Elliston v Glencore Services (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Lord Justice Patten,Lord Justice Moore-Bick |
| Judgment Date | 28 April 2016 |
| Neutral Citation | [2016] EWCA Civ 407 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2014/3664 |
| Date | 28 April 2016 |
[2016] EWCA Civ 407
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT, QUEEN'S BENCH DIVISION
HHJ RICHARD SEYMOUR QC
HQ2013XZ04837
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
VICE PRESIDENT OF THE COURT OF APPEAL
Lord Justice Patten
and
Lady Justice Gloster
Case No: A2/2014/3664
Mr David Craig QC (instructed by Linklaters LLP) for the Appellant
Mr Akhlaq Choudhury QC (instructed by GRM LAW) for the Respondent
Hearing dates: Wednesday 20 January 2016
Thursday 21 January 2016
Introduction
This is an appeal against an order of HHJ Richard Seymour QC (sitting as a judge of the High Court) dated 24 October 2014, in which he gave judgment in favour of the respondent, Richard Paul Elliston ("the respondent"), in the sum of £418,774 against the appellant, previously known as Xstrata Services (UK) Limited ("the appellant"). The issue in the appeal is whether the judge was correct to conclude that, in the circumstances, the appellant was in breach of contract in not paying the respondent a sum, defined under the latter's contract of employment as "the Prescribed Sum" ("the Prescribed Sum").
On the appeal, Mr David Craig QC appeared as counsel for the appellant and Mr Akhlaq Choudhury QC appeared as counsel for the respondent. Both counsel also appeared in the court below.
Factual background
The respondent was employed by the appellant as its company secretary from December 2003 until 2 August 2013. He was at all material times a qualified solicitor and, prior to his employment by the appellant, had been employed by Morgan Grenfell, and subsequently Deutsche Bank, from 1990 onwards.
Under the terms of his written contract of employment with the appellant ("the service agreement") he was entitled to payment of the Prescribed Sum in the event of termination of his employment after a Change of Control as therein defined.
The respondent was dismissed on notice after the merger between Glencore International plc ("Glencore") and Xstrata plc ("Xstrata") (of which the respondent had previously been a subsidiary), which obtained final regulatory and anti-trust approvals in May 2013. It was not in dispute that the merger involved a Change of Control.
What was in dispute was whether the respondent was, in the events which happened, entitled to payment of the Prescribed Sum. The respondent's claim was that the appellant was in breach of contract in not paying him the Prescribed Sum, after the termination of his employment on 2 August 2013 in the amount of £418,774.
The appellant's defence to that claim was that it was an express condition of an unsolicited, voluntary and gratuitous bonus award of £487,925 ("the Transaction Bonus") which had been made to the respondent in December 2012 (by letter dated 4 December 2012 but received by the respondent on 7 December 2012), that he would not be entitled to, and would agree to forego, the payment of the Prescribed Sum ("the condition").
The letter to the respondent dated 4 December 2012 sent by Mr Michael Davies, Chief Executive Officer of Xstrata, was in the following terms:
"Dear Richard,
The past year has been without doubt one of the most challenging for employees in Xstrata's history. It has also been a very unsettling time. The task of achieving a merger between Xstrata and Glencore has brought with it many hurdles along the way and has been a real test of our character to rise up and meet such obstacles.
I would like to thank you for the contribution you have made to get Xstrata to this point of the merger and am pleased to inform you that you have been awarded a transaction bonus of £487,925 in recognition of this.
Sincerely,
ML Davis"
Other employees of the appellant and Xstrata were sent letters in similar terms.
The appellant alleged at trial that the condition was first imposed orally by Mr Dominic O'Brien (at all relevant times Xstrata's General Manager Human Resources and Legal, acting on behalf of the respondent) at a meeting with the respondent on 10 December 2012, after the letter dated 4 December had been received and four days before the Transaction Bonus was paid on 14 December 2012. The appellant further contended that the respondent accepted the payment of the Transaction Bonus on that basis and that, accordingly, he could not then "double-dip" and also be paid the Prescribed Sum, as he sought to do by his claim.
