Arne Vigeland v Ennismore Fund Management Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Asplin |
| Judgment Date | 07 November 2012 |
| Neutral Citation | [2012] EWHC 3099 (Ch) |
| Docket Number | Case No: HC10C03968 |
| Court | Chancery Division |
| Date | 07 November 2012 |
[2012] EWHC 3099 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Asplin
Case No: HC10C03968
Adam Solomon and Marc Delehanty (instructed by DWFM Beckman) for the Claimant
Mathew Hardwick (instructed by Simmons and Simmons LLP) for the First Defendant
Daniel Hochberg QC (instructed by Travers Smith) for the Second Defendant
Hearing dates: 9 – 12, 15 – 17 October 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is a claim by Mr Arne Vigeland against the First Defendant, his former employer Ennismore Fund Management Limited (EFM). His claims relate to bonus payments for the years 2002, 2003 and 2004 made to him by EFM whilst he was a fund manager. Mr Vigeland's claims against EFM are in breach of contract or alternatively, in misrepresentation.
Mr Vigeland also brings a claim in breach of trust against Vistra Corporate Services Limited, (Vistra) the Second Defendant. Vistra was formerly known as Charwell Trustees Limited. It is the sole trustee of an employee benefit trust into which part of Mr Vigeland's bonuses were paid (the EBT). He contends that Vistra is in breach of clause 4(2) of the Deed of Settlement by which the EBT was established and is in breach of fiduciary duty in failing to take into consideration all relevant and no irrelevant factors when determining whether to exercise a discretion to distribute in his favour. He seeks a direction that a distribution be made to him or alternatively a declaration setting out the relevant and irrelevant factors to be taken into account when exercising the discretion.
Mr Vigeland no longer proceeds with a claim for a declaration that he is entitled under the terms of the Deed of Settlement by which the EBT was established and the Bonus Agreement which he says was reached with EFM to have the investments representing his bonus payments paid into the EBT, transferred to him forthwith or require that they be sold and the proceeds of sale transferred to him forthwith. A claim for equitable compensation is also no longer pursued.
Mr Vigeland claims that in about June 2002 he agreed a bonus related remuneration package with Mr Geoffrey Oldfield on behalf of EFM orally, (the Bonus Agreement). Under the Bonus Agreement Mr Vigeland contends that he was entitled to an annual bonus calculated as a percentage of the absolute return less benchmark costs on the investments under his management in each calendar year, (the Annual Performance Bonus). He says that it was agreed that 50% of the Annual Performance Bonus was a cash element to which he was absolutely and unconditionally entitled and which was payable within two months of the calendar year end of each year. He says that it was agreed that the remaining 50% of the Annual Performance Bonus would be paid into the EBT and would be invested in one of the investment funds operated by EFM.
This EBT element of the Annual Performance Bonus was subject to a three year clawback mechanism. This enabled EFM to reclaim some or all of the EBT element of the Annual Performance Bonus if the investments made by Mr Vigeland produced a negative investment return which resulted in a reduction in the performance fee earned by EFM in any of the three calendar years subsequent to the calendar year to which the EBT contribution related. It is Mr Vigeland's case that upon the expiry of the three year period and assuming that no legitimate clawback in respect of negative investment returns applied, he was entitled absolutely and unconditionally to the EBT bonus element of the Annual Performance Bonus and he asserts that Mr Oldfield told him this.
He also contends that he was told that if he chose to invest the cash element of his bonus in the EBT, it too would be available to him were he to call for it, or rather the investments representing it, at any time.
Mr Vigeland claims therefore, that he is entitled to the value of the investments representing a sum of £40,000 which he says was the EBT element of his bonus for 2002 which he was told had been invested in the EBT. In the same way he claims in respect of the EBT element of his bonus for 2003 which was £300,000 and is now free of any clawback. In respect of 2004 he claims both the cash element of his bonus being originally £393,007 which he reinvested in the EBT and the EBT element the value of which was also originally £393,007.
