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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Dresdner Kleinwort Ltd & Anor v Attrill & Ors  EWCA Civ 394 (26 April 2013)
Cite as:  3 All ER 607,  EWCA Civ 394,  ICR D30,  IRLR 548,  WLR(D) 156
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE HONOURABLE MR JUSTICE OWEN
HQ09X04007 and HQ09X05230
Strand, London, WC2A 2LL
B e f o r e :
VICE PRESIDENT OF THE COURT OF APPEAL
LORD JUSTICE ELIAS
LORD JUSTICE BEATSON
| (1) DRESDNER KLEINWORT LIMITED
(2) COMMERZBANK AG
|- and -
|RICHARD ATTRILL & ORS
|- and -
|FAHMI ANAR & ORS
Mr Nigel Tozzi QC and Ms Kate Livesey (instructed by Stewarts Law LLP) for the First Respondent
Mr Andrew Hochhauser QC and Mr David Craig (instructed by Mishcon De Reya) for the Second Respondent
Hearing dates : 5, 6 and 7 March 2013
Crown Copyright ©
Lord Justice Elias :
The contracts of staff.
"The Company reserves the right to vary the terms and conditions described in this handbook and the terms and conditions of your employment generally. Such changes can only be made by a member of the Human Resource Department and must be communicated to you in writing. When the change affects a group of employees, notification may be by display on notice boards or Company Intranet."
The proper construction of this clause is one of the issues in this case.
"33.1 You may be eligible to be considered for the payment of an annual discretionary award if, but only if, on the day bonus awards are actually paid (which is usually in the first quarter of the calendar year), you are both employed by the Company and not within a period of notice of termination of your employment.
33.2 Whether an award is made and the amount of such award, if any, is at the absolute discretion of the Company."
"…the continuing uncertainty among management and staff [which] could lead to a significant number of key individuals leaving or becoming disaffected…"
"the risk of defections has risen considerably. A retention programme is therefore being discussed internally as well as with Allianz and we expect its terms to be finalised shortly."
"for 2008 a de minimus [sic] pool of €400m (75% of 2007) to be set aside for DKIB."
"In order to stabilise the DK business it is essential and necessary to formally communicate the pool that has been secured for the staff base.
If agreed it would be our intention to formally communicate to the entire staff base of [DK] via a business update that Allianz have recognised the uncertainty and impact the strategic discussions are having on the staff base and have agreed to set aside a de minimus [sic] overall [DK] bonus pool for 2008 at €400m."
"A minimum bonus pool, which should be announced in the coming week, is needed to ensure employee stability. All risk policies must be strictly observed in order to prevent the pool being 'generated' by taking excessive risks. The minimum bonus pool should be guaranteed and allocated on a discretionary basis. Revenues of 2,327.5 million formed the basis of the cash pool of 400 million, with corresponding increases. Independently of the minimum pool, but related to it at a content level, approximately 60 front office staff should receive individual bonus guarantees."
a) a guaranteed minimum bonus pool of €400m had been created for 2008;
b) it represented a reduction of approximately 25% from the bonus pool for 2007;
c) there was potential for the size of the pool to be increased by 40 cents in the Euro if revenue exceeded targets;
d) it did not give rise to individual guarantees and that the pool would be allocated on a discretionary basis by reference to performance;
e) the effect of the guarantee was that the bonus pool would be distributed "no matter what" (to use a term which Dr Jentzsch apparently used in response to a question on 18 August) i.e. irrespective of the performance of DKIB;
f) the allocation of bonuses from the pool was to be made "in the usual way". So, for example, this meant that a number of guaranteed bonuses would be paid from the bonus pool.
In fact, only items (e) and (f) were in issue before the judge; it was conceded that the other statements had been made.
"The communication date for bonus awards for both [DK] (Front Office employees) and Aligned Functions (support employees) will be Friday 19 December 2008.
