Geys v Societe Generale, London Branch
| Jurisdiction | England & Wales |
| Judgment Date | 25 March 2010 |
| Neutral Citation | [2010] EWHC 648 (Ch) |
| Docket Number | Case No: HC08C02683 |
| Court | Chancery Division |
| Date | 25 March 2010 |
[2010] EWHC 648 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr. G. Leggatt Q.C.
Sitting as a Deputy Judge of the Chancery Division
Case No: HC08C02683
David Cavender Q.C. (instructed by Fox Williams LLP) for the Claimant
Ian Gatt Q.C. and Rachel Bennett (of Herbert Smith LLP) for the Defendant
Hearing dates: 16 – 19 March 2010
Mr G. Leggatt Q.C.:
Introduction
The claimant, Mr Raphael Geys, was employed by the defendant, Société Générale, London Branch (“the Bank”) as Managing Director, European Fixed Income Sales, Financial Institutions, from 9 February 2005. On 29 November 2007 the Bank told him that his employment was being terminated “with immediate effect”. The dispute in this action is about when, as a matter of law, the claimant's contract came to an end and what amount of money he is owed under his contract with the Bank. Substantial sums are at stake. On the claimant's case he is entitled to be paid more than €12.5 million on the termination of his contract plus further sums not yet quantified for which the Bank is said to be liable because of its failure to make payments to him in a tax efficient manner. By contrast, the Bank originally calculated the amount of its liability as €7,989,619, but now claims that the claimant is not entitled to be paid anything at all because he has not complied with a condition precedent to his right to receive payments on termination.
The Contract
The claimant's contract of employment is contained in the following documents:
(1) A letter dated 28 January 2005 containing the Bank's offer of employment to the claimant;
(2) A document entitled “Contract of Employment” (which I shall refer to as “the Contract”);
(3) The Bank's UK Staff Handbook, which contains in Section I standard terms and conditions of employment (“the Handbook”); and
(4) The Bank's UK Compliance Manual.
Under the terms of the Contract the claimant was entitled to an annual salary of £150,000 (clause 4) and various further benefits. Three of these benefits were, potentially, of particular value to the claimant and are of particular relevance to the present dispute.
First, as well as being eligible to participate in the Bank's discretionary bonus scheme (“the Scheme”), the claimant was eligible to participate in the Bank's Fixed Income Sales Scheme (“FISS”) in respect of the years 2005 to 2008. Under the FISS, the claimant was entitled to an award calculated according to a formula which was dependent on the “Gross Revenue” and “Net Revenue” achieved by the European Fixed Income Sales and Derivatives to Financial Institutions Division of the Bank (“the Division”) for the relevant year (clauses 5.2 to 5.4). A proportion of any award (25% of any amount in excess of €250,000) was subject to deferral in that it was to be retained by the Bank and released in three subsequent yearly instalments (clause 5.7).
Second, the Bank agreed to use “all reasonable endeavours” to ensure that “any award made to [the claimant] under the FISS” was made in as tax-efficient a manner as possible to take advantage of the claimant's Non-UK domiciled status (clause 5.5). In his evidence the claimant described this benefit as making “a massive difference to the economics” of his contract with the Bank.
Third, if the Bank terminated the claimant's employment in certain circumstances the Bank undertook to make a “Termination Payment” with two components: (a) the value of the proportion of any award under the FISS which under the rules governing deferral had been retained by the Bank and not yet released; and (b) a “Compensation Payment” which varied in amount depending on the year in which the claimant's employment terminated (clauses 5.14 and 5.15). If the claimant's employment terminated after 31 December 2005 but before 1 January 2009, the Compensation Payment was to be calculated as a percentage of the average of the last two awards made to the claimant under the FISS (and the Scheme). The claimant was also entitled to a replacement bonus in relation to the FISS (and the Scheme), payable at the same time as the Termination Payment, for the year in which his employment terminated up to the date of termination (clauses 5.18 and 5.24).
Clause 13 of the Contract provided:
“Your employment can be terminated on the expiry of 3 months’ written notice of termination given by you to the Company or by the Company to you.”
