Breach of agreement - High Court Case
17 August 2010
This article was first published in Company
Secretary's Review in July 2010
The claimant, Mrs Antonio claimed an order setting aside
agreements made with the defendant, her ex-husband, Mr Antonio,
whilst he counterclaimed for damages for breach of agreement and
for inducing a breach of his employment contract.
Mrs Antonio was the director of Gina Holdings Limited
(“Holdings”), a designer, manufacturer and supplier of women’s
wear. Mr Antonio was employed by Holdings’ subsidiary. In 2006, Mrs
Antonio transferred 50% of her Holdings’ shares to Mr Antonio under
a transfer agreement, whilst a shareholders’ agreement governed the
future conduct of the affairs of Holdings.
In 2008, Mr Antonio assaulted Mrs Antonio. He was suspended for
gross misconduct in assaulting a director, then dismissed. Mrs
Antonio commenced proceedings, claiming the agreements had been
executed under duress following Mr Antonio’s sustained campaign of
intimidation and threats against her which culminated in the
assault – the ‘last straw’. He counterclaimed that she acted in bad
faith towards him contrary to the shareholders’ agreement in
procuring his dismissal.
The primary issue in question was whether Mrs Antonio’s version
of events was preferred and if so, whether the agreements were
executed under duress. The court considered the chronology of
events leading up to and following the execution of the agreements
and accepted her account of Mr Antonio’s conduct. The court
considered the law as to duress which entails (a) wrongful or
illegitimate threats or pressure (including violence or threats of
violence to the person) and (b) a sufficient causal link between
the threats or pressure and the decision of the contracting party
to enter the contract. The court held Mr Antonio’s intimidation and
threats of violence against Mrs Antonio and others were
illegitimate.
Considering the test for duress in Barton v Armstrong
(1976) AC 104 PC (Aus), the court held that Mr Antonio’s conduct
was directed, at least in part, towards pressuring Mrs Antonio into
transferring 50% of her valuable business to him for scant
consideration. His intimidation and threats were the primary reason
(and the only apparent reason) why she eventually executed the
agreements. The burden was on him to prove his intimidation and
threats were not, at least, a reason why she signed the agreements.
He failed to discharge that burden. The agreements were executed
under duress and were voidable when made. The duress continued for
two years after execution negating any defence of affirmation or
ratification. Secondly, the court held that the shareholders’
agreement did not impose a general obligation to act in good faith
and, given Mr Antonio’s behaviour, it was difficult to see how
procuring his dismissal demonstrated bad faith, thus Mrs Antonio
had not breached the agreement. Thirdly, Mr Antonio’s conduct meant
his employment could not reasonably be permitted to continue, which
amounted to a repudiation of his employment contract. His dismissal
was not a breach of contract; the decision to dismiss him being
fully justified in the company's best interests. The court found
for Mrs Antonio, granting an order that the agreements be set aside
and Mr Antonio’s counterclaims be dismissed.
Helen Antonio (Claimant) v Douglas Steven Antonio
(Defendant): Douglas Steven Antonio (Part 20 Claimant) v (1) Helen
Antonio (2) Gina Designs Ltd (3) Gina Holdings Ltd (Part 20
Defendants) (2010) [2010] EWHC 1199 (QB), QBD (S Phillips QC)
24/5/2010
For more information, contact Freya Law.