Contract

first_imgVariation – Written contract – Claimant working for first defendant under contract of employment The first defendant DKL was a service company for a global investment bank DKIB. DKL was wholly owned by Dresdner Bank AG (DBAG), which since 2009 was a wholly owned subsidiary of the second defendant, Commerzbank AG (Commerzbank). Each of the 104 claimants was employed by DKL and worked in London and had contracts of employment with DKL. Those contracts incorporated the DKL employment handbook. Section 1.4 of the handbook provided to the effect that the company reserved the right to vary the terms and conditions of employment generally. The claimants formed two groups, the Attrill claimants and the Anar claimants. It was the established practice to allocate a bonus pool and individual bonuses in November each year, to communicate the allocation to those employed to work within DKIB, and to pay the cash element of any such bonus in January of the following year, provided that the employee was still then employed by DKL and not under notice to leave. At a board meeting of DBAG held on 12 August 2008, the chief executive officer of DKIB, J, explained the need to define a minimum bonus pool for 2008 for DKIB so as to ensure employee stability. The board approved the creation and communication of a bonus pool of €400m as presented by J. On 18 August, J made an announcement at what was known in DKIB as a ‘town hall’ meeting. It was common ground that he announced a guaranteed minimum bonus pool of €400m for 2008 to be allocated to individuals on a discretionary basis according to individual performance. In December 2008, a ‘bonus letter’ was sent to each of those employed in DKIB by DKL stating that a discretionary bonus for 2008 had been provisionally awarded at a specified sum, but subject to a material adverse change clause (MAC clause). On the same day there was a town hall meeting at which J reassured those employed in DKIB that it was very unlikely that DBAG would seek to rely on the MAC clause. J was replaced as CEO of DKIB by MR. The MAC clause was invoked, and on 18 February 2009 MR sent an email to all employees in DKIB informing them that: ‘Bonus awards for all front- and middle-office employees who received a letter in December stating their provisional award, which was subject to Dresdner Kleinwort’s financial performance targets, will be cut by 90% pro rata to the stated provisional amount.’ In the event, the guaranteed minimum bonus pool of €400m was applied in payment of €152.2m to those to whom individual bonus guarantees had been made. Approximately 10% of the remaining €247.8m was distributed as bonus payments. Each of the claimants claimed against DKL the unpaid balance of the sum stated in their bonus letter of December 2008, in the aggregate a sum of €51,855,474; and from Commerzbank the like sum as damages for inducing breaches of contract. The main issue was whether the announcement of 18 August, and/or any subsequent statements made on behalf of DKL, gave rise to a binding contractual obligation, in that the contracts of employment of each of those employed in DKIB was varied by DKL by virtue of the operation of section 1.4 of the employment handbook, to the effect that discretionary bonuses for 2008 would be determined by reference to a guaranteed minimum bonus pool. Resolution of that issue required consideration of, inter alia, the following questions: (i) whether the announcement was sufficiently certain to create legally binding obligations; and (ii) whether the announcement was such that an intention to create legally binding obligations was to be inferred. The claim would be allowed. Whether the parties intended to enter into a legally binding relations was an issue to be determined objectively and not by enquiring into their respective states of mind, the context was all important. The objective test prevented a party from relying on his subjective (and communicated) belief that he was not binding himself. It protected the party who had relied on the objective appearance of consent from the prejudice that he would suffer if the other party could escape liability by asserting that he had no intention that he had been legally bound, and did not believe that he was. The onus of proving that there was no intention to create legal relations would ordinarily be on the party who asserted that no legal effect was intended (see [129], [130], [132] of the judgment). In the instant case, the announcement was sufficiently certain to be capable of giving rise to a binding obligation. Further, there was evidence to support the conclusion that the announcement was made with the intention of creating a legally binding obligation to those employed by DKIB. The court was satisfied that the contracts of employment had been varied under section 1.4 of the employee handbook. Accordingly, the promise made by J on 18 August had given rise to a contractual obligation to pay discretionary bonuses from a guaranteed minimum pool of €400m, depending in the case of each individual upon their performance. In the case of each of the claimants their entitlement was assessed by reference both to their individual performance at the figures identified in the bonus letters distributed on 19 December, and to the figure at which the pool had been fixed. It was conceded on behalf of the defendants that if the announcement on 18 August gave rise to a binding obligation, then the first defendant was not entitled to introduce the MAC clause into the bonus letters. It followed that the first defendant was in breach of contract in failing to pay bonuses in the sums identified in the bonus ­letters, and each of the claimants was entitled to damages for breach of ­contract, namely the difference between the sums stated in his or her bonus letter and the sum in fact paid by way of discretionary bonus (see [127], [160], [161], [192]-[194] of the judgment). Attrill and others v Dresdner Kleinwort Ltd and another company; Anar and others v Dresdner Kleinwort Ltd and another company: QBD (Mr Justice Owen): 9 May 2012center_img Andrew Hochhauser QC and David Craig (instructed by Mishcon de Reya) for the Anar claimants; Nigel Tozzi QC and Kate Livesey (instructed by Stewarts Law) for the Attrill claimants; Thomas Linden QC, Martin Chamberlain and Oliver Jones (instructed by Linklaters) for the defendants.last_img