B e f o r e :
MR JUSTICE SINGH
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MR ANDREW HOCHHAUSER QC & MS JANE RUSSELL (instructed by Edwin Coe LLC) appeared on behalf of the Claimant
MR CHRISTOPHER JEANS QC (instructed by Baker & Mackenzie LLC) appeared on behalf of the Defendant
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MR JUSTICE SINGH:
- These are applications made by the defendant to strike out the claim and/or for summary judgment in favour of the defendant.
- The claimant was at all material times employed by the defendant bank. The claimant was initially employed by the defendant between 2001 and 2003 but was made redundant. For present purposes, the claimant started his employment with the defendant in or around February 2006. At all material times he was employed to work in the defendant's money market derivatives desk within its global finance department. He relies in his claim on alleged breaches of his contract of employment. He contends that the defendant breached both an express term and implied terms of that contract in relation to the payment of discretionary bonuses in respect of the years 2008 and 2009.
- I turn to the claimant's particulars of claim. At paragraph 3 it is averred that the claimant was employed by the defendant from February 2006 pursuant to a contract of employment contained in: a letter from the defendant to the claimant dated 11 January 2006; the terms and conditions contained in the company and employee handbook dated 1 November 2005; and the compliance manual.
- At paragraph 5, it is stated that the claimant claims against the defendant in respect of the defendant's breaches of contract in the award of discretionary bonuses for each of the 2008 and 2009 bonus years, each of which awards was inter alia irrational or perverse in breach of the express term as set out at paragraph 6;in breach of the implied term as set out in paragraph 7(1) and in breach of the implied term of trust and confidence as set out at paragraph 7(2).
- As I have mentioned, there is reference in paragraph 5 to an express term of the contract. That is set out at paragraph 6 of the particulars of claim and reads as follows:
All employees are eligible to be considered for an annual Discretionary Incentive Award. Details are specified in the Handbook (page 23). The Company reserves the right to deliver a percentage of the Incentive Awards (whether Guaranteed or Discretionary) under any applicable DB compensation plans that are in effect at the time of the award. The portion of your Incentive Award under DB compensation plans will be determined in a manner broadly consistent with that applied to your peers at similar levels of compensation and taking into account any other factors that the Company determines are relevant in a given year for each business."
- As I have said, paragraph 5 of the particulars refer to implied terms which are then set out at paragraph 7 as follows:
"(1) The defendant would not behave arbitrarily, capriciously or inequitably in matters relating to remuneration and, in particular, it would exercise its discretion as to whether to award a bonus to the Claimant and, if so, the amount of that award, in good faith and in a manner which was not irrational or perverse. It was, inter alia, an incident of the said implied term that the Defendant would treat comparable employees in a similar fashion, including as to the amount of their awards, when exercising its discretion.
(2) The Defendant would not, without reasonable and proper cause, act in a manner that was likely to destroy or similarly to damage the relationship of trust and confidence to be expected between the Claimant and the Defendant as employer and employee. It was, inter alia, an incident of the said implied term that the Defendant would give the Claimant proper reasons for his bonus awards, and further that such reasons would be truthful and not misleading."
I will for the sake of convenience during the course of this judgment refer back from time to time to those terms. It is important to recall their full and exact terms even though they may be summarised for ease of exposition more briefly.
- The particulars of claim then go on to set out the claimant's case so far as it relates to the 2008 bonus year at paragraphs 8 to 13. It is said at paragraph 8 that, in respect of that year, the claimant generated profits of around £133 million. At paragraph 9 it is said that, on or around 4 February 2009, the claimant was informed by Mr Nicholls (head of global finance and forward foreign exchange) that he was being awarded a total bonus for the relevant year of 1,275,685 euros (in other words around 1 percent of the profits which he had generated that year).
- At paragraph 10 it is stated that Mr Nicholls said or around 4 February 2009 to the claimant that:
(1) a material factor in the exercise of the discretion to award him that bonus had been the losses that the bank had made in areas outside the money market derivative desks;
(2) all members of the money market derivatives desk had been treated similarly and that they were all receiving reduced awards because of losses that had been incurred elsewhere;
(3) the claimant was "lucky" that he was not a managing director, because the more senior one was the bigger reduction one suffered in the bonus award. At paragraph 11 it is said that the matters set out at paragraphs 10(1) and (2) were also communicated by a Mr Curtler and a Mr Christian Bittar, to whom there will be more reference later.
- At paragraph 12 it is averred that in fact, contrary to the statements made to the claimant, it transpired that for the 2008 year a Mr Carl Maine received a total bonus for the 2008 year of around 38 million euros based upon a profit generated by him of around 479 million euros. It is said that he therefore received a bonus equating to 8 per cent of the profits he generated that year. It is also averred that Mr Bittar received a bonus award of around 84 million euros based upon a profit generated by him for that year of 766 million euros. It is said that he therefore received a bonus equating to 11 per cent of the profits he generated.
- Accordingly, at paragraph 13, it is averred that the statements made by the relevant persons were deliberately misleading and untrue, those statements being expressly said to be the ones set out at paragraphs 10 and 11 of the pleading.