The bonus pool for the Front Office has already been communicated by Stefan Jentzsch in his updates. The bonus pool for Functions will be comparable with last year's, adjusted for headcount movements. Individual bonus awards continue to be discretionary and determined by the relevant management, and last year's award should not be taken as any indication of the level of any bonus award for 2008.
Bonuses communicated on 19 December 2008 will be paid in full with January salaries through the January payroll. The 2008 bonus awards will be awarded in cash and subject to statutory deductions ..."
"…. That this measure has fulfilled its purpose can already be seen on the basis of significantly reduced personnel fluctuations."
"... to leave the volume of the [DK] bonus pool resolved on August 12, 2008 unchanged at present. However, this resolution is subject to the proviso that a clause is included in the bonus letter stating that the bonus payment will be adjusted if material negative deviations in DKIB's revenue and earnings as against the existing forecast for the months of November and December 2008 are established during the preparation of the annual financial statements for 2008. The review of this issue will be conducted in January 2009 under the leadership of Stefan Jentzsch."
"I expect and apprehend that a retraction of the commitments will destroy the trust of the employees in the executive management fundamentally, finally and irrevocably, with the risk of high operating instability and corresponding consequences for the income and capital of the bank."
A discretionary bonus for 2008 under the arrangements given below has been provisionally awarded at [x] EUR
The provisional bonus award stated above is subject to review in the event that additional material deviations in Dresdner Kleinwort's revenue and earnings, as against the forecast for the months of November and December 2008, are identified during preparation of the annual financial statements for 2008 i.e. that Dresdner Kleinwort's earnings position does not deteriorate materially in this period. This will be reviewed in January 2009 by Stefan Jentzsch. In the event that such additional material deviations are identified, the Company reserves the right to review the provisional award and, if necessary, to reduce the provisional award……
You will receive a detailed statement confirming your final bonus award in local currency in February 2009. This will be paid together with your salary in the February 2009 payroll."
"…. I remain confident that in the end we will deliver on the overall bonus pool amount for [DKIB] and the individual promises made to each of you."
The issues before the judge.
(1) Whether the announcement of 18 August 2008 created a binding obligation to pay the claimants the sums claimed;
(2) Whether the introduction of the MAC clause on 19 December 2008 was a breach of the implied duty of mutual trust and confidence; and
(3) Whether if the MAC clause was lawfully introduced, it was properly construed and applied by the Bank when it decided what bonuses should actually be paid to the claimants.
Was there a variation pursuant to clause 1.4?
"The Company reserve the right to vary the terms and conditions described in this handbook and the terms and conditions of your employment generally. Such changes can only be made by a member of the Human Resource Department and must be communicated to you in writing. When the change affects a group of employees, notification may be by display on notice boards or Company Intranet."
(1) The Bank says there must be a single communication which satisfies the relevant requirements; they cannot be satisfied by different communications read together over a period of time. The claimants submit that there is no reason why a single communication should be necessary. It is not inconsistent with the wording of the clause to consider the combined effect of different communications.
(2) The Bank submits that in all cases the communication must be from HR. The purpose of this is to ensure that it is clear that the change is properly authorised and that reliance is not placed on unauthorised promises made by individual managers. The need for HR involvement is required not only where individual changes are made but also where group changes are effected. The claimants disagree and submit that the second and third sentences of the clause should be read disjunctively in which case there is no need for changes to be made by a member of the HR Department where group changes are effected.
(3) The Bank submits that the communication must always be in writing even when the change affects a group of employees. The claimants say, consistently with their submission that the two sentences are disjunctive, that this is not required for group changes.
(4) The Bank says that where a change affects a group of employees it is not enough to have a single "broadcast" on the Company Intranet; the notification needs to be displayed and that pre-supposes that some record of it is kept either on actual or virtual notice boards. An evanescent communication will not suffice. The claimants say that as a matter of fact the announcement in this appeal was available and could be seen on the Company Intranet even after it had been communicated on the 18 August. But even if that were not so, an oral announcement informing staff of a change in terms itself constitutes a notification displaying the change on the Company Intranet.
