Plaintiff would not have been dismissed.

  1.  Pre-action conduct

The CFI criticized the Defendant’s pre-action correspondence on the basis that it was “wasteful and unconstructive”. Judge Seagroatt considered that pressing the Plaintiff for a substantial sum for security for costs was an attempt to “overawe” the Plaintiff although this was a less significant consideration in making the order for indemnity costs in his favor.

Take away points

This case highlights the fact that, when a damaging event takes place which may lead to a summary dismissal, employers are best advised to appoint independent senior employees (i.e. not those involved in the incident) to investigate to ensure that any action taken is warranted. In situations where there is actual or perceived damage to a company’s reputation, there is a real risk of a knee jerk reaction demanding that a ‘head must roll’. This case sounds a note of caution that hasty decisions may well not withstand judicial scrutiny and may be costly. It is prudent to keep in mind that decisions made in an office where different employment laws apply (for example ‘at-will’ employment) may not “translate” to the jurisdiction employing the individual in question. Time taken to verify core facts and gather supporting evidence is an essential investment in sound litigation management.