There was no dispute before the court below, or indeed in this court, that the respondent had no contractual entitlement to the Transaction Bonus although such bonuses had been paid in the past, that it was an award made wholly for past services and that the respondent gave no consideration for it. It was a gratuitous promise, described by the respondent himself as a "voluntary payment". It was also common ground that it followed that the appellant was entitled to introduce such terms as it wanted in respect of the payment of that bonus (i.e. to amend the terms on which the payment was to be made).
The critical issues at trial were:
i) whether the appellant had introduced such a term by making it clear during the meeting between Mr O'Brien and the respondent, that the Transaction Bonus was being paid in lieu of the Prescribed Sum, such that it was a condition of payment of the Transaction Bonus that the respondent forego his entitlement to the Prescribed Sum; in particular, the issue arose as to whether the respondent was told by Mr O'Brien merely that the appellant "preferred" that people did not "double dip" (as per the respondent's pleaded case), or whether he was told by Mr O'Brien expressly that the Transaction Bonus was being paid in substitution for the Prescribed Sum (as the appellant contended);
ii) a subsidiary issue to the previous issue was what was the date at which the meeting between the respondent and Mr O'Brien took place, and in particular whether the meeting was (as the appellant asserted) before or (as the respondent asserted) after payment of the Transaction Bonus on 14 December 2012; the respondent's case was that he had been told only after payment had been made on 14 December 2012 that payment was in lieu of any entitlement to the Prescribed Sum and that conditions could not be imposed on the Transaction Bonus retrospectively; the appellant's case was that the respondent had been told prior to payment on 14 December 2012;
iii) whatever words actually were used by Mr O'Brien, what would a reasonable individual in the respondent's position with all the background knowledge available to the parties at the time, have understood by what he was told by Mr O'Brien.
So far as the second issue was concerned, during the course of cross-examination at trial, the respondent ultimately accepted that his conversation with Mr O'Brien had indeed taken place before he was paid the Transaction Bonus, and not after it.
Various issues of construction in relation to the terms of the employment contract were also raised by the appellant. The judge found against the appellant on these issues and the latter did not pursue these arguments on appeal.
The judgment
The hearing took place on 14, 15 and 16 October 2014 and the judge gave judgment on 24 October 2014. Despite the judgment purportedly bearing a neutral citation reference, unfortunately it does not appear to be available on BAILII.
In relation to the appellant's defence that the respondent had agreed to forego payment of the Prescribed Sum by acceptance of the Transaction Bonus, which the judge referred to as the "Variation Defence", the judge summarised the defence and his views of it as follows, at paragraphs 13 to 16 and 25 1:
"13. The principal line of defence expounded in the Amended Defence, which I shall call in this judgment "the Variation Defence", was pleaded in paragraphs 17 to 19, inclusive, of the Amended Defence:-
"17. At a meeting between the Claimant and Mr. O'Brien on 10 December 2012, Mr. O'Brien, inter alia informed the Claimant that he was going to be awarded a bonus (i.e. the Transaction Bonus [which I have called the December Bonus]) in the light of the proposed merger between Xstrata and Glencore. Mr. O'Brien further informed the Claimant that this bonus would be in substitution for the Claimant's entitlement to a Prescribed Sum under his contract of employment, and that it would have been inappropriate for employees to "double-dip" by receiving a Transaction Bonus and a Prescribed Sum payment.
18. It was, accordingly, an express term of the award of the Transaction Bonus that it was in substitution for the
Prescribed Sum payment under the Claimant's Employment Agreement, and accordingly that the Claimant had to forego [sic] any entitlement (and/or any claim) that he might have to the payment of a Prescribed Sum pursuant to his Employment Agreement.19. The Claimant did not demur from this, and he clearly understood that it was a condition of the payment of the Transaction Bonus that he would not be entitled to, and would effectively forego [sic] any entitlement that he might otherwise have to, a Prescribed Sum payment pursuant to the Employment Agreement."
14. The legal consequences of what was alleged in these paragraphs were characterised variously in paragraph 23 of the Amended Defence:-
"Accordingly, the Defendant avers that:
(1) it was an express term of the award to the Claimant of the Transaction Bonus that the Claimant would forego [sic] any entitlement to and/or claim to a Prescribed Sum payment, alternatively it was a condition...
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