- Similar averments are made in respect of the 2009 bonus year at paragraphs 14 to 19. It is not necessary for present purposes to rehearse those in detail. They are well-known to the parties and should be read in conjunction with this judgment.
- Under the heading "Breaches of contract", at paragraph 20 of the particulars of claim it is alleged that in acting as aforesaid, and in particular in awarding bonuses to the claimant in the sums awarded to him in respect of each of the 2008 and 2009 bonus years, the defendant:
(1) breached the express term of the claimant's contract set out at paragraph 6 and in particular the obligation to treat him in a manner broadly consistent with his peers;
(2) breached the implied terms set out at paragraph 7. In particular:
(a) it was irrational and/or perverse and/or a breach of the implied term of trust of confidence
(i) to award the claimant bonuses in the sums that it did, having regard inter alia to the profits that he generated that year and the bonus awards made to Mr Maine and/or Mr Bittar and/or
(ii) to make those bonus awards without meaningful or rational analysis of the amounts that should be paid and/or
(b) it was a breach of the implied term of trust and confidence to fail to give a proper, complete and accurate explanation and reasons for the awards made to the claimant and to make deliberately misleading and false statements as to the manner in which he and others had been treated and/or
(c) if and insofar as the defendant paid formulaic and/or guaranteed bonus awards to inter alia Mr Maine and/or Mr Bittar, it was a breach of the implied term of trust and confidence to pay such formulaic and/or guaranteed bonus awards (inter alia to Mr Maine and/or Mr Bittar) in such sums as to reduce to a disproportionately small sum the amount available to be paid to other employees, including to the claimant, who was entitled to be considered for discretionary bonus awards in each of those years.
- Under the heading "Loss and damage", at paragraph 21 of the particulars of claim, it is alleged that, by reason of the defendant's breaches of contract, the claimant has suffered loss and damage in that he should have received substantially larger bonus awards for each of the 2008 and 2009 bonus years.
- The defendant has filed a defence to that claim and the claimant has filed a reply. The claimant has also made a request for further information dated 9 July 2015. A response was made by the defendant on 28 August 2015. On the same date the defendant made the present applications to the court.
Relevant legal principles
- The legal principles which govern the two applications before the court are well established. The power to strike out a statement of case is set out in CPR 3.4. At subparagraph (1) it is made clear that reference to a statement of case includes reference to part of a statement of case. Subparagraph (2) states that the court may strike out a statement of case if it appears to the court (a) that the statement of case discloses no reasonable grounds for bringing the claim. That is the provision upon which the defendant relies for present purposes.
- The power to award summary judgment is to be found in CPR 24.2, which, so far as material, states that:
"The court may give summary judgment against the claimant ... on the whole of the claim or on a particular issue if-
(a) it considers that:
(i) that the claimant has no real prospect of succeeding on the claim or issue ... and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
- The relevant principles were summarised by Floyd LJ in TFL Management Services Limited v Lloyds TSB Bank Plc  1 WLR 2006 at paragraphs 26 to 27. In that passage, Floyd LJ referred to an earlier decision of the High Court in Easy Air Limited (Trading as Open Air) v Opal Telecom Limited  EWHC 339 (Ch) in the judgment of Lewison J, as he then was, at paragraph 15. For present purposes, I would set out the relevant principles which are summarised without citation of the authorities which are referred to. They are familiar to the parties and of course the whole of that passage should be read as if it were set out in this judgment. Those principles were summarised in the following way:
" .. the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success ...
ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable ...
iii) In reaching its conclusion the court must not conduct a 'mini-trial'...
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents ...
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial ...
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without a fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case …
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction ... "
To that summary of principles, Floyd LJ added the following observation at paragraph 27 of his judgment:
"... the court should still consider very carefully before accepting an invitation to deal with single issues in cases where there will need to be a full trial on liability involving evidence and cross examination in any event, or where summary disposal of the single issue may well delay, because of appeals, the ultimate trial of the action ... Removing road blocks to compromise is of course one consideration, but no more than that. Moreover, it does not follow from Lewison J's seventh principle that difficult points of law, particularly those in developing areas, should be grappled with on summary applications; ... Such questions are better decided against actual rather than assumed facts. On the other hand it may be possible to say that the trajectory of the law will never on any view afford a remedy ... "
- On behalf of the claimant at the hearing before me, and in a very helpful skeleton argument, I was also reminded of the following principles set out at paragraph 18 of that skeleton argument. First, the criterion "real" is not one of probability, it is the absence of reality; see Lord Hobhouse in Three Rivers District Council v Bank of England (Number 3)  2 AC 1 at paragraph 158. Secondly, an application for summary judgment is not appropriate to resolve a complex question of law and fact, the determination of which necessitates a trial of the issues having regard to all the evidence; see the notes in the White Book at paragraph 24.2.3 and the decision of the High Court in Apovdedo Nv v Collins  EWHC 775 (Ch). Thirdly, in relation to the burden of proof, the overall burden of proof rests on the applicant to establish that there are grounds to believe the respondent has no real prospect of success and there is no other reason for trial. The standard of proof required of the respondent is not high; it suffices merely to rebut the applicant's statement of belief. Fourthly, the facts must be presumed in the claimant's favour. My attention in that regard was particularly drawn to the recent judgment of Jay J in James Bowen v Commissioner of Police for the Metropolis  EWHC 1249 (QB) at paragraph 3, where he stated:
"In line with well established principles, discussed at great length below, the evidence cannot be tried at this stage and the facts must, unless plainly contradicted by insurmountable material or otherwise wholly fanciful, be assumed in the claimant's favour."
- The court has before it, in support of the present applications, witness statements filed by Mr David Nicholls and Mr Steven Ward dated 26 and 28 August 2015 respectively.
- I will briefly go to the first witness statement of Mr Ward initially. At paragraph 5 he states that he is the bank's global HR (Human Resources) business partner for the corporate banking and securities division and regional head of HR for the UK. He holds the corporate title of managing director. He has been employed by the bank since 1996. During the period to which this claim relates, that is 2008/2009, he was global HR business partner for global markets.
- At paragraph 6 he makes it clear that he understands that the claimant worked as a trader within the global finance and foreign exchange (GWFX) business unit. It would appear therefore that he has no personal knowledge of the claimant.
- At paragraph 12 he makes it clear that he was not involved in deciding the amounts of variable compensation (VC) to be awarded to the claimant for 2008 and 2009 and therefore he is not in a position to be able to comment on the decision making in this particular case.
- At paragraphs 7 and 8, Mr Ward outlines for the benefit of the court the general structure by which compensation was payable at the relevant time. He states that compensation at the bank was made up of fixed pay (largely salary) and variable compensation (cash awards and, in circumstances where awards are significant, restricted cash awards and restricted equity awards, together known as deferred compensation). At paragraph 8 he informs the court that, with a few notable exceptions, to which he refers later in his witness statement, VC awards were discretionary. Accordingly it is clear that he uses the term VC or variable compensation awards to include not only discretionary awards but other types of award to which I will return.
- At paragraph 14 of his first witness statement, Mr Ward states that in 2004 the bank commissioned a report from a management consultancy to look at market practice with regard to formula arrangements and he says that this report demonstrated to the bank that similar arrangements existed at other financial institutions. In summary, he states, the report concluded that formula deals were in use at hedge funds and there was a developing practice for their use at competitor banks. The data revealed percentage arrangements of up to 25 per cent of profits, the median being 17 per cent for investment banks and 15 per cent for universal banks and hedge fund.
- Mr Ward states at paragraph 13 of the same statement that the majority of employees at the bank were considered for a discretionary VC award but had no contractual right to one. A small number of employees did have contractual VC arrangements. He then goes on to describe the two main types of contractual arrangement in the relevant period which also reflected market practice at the time. The first of those was minimum guarantees. The second, which is relevant to the present proceedings, was formula based contractual arrangements. As he states at paragraph 13(b) of his statement, these were the type of arrangements that were granted to Mr Bittar and Mr Maine in the present case. He states that these were only offered in exceptional circumstances.
- I turn briefly to the first witness statement of Mr Nicholls at this stage. At paragraph 4 he states that he worked for the bank for 16 years from April 1996 until January 2013. From December 2006 until July 2008, he held the position of head of global finance Europe. From July 2008 until June 2012, he held the position of global head of what he refers to as "core global finance and FX forwards". From December 2006 to June 2012, and therefore during the relevant time, he reported to a Mr Alan Cloete, who was at the relevant time global head of global finance and foreign exchange.
- In paragraph 8 he describes the VC award process in broad terms for the performance years 2008 and 2009 in lettered subparagraphs (a) through to (f), which it is unnecessary to set out, but which are familiar to the parties and should be read with this judgment. At paragraphs 9 to 12, Mr Nicholls sets out his evidence in relation to individual discretionary VC award decisions. At paragraph 9 he says that there were no minimum or maximum values imposed, nor did he apply any fixed formula or mechanism for determining the appropriate level of VC to award to particular individuals. At paragraph 10 he states that individual VC decisions were heavily influenced by the overall performance of the bank, the global markets division and the performance of the GFFX business unit as a whole as this would affect the level of bonus pool available to that unit and to each product group. When considering the level of discretionary award to allocate to a particular employee within each team, he says that he considered a number of different factors, including individual performance. This included both financial and non-financial performance (see paragraph 11 of his statement). At paragraph 12 of his statement he says that he also considered factors such as the strategy of the business going forward and the need to incentivise, and I would emphasise this, or ensure particular traders were retained.
- At paragraph 16 he makes it clear that in 2008 and 2009 both Mr Bittar and Mr Maine were not eligible to be considered for a discretionary VC award as they had contractual arrangements under which they were entitled to a VC award based on a formula. I will return later in this judgment to his evidence in relation to those individuals more particularly.
- The court has before it, in opposition to the present application, a witness statement filed by the claimant dated 16 October 2015. Finally, it has the second witness statements of both Mr Nicholls and Mr Ward, dated 3 November 2015.
Application of the above principles to the facts of this case
Issue 1: construction of the express cause
- The claimant accepts that Mr Bittar was not a "peer" of his, but he contends that Mr Maine was. He contends that there was a breach of the express clause set out at paragraph 6 of his particulars of claim because of what he alleges was the inconsistent way that he and Mr Maine were treated in the relevant years when it came to the payment of bonuses.
- The claimant submits that even this issue, which the defendant asserts is one of pure construction, is not one that should be disposed of at this stage and that it should be permitted to proceed to trial. In particular, the claimant submits that the construction of the clause is not straightforward and that further the factual context is relevant to the question of construction. He relies in that regard upon Rainy Sky SA v Kookmin Bank  1 WLR 2900. In his judgment Lord Clarke JSC said at paragraph 21:
"The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other."
I do not accept those submissions on behalf of the claimant and prefer the submissions made on behalf of the defendant.
- The clause and in particular the phrase on which the claimant relies and places emphasis in this case about broad consistency cannot be read in isolation. It needs to be read in the context in which it appears and having regard to the clause as a whole. The crucial phrase is "portion". That is a reference to the defendant's restricted cash plan and its equity plan for the relevant year. I was shown the plans for the relevant years. The documents are in materially the same terms. By way of example, the restricted cash plan, which had the effective date 1 January 2009, at paragraph 4 in particular. Paragraph 4.1, which is headed "General" states:
"The Award represents a contingent right, granted by the legal entity which employs the Participant on Award Date, subject to the terms and conditions in these Plan Rules, to receive a payment of the value of an Award following the Vesting Date."
- Paragraph 4.5, which is headed "terms", states that awards are subject to the following terms and that includes, at subparagraph (b), the vesting date. Subject to other provisions, that will be such date or dates as the committee shall determine at the award date and will be stated on the award statement. There are similar provisions in the other documents which it is not necessary to recite for the purposes of this judgment. They are familiar to the parties.
- It is also important, returning to the express clause itself, to note that it refers to peers at a similar level of compensation, but that does not mean any peer, for example someone working in the same desk. Furthermore, the express clause itself recognises on its face that there may be some bonuses which are guaranteed in contrast with those which are discretionary. Further, the clause again on its face recognises that the defendant will be entitled to take into account any other factors which it determines are relevant in a given year for each business.
- It is also helpful in my view to look at the terms of the handbook, the 2007 version, although it is fairly accepted, and indeed common ground, that in case of conflict the letter of employment takes precedence. The handbook makes clear (for reference this is at page 64 of volume A):
"All employees are eligible to be considered for an annual Discretionary Incentive Award. You will be considered for an award based on a number of factors including but not limited to (in no particular order of importance) the performance of the Bank generally, the specific contribution of its component business units, your individual personal contribution and the need to retain you in employment within the bank."
Furthermore, it is expressly made clear in the handbook that "you do not have a contractual entitlement to receive a discretionary incentive award annually and any such award will be at the absolute discretion of the company".
- There is no inconsistency in my view between the handbook and the letter of appointment in the present case. The two can and should be read as a harmonious whole. I therefore accept the defendant's submissions in relation to issue 1.
- This raises the allegation that there was a breach of the implied term set out at paragraph 7(1) of the particulars of claim, in particular that the defendant would not breach the obligation to act in good faith and in a manner which was not irrational or perverse.
- It is important to note at the outset, before addressing this issue, that the present case is not necessarily on all fours with the authorities which were cited before me. In those case, as will be seen, what has usually been the subject of complaint is the exercise of a discretionary power by an employer, such as to whether to pay a discretionary bonus and, if so, for what amount.
- In the present case, the claimant was paid a discretionary bonus in respect of the years 2008 and 2009, whereas Mr Bittar and Mr Maine were not. Each of them was paid according to the formula which had been individually negotiated and agreed with them. In Mr Bittar's case, the agreement reached with him was in fact first entered into in 2004, well before the claimant's contract of employment for the relevant period in this case. In Mr Maine's case, the agreement was reached in 2007. Yet the claimant alleges that it was a breach of his contract of employment for the defendant to pay Mr Bittar and Mr Maine bonuses in accordance with agreements that were made with each of them. Therefore the complaint in this case is about a logically prior question and not about the exercise of a discretionary power to pay bonuses as such. Nevertheless, I did not hear full argument on whether that distinction is legally significant and the parties were content, as I understood them, to proceed for the purpose of the present applications on the basis that the relevant legal principles would be the same.
- I turn to the relevant authorities. First, considerable emphasis was placed, in particular by the defendant, on the decision of the Court of Appeal in Keen v Commerzbank AG  ICR 623. The facts can be summarised by reference to the headnote. The claimant was employed as manager of a proprietary trading desk in the defendant bank's global investment banking division on a basic salary of £120,000 per annum. He was entitled in addition to participate in the bank's bonus scheme, any award, its amount and timing being at the bank's discretion, and no bonus was payable if, on the date of payment, the employee was no longer employed by the bank or was under notice to leave. The claimant received a bonus of almost 3 million euros for each of the years 2003 and 2004. He ceased working for the bank in May 2005 when the desk was closed down, being made redundant in June, and he received no bonus for that year.
- The claimant brought proceedings for damages for the bank's breach of the implied term not to exercise its discretion, irrationally or perversely, in failing to award him more substantial bonuses for 2003 and 2004 and by failing to award him a bonus for 2005, contending that the contractual provision on which the bank relied in refusing to make an award for 2005 was contrary to section 3 of the Unfair Contract Terms Act 1977.
- At first instance, the judge dismissed an application by the bank for summary judgment made on the ground that the claim had no real prospect of success, holding the claim was properly arguable and that the issue whether the 1977 Act applied was better dealt with at trial.
- The bank's appeal was allowed. The principal judgment was given by Mummery LJ, whose experience in the field of employment law is well-known. It will be seen from paragraphs 47 and 48 of his judgment that that case was not pleaded, argued or decided on the basis of breach of a implied duty of trust and confidence. Rather, the case was argued on the basis of an alleged breach of the implied term that the bank would not exercise any discretion it had in relation to he claimant's bonus award, irrationally or perversely.
- Paragraphs 39 to 41 need to be set out in full:
"39. As to the size of the bonuses which have been paid by the Bank to Mr Keen and the bigger bonuses which he claims should have been paid to him, I must make it clear that it is not the function of the court to usurp the Bank's exercise of its discretion. It is for the Bank to decide whether to pay a bonus and, if so, how much, when and in what amount and form. The court is not entitled to substitute itself for the Bank. The court is not a bank. It does not employ the staff of the Bank or pay them. The court's function is limited to deciding whether the Bank acted in breach of the contractual term relating the discretionary bonus decisions in the years 2003 and 2004.
40. Mr Keen agreed with the Bank that it has a discretion to decide whether he is paid a bonus on top of his basic annual salary and, if so, how much. The only function of the court is to decide on the legal limits to the Bank's contractual discretion and whether the Bank has acted within or outwith the limits. Apart from that consideration, the Bank, not the court, is the judge of what it should pay its staff. If the employee thinks that he has been underpaid, he can make his representations to the Bank on the level of his pay or he can seek a better paid job with another bank, but he can only pursue a claim in court if there has been a breach of contract by the Bank.
41. All of this is obvious, but it needs to be stated and emphasised in order to answer ill-informed criticisms of the decisions under challenge."
At paragraphs 58 to 59, Mummery LJ gave his conclusion on the relevant part of the case:
"58. In my judgment, the claim that the bonus pool decisions for 2003 and 2004 were irrational or perverse faces difficulties which Mr Keen is unable to surmount.
59. First and foremost, the Bank has a very wide contractual discretion. Mr Keen has to show that the discretion has been exercised irrationally. It cannot be said that the decisions of the Bank on bonuses for 2003 and 2004 are irrational on their face. The burden of establishing that no rational bank in the City would have paid him a bonus of less than his line manager recommended is a very high one. It would require an overwhelming case to persuade the court to find that the level of a discretionary bonus payment was irrational or perverse in an area where so much must depend on the discretionary judgment of the Bank in fluctuating market and labour conditions".
Moses LJ gave a concurring judgment, see in particular paragraphs 108 and 109. Jacob LJ agreed with both judgments, see paragraph 107.
- In my judgment, turning to the facts of the present case, there were clearly sound reasons for the defendant's decision to award different bonuses to the claimant as compared in particular with Mr Bittar and Mr Maine. There were clearly sound reasons for the defendant's decisions in each of their cases not to include them in the scheme for discretionary bonus awards but to reach agreement with each of them that they would be paid guaranteed bonuses for the relevant years on a formula basis.
- In relation to Mr Bittar, first there is the evidence of Mr Nicholls in his first witness statement at paragraphs 17 to 20. I will not set all of that in full, it is familiar to the parties and should be considered with this judgment. In essence it was decided, initially in 2004, that it was important for the bank in order to retain Mr Bittar's services that they should enter into a formula agreement with him. Similar evidence is given in Mr Ward's first witness statement at paragraphs 16 to 20. He also exhibits relevant email correspondence from the time which clearly supports that contention.
- It is also important to note in this context what the claimant himself says about Mr Bittar at paragraph 24 of his witness statement. He states that over the course of 2008 Mr Bittar became an:
"... incredibly influential figure in the bank. He made such a profit in 2008 that the rumour was he had 'saved the bank' ... Mr Bittar's influence cannot be underestimated."
He clearly recognised himself the importance of Mr Bittar not only to the bank and its survival but also to all of its other employees including himself.
- In relation to Mr Maine, the evidence on behalf of the defendant is set out in the first witness statement of Mr Nicholls at paragraphs 21 to 28. Again, it is not necessary for present purposes to lengthen this judgment by setting out those matters in detail. They are familiar to the parties. In essence, the point made is that in Mr Maine's case it was felt important by the bank at that particular time in its history, in 2007, to reach the individual formula agreement with Mr Maine in order to retain his services so that he would not leave.
- If matters stood there, I would have no hesitation in accepting the defendant's submissions that, just as in Keen v Commerzbank, the claimant in this case cannot overcome the hurdle which he must in order to demonstrate with any real prospect of success that the defendant breached the implied term relied upon.
- However, on behalf of the claimant, it has been submitted before me that matters have not stood still and that the law has developed and is still developing in this important field of law. In particular, reliance was placed upon the decision of the Supreme Court in Braganza v BP Shipping Limited  ICR 449. The facts can be taken from the summary in the headnote.
- The claimant's husband was serving as chief engineer onboard the first defendant's vessel, having been so engaged by the second defendant under a contract of employment that provided for a death in service benefit, save where his death had resulted from his own act. When working on the vessel in the mid Atlantic, he disappeared overnight and after a search was declared to be lost overboard, presumed drowned. The second defendant set up it own investigation team, which discounted foul play. The team reported that the most likely explanation for his disappearance was that he had committed suicide rather than accidentally falling overboard. On the basis of that report, the second defendant's general manager decided for the purposes of the death in service benefit clause the deceased committed suicide and that no benefit was payable to the claimant, who thereupon brought proceedings in the High Court seeking inter alia recovery of that benefit.
- At first instance, Teare J held that the decision to refuse the payment of benefit on the ground of suicide was unreasonable because, first, the investigation team had failed to take into account that there was a real possibility that the deceased, who had demonstrated an interest in the weather shortly before his disappearance because of his responsibility for weather sensitive work planned for the ship on the following day, might have gone on deck in order to check the sea conditions and had fallen overboard and, secondly, because the general manager had failed to direct himself that, before the making of a finding of suicide, there should be cogent evidence commensurate with the seriousness of such a point.
- The Court of Appeal allowed an appeal by the defendants and reversed the judge's finding as to the team failing to take account of the possibility of the deceased having gone on deck for a work related reason and held that the general manager as a lay person ought not to have been expected to direct himself in the terms stated by the judge at first instance.
- The claimant's appeal to the Supreme Court was allowed by a majority. However, for present purposes, as I understand it it is common ground that the relevant legal principles were not the subject of disagreement as between the members of the Supreme Court.
- The main judgment for the majority was given by Lady Hale JSC with whom Lord Kerr JSC agreed. At paragraph 19 she stated:
"There is an obvious parallel between cases where a contract assigns a decision-making function to one of the parties and cases where a statute (or the royal prerogative) assigns a decision-making function to a public authority. In neither case is the court the primary decision-maker. The primary decision-maker is the contracting party or the public authority. It is right, therefore, that the standard of review generally adopted by the courts to the decisions of a contracting party should be no more demanding than the standard of review adopted in the judicial review of administrative action. The question is whether it should be any less demanding."
- At paragraphs 22 and 23 Lady Hale cited from earlier authorities, in particular the obiter comments of Lord Sumption JSC in Hayes v Willoughby  1 WLR 935 at paragraph 14. She observed towards the end of paragraph 23 of her judgment that Lord Sumption's comments had an obvious echo of the classic definition given by Lord Diplock when summarising the grounds of judicial review in Council of Civil Service Unions v Minister for the Civil Service (the GCHQ Case)  AC 374 at page 410, where Lord Diplock had stated, in a classic passage which deserves citation again:
"By 'irrationality' I mean what can by now be succinctly referred to as 'Wednesbury unreasonableness'. … It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it."
- Lady Hale went on to say at paragraph 24 of her judgment that the problem with this formulation, which was highlighted in the circumstances of Braganza itself, is that it is not a precise rendition of the test of the reasonableness of an administrative decision which in fact had been adopted by Lord Greene MR in Associated Provincial Pictures Houses Ltd v Wednesbury Corporation  1 KB 223, pages 233 to 234. As Lady Hale set out, Lord Greene's test has two limbs:
"The court is entitled to investigate the action of the local authority with a view to seeing whether they have taken into account matters which they ought not to take into account, or conversely, have refused to take into account or neglected to take into account matters which they ought to take into account. Once that question is answered in favour of the local authority, it may still be possible to say that, although the local authority have kept within the four corners of the matters which they ought to consider, they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it."
As Lady Hale went on to observe in paragraph 24 of her judgment:
"The first limb focuses on the decision-making process – whether the right matters have been taken into account in reaching the decision. The second focuses upon its outcome – whether even though the right things have been taken into account, the result is so outrageous that no reasonable decision-maker could have reached it. The latter is often used as a shorthand for the Wednesbury principle, but without necessarily excluding the former."
At paragraph 30 of her judgment Lady Hale said that it is clear that:
"... unless the court can imply a term that the outcome be objectively reasonable – for example, a reasonable price or a reasonable term – the court will only imply a term that the decision-making process be lawful and rational in the public law sense, that the decision is made rationally (as well as in good faith) and consistently with its contractual purpose."
- She stated that for her part, she would include both limbs of the Wednesbury formulation, to which she had earlier referred, in the rationality test. As she observed in the same passage, Lord Neuberger PSC expressed agreement as to the general principle at paragraph 103 in his judgment, albeit that he was in the minority in the circumstances of Braganza.