The arguments on appeal.
Aptness of the term for incorporation and uncertainty.
"The essence of the Town Hall meeting held on 18th August was that it quantified and qualified one uncertainty in the bonus procedure, namely the size of the bonus pool. Theoretically, it could have been any amount between nothing and the maximum the directors might properly so apply. Given the uncertainties which the directors of DBAG and the FSA had been discussing in May and June 2008, to set up a guaranteed minimum bonus pot of a specific amount was, and was intended to be, a substantial benefit to all those who might be eligible for the future award of bonuses and an inducement to stay. I see no reason why a promise of a guaranteed minimum bonus pool cannot be contractually binding even though individual employees cannot at that time point to an entitlement to a specific bonus payable out of it. At the very least each of them would be entitled to nominal damages for breach."
The intention to create legal relations.
"Where there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formulation of legally binding relations."
"Whether the parties intended to enter into legally binding relations is an issue to be determined objectively and not by enquiring into their respective states of mind. The context is all important."
"Secondly, the defendants pointed to the fact that the announcement was not communicated in writing, arguing that if there was an intention to create a binding obligation, then it could have been communicated to the entire workforce via the Company Intranet, as Mr Hindle did in his email of 20th October."
".. the inference plainly to be drawn from both the terms which the announcement was made and from the context in which it was made is that, viewed objectively, it was made with the intention of creating a legally binding obligation for those employed in DKIB."
The grounds of appeal.
Was the burden of proof on the Bank?
"In my view, with respect, [the claimant's counsel] has misunderstood the ET's decision. The Tribunal did not hold that there was no intention to create legal relations. Indeed, in my view, that question never arose. These two men were employer and employee; in effect, legal relations already existed between them. If words had been uttered that were capable of amounting to a contractual promise, it could not sensibly have been suggested that there was no intention to create legal relations."
Did the judge take account of the clause 1.4 point?
Was the judge entitled to have regard to matters not known to the employees?
Was there acceptance of the offer?
The introduction of the MAC Clause.
"…in considering whether the introduction of the MAC clause amounted to a breach of the duty of trust and confidence, it is necessary to consider whether, on an objective view,
(a) the introduction of the clause was calculated or likely to destroy or seriously damage the relationship of mutual trust and confidence between the claimants and DKL, and if so
(b) whether it was introduced without a reasonable and proper cause."
It is not suggested that there is any error in this approach.
The judge's findings.
"In the absence of any evidence or explanation from the Allianz Board members (or any disclosure of the Allianz documents) it is a legitimate inference that what drove Allianz to push for the introduction of a MAC clause was pressure from Commerzbank."
The judge then stated his conclusions about what lay behind this pressure:
"It is also clear the pressure successfully brought to bear by Mr Blessing was borne of an understandable sensitivity to the public perception of the payment of bonuses on such a scale in the context of the massive support for Commerzbank by the German Government. There was no financial motive in that the price Commerzbank had agreed to pay for the Bank reflected the accrual for the guaranteed minimum bonus pool so that the payment out of the whole of the guaranteed bonus pool would not have had an adverse financial effect for Commerzbank.
It follows that, in my judgment, the introduction of the MAC clause by DBAG was driven by Commerzbank for reasons unrelated to the problems of DKIB."
"A retraction of the commitments will destroy the trust of the employees and the executive management fundamentally, finally and irrevocably … I consider it neither comprehensible nor responsible at this time to step back from the commitments made."
He maintained that position thereafter.
"it is clear that the clause was introduced simply as a means of enabling DBAG to go back on the promise made by Dr Jentzsch, the purpose for which it was eventually used, rather than for the much more limited purpose for which on its proper construction it could be used…"
The grounds of appeal.
Trust and confidence.
The construction of the clause.
Lord Justice Beatson:
Lord Justice Maurice Kay: