‘Golden Hello’ or Repayable Loan? High Court Decides

10/02/2017


Contracts sadly do not always take into account all eventualities or accurately reflect the intentions of those who sign them – but one High Court case has illustrated how such flaws can be put right in the interests of fairness and commercial common sense.

The case concerned a £336,000 payment made by a financial services firm to a new employee. The former argued that the payment was a loan that was repayable in full if the employee left within four years. The latter, however, insisted that it was a so-called ‘golden hello’ and was not repayable in any circumstances. The employee stayed with the firm for just over a year before resigning and the latter launched proceedings against him to recover the money.

The Court could detect no express term in the written agreement under which the money was paid that required its repayment in the event of the employee’s early departure. However, in implying such a term into the agreement, it noted that, otherwise, the employee could simply have pocketed the money even if he had remained with the firm for only a week.

In ordering the employee to repay the money, the Court found that such an outcome would be demonstrably unfair to the firm and that the implied term was necessary in order to achieve commercial and practical coherence. The result of the case also reflected the parties’ clear intentions, as gleaned from extraneous evidence.

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