I will refer to terms of the claimant's contract of employment in more detail where they are relevant below.
The Issues
There are four main areas of dispute between the parties:
(1) When did the claimant's contract of employment terminate?
(2) In calculating amounts payable under the FISS, was the Bank entitled to deduct from “Gross Revenue” certain “negative sales credits”?
(3) What was the extent of the obligation undertaken by the Bank to use all reasonable endeavours to ensure that any award made to the claimant under the FISS was made in as tax efficient a manner as possible?
(4) Has the claimant forfeited his entitlement to payments on termination of the contract by pursuing some of the claims which he has made in these proceedings?
By an order made at a case management conference on 18 June 2009, certain issues relating to the tax efficiency obligation were excluded from the scope of this trial. These excluded issues are: (1) whether there has been a breach of the obligation; (2) if so, the consequences of any such breach; and (3) the quantification of any other sums payable as a consequence of that obligation. The parties have also agreed that three further issues should not be determined at this trial which have been set out in a document that can be incorporated in the order made following this Judgment. One of these issues relates to the dispute about negative sales credits and I will mention it in that context. The other two issues are relevant to questions of quantum and interest which, in any event, I consider should be left over for assessment.
Witnesses
At the trial I heard evidence from the claimant and from four witnesses called by the Bank: Mr Stephane Landon; Mr Rodolphe Sahel; Ms Patricia Froment; and Mr Graham Clark. The evidence of the first three of the Bank's witnesses was principally concerned with the system of sales credits operated by the Bank. The fourth witness, Mr Clark, gave evidence about the conclusion and termination of the claimant's contract of employment, although he was not personally involved with either.
The Court's Task
Most of the issues contested at this trial are issues as to the proper interpretation of the claimant's contract of employment and the legal validity and effect of the parties’ actions. The principles which the Court must apply in construing the contract are well established. Its meaning must be ascertained from the words used by the parties, interpreting those words as a reasonable person would understand them in the context of the contract as a whole, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties when the contract was concluded. It is fundamental to this exercise that the Court's approach is objective, in the sense that the Court is concerned only with the meaning which the contractual documents would convey to a reasonable person and not what either of the parties to the contract subjectively understood or intended them to mean. It is equally clearly established, and was recently confirmed by the House of Lords in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, that evidence of what was said during the course of pre-contractual negotiations is inadmissible in construing the contract.
Some of the testimony given by the claimant and by the Bank's witnesses at the trial concerned their subjective understanding of the claimant's contractual rights and of what the contract meant. In addition, both parties sought to rely on evidence of communications which took place during the negotiation of the claimant's contract. In accordance with the principles that I have mentioned, I have paid no regard to that evidence in interpreting the contract.
(1) The Date of Termination
The first issue is the date when the claimant's contract of employment terminated. It makes a significant difference to the amount payable under the contract on termination whether this date falls in 2007 or in 2008. This is because, if the claimant was still employed by the Bank at the end of 2007, he was entitled to an award under the FISS for that year. This in turn also affects the amount of his Compensation Payment. On the Bank's calculations the difference in financial terms between a termination date of 29 November 2007 and 29 February 2008, for which the parties respectively contended, is approximately €2.5 million.
Relevant Events
The relevant chronology of events is as follows:
(1) On 29 November 2007 the claimant was called to a meeting at which he was told, and handed a letter which stated, that the Bank “has decided to terminate your employment with immediate effect”. He was then escorted from the building after being permitted to clear his desk. He did not subsequently attend the Bank's premises.
(2) On 7 December 2007 the claimant's solicitors wrote to the Bank's solicitors chasing “further information in connection with the sums [the Bank] is offering to pay Mr Geys following the summary termination of his employment” and “delivery of termination documentation pursuant to Mr Geys’ contract of employment.” The letter ended by stating that “[i]n the meantime, [the claimant] reserves all his rights”.
(3) On 10 December 2007 the Bank sent to the claimant and copied to his solicitors a draft “Severance Agreement” in...
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