Ebury Partners UK Limited v M Acton Davis
[2023] EAT 40
Charles Anthony Joseph Steel v Spencer Road LLP
11 October 2023
[2023] EWHC 2492 (Ch)
High Court
A worker got a big bonus but had to pay it back if he quit within three months. He tried to argue this was unfair, but the court said it wasn't because he was still free to work for anyone else. He lost his appeal.
Key Facts
- •Mr. Steel, employed by Omerta, received a £187,500 bonus in January 2022.
- •His employment contract contained a bonus clawback clause requiring repayment if he left within three months of the bonus payment.
- •Mr. Steel resigned in February 2022 and refused to repay the bonus.
- •Omerta served a statutory demand, and Mr. Steel applied to set it aside, arguing the clawback was an unreasonable restraint of trade or penalty clause.
- •The ICC Judge Mullen dismissed Mr. Steel's application.
- •Mr. Steel appealed to the High Court.
Legal Principles
Setting aside a statutory demand requires a substantial dispute, similar to the summary judgment test.
Insolvency (England and Wales) Rules 2016, Rule 10.5(5)(b)
Restraint of trade doctrine: Two-stage test - 1) Is it a restraint? 2) If so, is it reasonable?
Case law dating back to the 18th century; summarized in Quantum Actuarial v Quantum Advisory [2021] EWCA Civ 227
A bonus clawback conditional on continued employment, but without a non-compete clause, is generally NOT a restraint of trade.
Tullett Prebon v BGC Brokers [2010] EWHC 484 (QB); Sweeney v Peninsula Business Services [2004] IRLR 49; Marshall v NM Financial Management [1997] EWCA Civ 1237
Outcomes
Appeal dismissed.
The bonus clawback clause was not a restraint of trade because it didn't restrict Mr. Steel's ability to work elsewhere. The judge correctly applied existing precedent, rejecting arguments that the disincentive effect of the clawback or its interaction with other contractual provisions rendered it a restraint of trade.