Mr Vigeland's primary case is that these matters were orally agreed. In the alternative he contends that terms should be implied into the Bonus Agreement. They are that EFM would deposit the EBT contribution or deferred element of the bonus in a structure which would confer on Mr Vigeland absolute and unconditional rights to the EBT element after the expiry of the clawback period, insofar as clawback was not applied, that in the event that Mr Vigeland chose to invest the cash element of his bonus in the same structure, the structure would entitle to him absolute and unconditional rights to the investments purchased with the cash sum, that EFM would provide him with reasonable assistance in asserting his rights to the investments representing the contributions to the structure and would not impede his claims to them.
In the further alternative, Mr Vigeland claims that Mr Blair on behalf of EFM misrepresented to him that he would be entitled and have access absolutely and unconditionally to the investments representing the EBT contributions to the extent that they were not subject to clawback. It is pleaded that in reliance upon the representations, Mr Vigeland agreed to enter the Bonus Agreement on the terms that the EBT contributions were paid into the EBT and did not seek to transfer investments from the EBT immediately upon the expiry of the clawback period and also elected to invest certain cash elements of his bonus in the EBT.
In summary EFM contends that there was no Bonus Agreement of the kind alleged by Mr Vigeland and accordingly, there was no entitlement to bonuses, per se. EFM contends however that as stated in his offer of employment, Mr Vigeland's bonuses were discretionary. It accepts that in accordance with the decision of the Court of Appeal in Horkulak v Cantor Fitzgerald International [2004] IRLR 942 the discretion provided for in Mr Vigeland's contract of employment was subject to an implied term that it be exercised genuinely and rationally.
It is also accepted that bonuses were paid in the years 2002, 2003 and 2004 and that each annual award consisted of a cash and an EBT element. The parties are agreed that the cash element of the 2002 bonus being £15,241.59 was paid to Mr Vigeland and there is no claim in that regard. It is EFM's position that the cash elements for each of 2003 and 2004 were also paid and nothing remains outstanding in relation to them either. It contends that Mr Vigeland has no "entitlement" to the three EBT contributions, distributions from the EBT being at the absolute discretion of the trustee, Vistra, and that in any event, the entirety of the 2004 EBT contribution and part of the 2003 contribution were clawed back against 2007 investment losses as agreed between Mr Blair on behalf of EFM and Mr Vigeland in 2008. The alleged agreement in 2008 took place during a telephone conversation on 30 January that year and is disputed.
With regard to the 2002 EBT contribution, EFM contends that it was £34,080.17 and not £40,000 at all and, that it was not physically contributed to the EBT because there were sufficient assets in the EBT for a notional allocation of shares to Mr Vigeland. Nevertheless it is EFM's position that any distribution in relation to the 2002 EBT contribution is at the absolute discretion of Vistra as trustee of the EBT.
Mr Hardwick for EFM says that the claim in relation to implied terms is misconceived because there was no Bonus Agreement in which to imply them. In any event, he says that the alleged implied terms are inconsistent with the express terms and cannot co-exist, are incapable of clear expression, and are neither obvious nor necessary to give business efficacy.
With regard to the alternative cause of action in misrepresentation, Mr Hardwick for EFM says that there are fundamental problems. He says that there is no statement of fact as to the absolute nature of the alleged unconditional entitlement. He says that the document upon which Mr Vigeland relies is merely to the effect that certain shares will cease to be under clawback on certain dates. He says that that is a statement about the cessation of clawback and not a statement that Mr Vigeland would gain an absolute right to specific investments in a discretionary EBT. He also points out that the statement was made in the context of a contribution to a discretionary trust and that in those circumstances, no reasonable representee in the position and with the characteristics of Mr Vigeland could have understood it to mean that an absolute and unconditional right to the shares was to spring into being.
He also says that there are serious problems with reliance and causation. The representations pleaded were allegedly made at meetings in the period from 2003 to 2008 and the email representation relied upon was dated 15 December 2005. But Mr Vigeland contends that in reliance on those representations he entered into the Bonus Agreement on terms that the EBT contributions would be paid into the trust. The Bonus Agreement, however was entered into in June 2002.
Vistra's position is quite straightforward....
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