- As I understand the judgment of Lord Hodge JSC, with whom Lord Kerr also agreed, they being part of the majority in the Supreme Court, he took a similar view to Lady Hale, see in particular paragraph 53 of his judgment. At paragraph 57 Lord Hodge added this in a context which is apt for present purposes:
"In cases such as Clark v Nomura International Plc, Keen v Commerzbank AG and Horkulak v Cantor Fitzgerald International  ICR 402 the courts have reviewed contractual decisions on the grant of performance-related bonuses where there were no specific criteria of performance or established formulae for calculating a bonus. In such cases the employee is entitled to a bona fide and rational exercise by the employer of its discretion. The courts are charged with enforcing that entitlement but there is little scope for intensive scrutiny of the decision-making process. The courts are in a much better position to review the good faith and rationality of the decision-making process where the issue is whether or not a state of fact existed, such as whether an employee's wilful act caused his death. The decision of the employer is not a judicial determination and the court cannot expect judicial reasoning. But I see no reason why an employer's decision-making should be subject to scrutiny that is any less intense than that which the court applies to the decision of a public authority which is charged with making a finding of fact …"
- For my part, I respectfully find that passage a little difficult to understand insofar as reference to made to the approach which the court takes to judicial review of a decision of an public authority which is charged with making a finding of fact. Generally speaking, as I understand it, although it is not a universal principle, the court in judicial review proceedings does not substitute its own view for that of the public authority in matters of fact, nor does it apply particularly intensive scrutiny. It subjects findings of fact generally speaking to review on the standard of irrationality or perversity. Be that as it may, the general import of the principles which are set out in Braganza is clear and I must of course follow them.
- In particular, it is clear that the two limbs of Wednesbury to which Lady Hale referred have been imported into this area of law also. This is an interesting example of the continuing development of the common law and in particular of the potential for cross-fertilisation between concepts of public law and private law, including the law relating to contracts of employment. However, for my part, I would respectfully sound a note of caution. It is to be recalled that the fundamental basis of public law is that public authorities have only those powers which are conferred upon them by law and must act in the public interest. Private actors such as employers and business entities more generally do not necessarily have the same duties. They may do so depending on the context. However, this would appear to be another illustration, if one were needed, of the continuing strength of the common law, in particular its ability to develop in an incremental way so as to meet the needs of a modern society.
- However interesting these developments in the law may be, I find it difficult to see how they assist the claimant when one returns to the facts of the present case. In particular, I return to the allegations set out in the claimant's particulars of claim. They have been fully described earlier in this judgment, so it is not necessary to repeat those passages again.
- I have scrutinised with care what is alleged in the particulars of claim in relation to issue 2 and the alleged breach of the implied term which is set out of paragraph 7(1); see also in this regard, as I have also mentioned, paragraph 20(2). On a fair reading of the particulars of claim as a whole, I have come to the conclusion that it does not raise any allegation that there was a Wednesbury error in the process adopted by the defendant, for example that an irrelevant consideration was taken into account. It is instructive to recall that in Wednesbury itself, at page 228, Lord Greene MR said:
"What then is the power of the courts? They can only interfere with executive authority if it be shown that the authority has contravened the law. It is for those who assert that the local authority has contravened the law to establish that proposition."
- That, of course, is consistent with the general principle of civil litigation that the burden usually lies on the person who asserts a fact to prove it. Accordingly, I accept the defendant's submissions in relation to issue 2. In my judgment, the allegation in relation to issue 2 advanced by the claimant in the particulars of claim was that the defendant acted irrationally in relation to the outcome. There is no real prospect of success in relation to any other matter. There is certainly no real prospect of success in relation to that allegation for the reasons that I have already given, in particular by reference to the evidence filed by Mr Nicholls and Mr Ward. The decision of the bank to pay guaranteed bonuses to Mr Bittar and Mr Maine on a formula basis and for distinguishing their cases from that of the claimant was obviously in my judgment a rational one.
- As I have noted earlier, in Keen the claimant had not pleaded breach of the implied duty of trust and confidence. In the present case, this claimant does do so. It is submitted on his behalf that for that reason alone, as well as others, his claim should be permitted to proceed to trial, since it will require evidence to be called and tested by cross-examination and after appropriate disclosure, leading to findings of fact by the trial judge in due course.
- Again, I have scrutinised with care what the claimant has actually alleged in his particulars of claim in relation to issue 3 in reliance upon the implied clause set out at paragraph 7(2) of those particulars and the allegations made, for example, at paragraphs 13, 19 and 20(2). The fundamental difficulty in my judgment, accepting the defendant's submission in this context, is that the claimant relies upon a breach of this implied duty in relation to events which occurred after the decisions to grant bonuses in respect of the years 2008 and 2009. I accept the defendant's submission that, even if the facts as pleaded by the claimant were true, which is vigorously denied by the defendant, this does not lead anywhere for relevant purposes because any breach of this duty could not have any causal link to the loss which the claimant claims in this case. The only loss that is pleaded is that set out in paragraph 21 to which I have already referred. Accordingly, I find in the defendant's favour on issue 3 as well.
Other issues raised by the claimant
- In the course of argument, both written and oral, reliance was placed on the concept of reasonable expectations. I note, accepting the defendant's submission, that this was not raised in the particulars of claim. Nevertheless, I will address it briefly.
