Malik and Mahmud v Bank of Credit and Commerce International SA
Encyclopedia
Malik and Mahmud v Bank of Credit and Commerce International SA [1997] UKHL 23 is a leading English contract law
and UK labour law case, which confirmed the existence of the implied term of mutual trust and confidence
in all contracts of employment.
. BCCI went insolvent
due to massive fraud, connection with terrorists, money-laundering, extortion and a raft of other criminal activity on a global scale. Malik and Mahmud had both lost their jobs and they sought employment elsewhere. They could not find jobs. They sued the company for their loss of job prospects, alleging that their failure to secure new jobs was due to the reputatational damage they had suffered from working with BCCI. Nobody, they said, wanted to hire people from a massive fraud operation like that at the company. This raised the question of what duty the company had owed to its employees that had been broken. Although there was no express term in their contracts, Malik and Mahmud argued there was an implied term in their employment contract that nothing would be done calculated to undermine mutual trust and confidence.
The principle was not limited by any rule that an employee had to know of the breach while the employment relationship subsisted, since if that ‘were right it would mean that an employer who successfully concealed dishonest and corrupt practices before termination of the relationship cannot in law commit a breach of the implied obligation whereas the dishonest and corrupt employer who is exposed during the relationship can be held liable in damages. That cannot be right.’
English contract law
English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
and UK labour law case, which confirmed the existence of the implied term of mutual trust and confidence
Mutual trust and confidence
Mutual trust and confidence is a phrase used in English law, particularly with reference to contracts in UK labour law, to refer to the obligations owed in an employment relationship between the employer and the worker....
in all contracts of employment.
Facts
Mr Malik and Mr Mahmud both worked for the Bank of Credit and Commerce InternationalBank of Credit and Commerce International
The Bank of Credit and Commerce International was a major international bank founded in 1972 by Agha Hasan Abedi, a Pakistani financier. The Bank was registered in Luxembourg with head offices in Karachi and London. Within a decade BCCI touched its peak...
. BCCI went insolvent
UK insolvency law
United Kingdom insolvency law deals with the insolvency of firms and individuals in the United Kingdom. The important statutes are the Insolvency Act 1986, as amended by the Enterprise Act 2002, as well as the Company Director Disqualification Act 1986 and the Companies Act 2006.Insolvency is a...
due to massive fraud, connection with terrorists, money-laundering, extortion and a raft of other criminal activity on a global scale. Malik and Mahmud had both lost their jobs and they sought employment elsewhere. They could not find jobs. They sued the company for their loss of job prospects, alleging that their failure to secure new jobs was due to the reputatational damage they had suffered from working with BCCI. Nobody, they said, wanted to hire people from a massive fraud operation like that at the company. This raised the question of what duty the company had owed to its employees that had been broken. Although there was no express term in their contracts, Malik and Mahmud argued there was an implied term in their employment contract that nothing would be done calculated to undermine mutual trust and confidence.
Judgment
The House of Lords unanimously held that the term of mutual trust and confidence would be implied into the contract as a necessary incident of the employment relation. This was a term implied by law. Lord Steyn said the term, as it had evolved, was a ‘sound development’. He continued.The principle was not limited by any rule that an employee had to know of the breach while the employment relationship subsisted, since if that ‘were right it would mean that an employer who successfully concealed dishonest and corrupt practices before termination of the relationship cannot in law commit a breach of the implied obligation whereas the dishonest and corrupt employer who is exposed during the relationship can be held liable in damages. That cannot be right.’
See also
- Wilson v RacherWilson v RacherWilson v Racher [1974] ICR 428 is a UK labour law case concerning constructive dismissal. It serves as an example of an employer being found to have wrongfully dismissed an employee, because of the employer's own bad behaviour...
- Liverpool CC v Irwin