In Duchey Farm Kennels Ltd v Steels, the High Court has confirmed that an employee’s breach of a confidentiality clause contained within an ACAS-negotiated settlement agreement (COT3) did not release the employer from its obligation to pay outstanding settlement sums.
Mr Steels brought tribunal proceedings against Duchey Farm Kennels Ltd (DKF) which were settled by way of a COT3. The COT3 confirmed settlement of all Mr Steels’ claims in exchange for a settlement payment, which would be paid in instalments over 47 weeks. The COT3 also contained a standard confidentiality clause requiring the parties to keep the fact of and the terms of the COT3 strictly confidential.
DKF became aware that Mr Steels had breached the COT3 by telling a former colleague about the agreement and the total amount that would be paid to him. As a result, DKF ceased paying outstanding instalments that were due, relying on Mr Steels’ breach.
Having issued a further claim to enforce the the COT3, a County Court found that while Mr Steels had breached the confidentiality clause, it was not a “condition” of the COT3. That meant DKF were not released from their future obligations arising under the COT3 (including paying the settlement sum). The County Court also found that Mr Steels’ breach did not repudiate the contract; in other words, allow DKF to treat the contract as having been brought to an end.
On appeal, the High Court confirmed the County Court’s decision. While it was possible for parties to expressly agree that a term in a contract was a condition that was not the case here. There were no grounds to imply the confidentiality provision as a condition of the COT3. Equally, the confidentiality clause did not go to the root of the contract – at its heart, the COT3 was about payment of compensation in exchange for settlement of Mr Steels’ tribunal claims – and as such a breach of it did not repudiate the contract.
Alex Payton comments:
"Ensuring the confidentiality of settlement agreements is crucially important for any employer – it protects commercially sensitive information and avoids opening the floodgates to unmeritorious claims brought by those just seeking a pay-off. This case is a useful reminder of the need to carefully review settlement agreements to ensure maximum protection for the employer."
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