- The gist of the claimant's grievance in this regard can be gleaned from paragraph 9 of his witness statement, where he describes an interview which took place in 2006 with Mr Nicholls before he was recruited on this occasion. He states that in that interview Mr Nicholls told him that, in respect of awards, traders including him should expect between 5 per cent and 10 per cent per year of what they generated for the bank, 5 per cent in "bad" years and 10 per cent in "good" years. He states that Mr Nicholls told him that a "good" year was when he and the bank generally performed well and a "bad" year would be when one or both did not perform so well. He concludes paragraph 9 by stating:
"My clear understanding was therefore that I would never receive less than 5 per cent of the monies I generated for the bank."
In essence, he feels a grievance because in both of the relevant years, 2008 and 2009, he did not receive a bonus of that sort of percentage.
- Reliance was placed on behalf of the claimant upon the decision of Leggatt J from Brogden v Investec Bank Plc  IRLR 924. I would refer in particular to passages in that judgment at paragraphs 115 to 117, under the heading 'reasonable expectations'. Leggatt J noted that the claimants sought to rely on the principle that, if an employer has acted in such a way as to engender particular expectations in an employee, those expectations are a relevant consideration in assessing whether an employer has acted rationally. In support of that principle, the claimants cited the case of IBM United Kingdom Holdings Limited v Dalgliesh  EWHC 980 (Ch), a case which was also shown to me in material part. That was a decision by Warren J who stated at paragraph 441:
"… it seems to me that breach of expectations is, at root, an aspect of irrationality or perversity. In other words, if expectations have been engendered by an employer, that may have been done in such a way that to disappoint those expectations would, absent some special change in circumstances, involve the employer acting in a way that no reasonable employer would act; in which case, irrationality or perversity, as those concepts are to be understood in this context, is established. …"
Leggatt J observed at paragraph 116 of his judgment that Warren J had drawn a distinction in this regard between "reasonable expectations" which are relevant in judging whether an employer has acted irrationally or perversely and "mere expectations" which are not.
- On the facts of the case before him, Leggatt J concluded at paragraph 117 that what was being invoked by the claimants in that case was a mere expectation, it would not be regarded in that case as a reasonable expectation.
- Turning to the facts of the present case, in my judgment the claimant here too had no more than a mere expectation. It was not a reasonable expectation, particularly having regard to the contractual provisions which he then proceeded to enter into, see for example the letter of appointment of 11 January 2006 which he signed. At page 63 of volume A on the same page, there appears this:
"For the sake of clarity, this letter supersedes any prior offers or representations, whether verbal or written."
Furthermore, my view in this context is reinforced by the obvious realities of the commercial environment in which the claimant was working and market practice.
- Another aspect of the claimant's grievance which has been aired in this case can be found at paragraph 60 of his witness statement, where he draws together his key concerns about the formula provisions. In particular, at paragraph 60.1 he states that over the course of 2008 and 2009, the bank paid over £110 million in awards to Mr Bittar and Mr Maine. He says that even by the bank's standards this is a very material amount of money. He continues that this had a considerable impact on the size of the available award pool for the discretionary awards with the effect that that pool was reduced so as to make it impossible to reward equitably the other traders on the MMD desk and/or GFFX division and/or global markets. Much was made of this impact on the bonus pool on his behalf at the hearing before me.
- However, this is not a case on which there was any promise made as to whether there would be a bonus pool or that it would be of any particular size. Contrast the decision of the Court of Appeal in Atrill v Dresdner Kleinwort Limited  IRLR 548, in particular in the judgment of Elias LJ, who gave the only substantive judgment at paragraphs 65 and 135. In the present case it is important to recall what was in fact promised to the claimant. That is to be found in the terms of the contract to which I have already made reference.
- The claimant has not pleaded, and in my judgment could not realistically argue, that the defendant was not entitled in its discretion to have the bonus structure which it chose to have. Whether it was right to do so or whether it was wise to do so is not the question for this court. The only issue for the court for present purposes is whether there was any breach of contract with the claimant by reason of its decision to adopt that bonus structure. In my judgment, there is no real prospect of that being established at trial.
Any other compelling reason
- In my judgment, there is no other compelling reason why this case should proceed to trial. On behalf of the claimant, it was submitted that the witness statements filed in this case reveal a number of factual disputes between the parties. For example, there is a dispute about what exactly was said by Mr Nicholls or others on the defendant's behalf both in pre-contractual discussions and subsequently after the bonus payments were made in respect of the years 2008 and 2009. However, in my judgment there is no factual dispute which is material to the issues which the claimant has raised in his particulars of claim. This is for reasons I have already set out.
- In the course of these proceedings, various complaints have been made by the claimant in particular that there has been inadequate disclosure by the defendant. However, it has to be recalled that disclosure in civil litigation is designed to facilitate a fair resolution of the issues which arise in that litigation. The prior question which has to be decided is what those issues are. For that purpose, I have examined with care the grounds of complaint raised by the claimant in his particulars of claim. As I have said, those ground have no realistic prospect of success in my judgment. Although the claimant may wish to see more disclosure, that is not in my judgment a compelling reason to permit this case to proceed to trial nor in my judgment is there any other compelling reason to do so.
- For the reasons I have given, the application by the defendant succeeds in that I will order summary judgment in its favour.