Compromise Agreements - Court of Appeal

[Thanks to Anthony Johnson of 1 Temple Gardens for providing this case summary]

In Collidge v. Freeport plc, handed down last week, the Court of Appeal unanimously upheld the High Court's decision that it was a condition precedent of the Respondent's liability to perform its obligations under a Compromise Agreement that the Claimant was not in breach of a term included in that agreement to the effect that he had not previously committed any repudiatory breaches of his contract of employment that would have entitled the Respondent to terminate his employment.

Counsel for the Claimant argued in the Court of Appeal that the Respondent had elected not to treat the Claimant's repudiatory breach as bringing the agreement to an end, or at least not before his right to payment had accrued. However, all three judges rejected this construction of the agreement. Tuckey LJ, giving the lead judgment, said that it was a carefully drafted agreement, and that its construction was put beyond doubt when its context was considered. Sedley LJ said that the proverbial officious bystander "would have thought the parties were pulling his leg" if told that Claimant's purported construction of the agreement was the correct one.