Practice and Procedure


PUBLISHED April 30, 2003

It was an implied term of the Tesco Executive Share Option Scheme that employees would not be entitled to exercise the share option to which they would otherwise have been entitled for so long as they were in such breach of contract as would have entitled Tesco to terminate their contract of employment.Action by the claimant ('Tesco') to recover the sum of ?323,749.99 allegedly paid as a bribe to the third defendant ('UP') by a company who did business with Tesco ('Delta'). The first defendant ('P') counterclaimed in respect of his right to exercise share options granted to him under an executive share option scheme for Tesco's employees. UP was a company owned and controlled by P. P was employed by Tesco as its New Grocery Development Manager in its e-commerce department. Delta was a supplier of services to that department. Tesco contended that P, who was in a position to decide whether or not Tesco would continue its relationship with Delta, effectively blackmailed Delta into paying the bribe to him by threatening to withdraw Tesco's custom from Delta. Upon discovery of the alleged bribe, Tesco dismissed P. P contended that the money in question had been loaned to him by Delta.HELD: (1) P's case that the money had been paid to him by way of loan simply was not credible. P admitted that the invoices were false and it was quite clear that P had extorted the money in question from Delta as the price of keeping Tesco's business. (2) The secret payment had been a bribe which had clearly put P in a position of conflict of interest. It had also been a secret commission. P was liable to account for the payment and held it on trust for Tesco (see Attorney General for Hong Kong v Reid (1994) 1 AC 324). (3) It was an implied term of the share option scheme that P should not be entitled to take advantage of his wrongdoing. Therefore, there was an implied term that P would not be entitled to exercise his share options for so long as he was in such breach of contract as would have entitled Tesco to terminate his contract of employment. (4) If necessary, the court would have held that Tesco was entitled to succeed on P's counterclaim on the basis that P was in breach of a positive duty on his part to disclose that he had received the bribe.Judgment accordingly.

[2003] EWHC 823 (Ch)