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The High Court has held in Palmeri and others v Charles Stanley & Co Ltd that a firm was entitled to rely on a self-employed stockbroker's repudiatory conduct to justify the summary termination of his contract. This was the case even though the firm itself had breached the contract prior to termination by issuing an illegal ultimatum.

Mr Palmeri was a self-employed investment manager contracted to Charles Stanley & Co Ltd with a three-month notice period and no PILON clause. The firm decided to change its operative model to take a larger portion of Mr Palmeri's revenues.  When this was resisted by Mr Palmeri the firm called him to a meeting and offered him an ultimatum, either to sign the new terms or leave immediately with pay in lieu of notice.  Mr Palmeri verbally abused the managers present, but said that he would accept the new terms under protest for the duration of his notice period.  However, he continued to be abusive and the firm withdrew the offer of new terms and summarily terminated his contract.

Mr Palmeri issued a claim for breach of contract and also alleged that the failure to allow him the opportunity for an orderly transition of his clients' business was a breach of the implied term of mutual trust and confidence.  The High Court found that the firm had no contractual right to present Mr Palmeri with the ultimatum as it had no right to pay in lieu of notice.  However, his conduct as whole amounted to serious misconduct justifying summary termination.  The fact that the firm had been poised to deny Mr Palmeri his notice period did not affect its entitlement to rely on his repudiatory conduct.

Take note:  The decision in Palmeri is a reminder that where there is no right to pay in lieu of notice it will be a breach of contract to offer it, especially with summary dismissal as the alternative option.  However, in this case, the firm's breach was overridden by Mr Palmeri's own repudiatory conduct so his summary dismissal was justified.