Looney v Trafigura Beheer BV

In January 2009, the claimant, Mr Kieran Looney (“Mr Looney”), entered into a contract to provide the defendant, Trafigura Beheer BV (“Trafigura”), with a performance management programme. Late in the same year, Trafigura purported to bring the contract to an end pursuant to a provision for early termination which the contract contained. It is Mr Looney’s case that Trafigura was not in fact entitled to invoke the early termination clause and that it repudiated the contract. In these proceedings, Mr Looney claims damages for breach of contract.

After spending half a dozen years with Lehman Brothers, the investment bank, Mr Looney switched careers in 1995 to leadership development and executive coaching. He worked with management development consultancies for some five years before setting up his own business in 2000. His clients have included BP and Citigroup.

One of the programmes which Mr Looney offers is the “Kieran Looney & Associates Performance Management System Program” (or, more shortly, the “KLA Program”). This makes use of a range of materials designed by Mr Looney. They include “performance contracts” (which provide criteria against which an executive’s performance can be evaluated), “90-day delivery plans” (which focus, as their name suggests, on things to be achieved over 90-day periods) and “engagement plans” (which identify key individuals who need to be enrolled and partnered to achieve particular results). Among other things, the Program provides for the use of precise and focused language, for clear objectives to be set, for review of whether such objectives are being met, and for taking responsibility and not giving (or accepting) excuses for failure to achieve objectives.

Mr Looney prefers to disseminate his training by a “Train the Trainer” approach. This involves Mr Looney sharing the KLA Program’s concepts with an organisation’s senior leaders and those leaders in turn, having achieved an appropriate level of expertise (known as “accreditation”), passing the concepts on through the organisation (a process known as “cascading”).

Mr Looney distinguishes between “cascading” and “embedding”. As Mr Looney uses the term, “embedding” involves a formal implementation (or “roll out”) of the KLA Program to the organisation’s employees. This requires detailed implementation and engagement plans, and oversight, from Mr Looney.

Trafigura is a substantial commodities trading company. It has offices around the world, but its principal offices are in London and Switzerland. The group has some 1,700 employees in total.

The president of Trafigura is one of its co-founders, Mr Claude Dauphin. Trafigura’s management board also includes Mr Mike Wainwright (“Mr Wainwright”), the chief operational officer, Mr Pierre Lorinet (“Mr Lorinet”), the chief financial officer, Mr Frank Runge (“Mr Runge”) and Mr Jose Larocca (“Mr Larocca”), the co-heads of oil trading, Mr Christopher Cox, the global head of concentrates and coal trading, and Mr Jeremy Weir, the head of derivatives and chief executive officer of Trafigura’s asset management subsidiary.

On 8 September 2008, Mr Wainwright and Mr Lorinet gave a presentation to London-based senior managers of Trafigura about problems they perceived to exist with the group’s management. Among the concerns Mr Wainwright and Mr Lorinet expressed were that there was a “silo mentality”, that there was a “lack of accountability and discipline”, that too much emphasis was being placed on “doing rather than managing” and that too little energy was being devoted to longer-term planning. In the discussions that ensued, it was agreed that there should be a follow-up meeting led by an outside facilitator. Mr Ralph Torrance (“Mr Torrance”), global head of operations (oil), suggested that Trafigura should approach Mr Looney, whom he had encountered when working at BP. In due course, it was agreed between Trafigura and Mr Looney that the latter would facilitate at a management meeting on 8 November and, in advance of that meeting, would assist with a “360° feedback process”. Such a process involves analysis of feedback from employees at different levels of an organisation (including management, direct reports and peers) on perceptions of individuals’ behaviour.

Shortly after the 8 November meeting, Mr Runge entered into a contract for Mr Looney to provide him with personal coaching at a fee of £100,000 for 12 months. Mr Runge had not been involved in the “360° feedback process” or the 8 November meeting, but he had met Mr Looney on a couple of occasions and been impressed by him.

On 12 November 2008, Mr Wainwright emailed Mr Looney about a “general proposal for Trafigura”, to include “Development of leadership team” and “Key leader development”. Mr Looney responded by putting forward a proposal for a three-year KLA Program focused on Trafigura’s back and mid office. As Mr Looney explained in his evidence, this was to have four key elements:

Mr Looney supplied Mr Wainwright and Mr Lorinet with a draft agreement for the provision of the KLA Program. This envisaged that Mr Looney would be employed for three years at an annual fee of £3 million. The draft also, however, included (as clause 1.10) a provision for early termination. This was in these terms:

“Early termination may only occur on written notice on the basis set out in the Financials. On Trafigura serving written termination notice and paying the early termination fee the Program will be discontinued and Trafigura and KLA will have no further obligations to the other in relation to payment or delivery of the Program respectively except that the confidentiality, Materials terms and other provisions of this agreement intended to apply after termination will continue to apply with full force and effect. If no written notice is served under and in accordance with the timescale set out in clause 2.5 Trafigura will pay the license fee for 2010 by 15^th December 2009, and the license fee for 2011 by 15^th December 2010.”

The reference to the “Financials” related to “pricing terms and conditions” set out in an attachment. Section 5 of this attachment stated the following as regards early termination:

“Written notice must be received by KLA on or before 1st November 2009

Non refundable deposit + £1,000,000 early termination fee to be paid to KLA within fourteen days of notification”

Mr Looney’s employment was discussed at a Trafigura board meeting on 21 November 2008. Although members of the board queried the cost of the KLA Program and the benefits it would bring, the board endorsed proposals for the adoption of a leadership programme for senior managers. Mr Wainwright and Mr Lorinet were asked to “go through a tender process in order to evaluate service providers available and costs”. Thereafter, inquiries were made as to alternatives to Mr Looney. In the end, however, Mr Wainwright and Mr Lorinet preferred Mr Looney’s KLA Program to what was available elsewhere.

Mr Wainwright and Mr Lorinet were aware that Mr Looney had a strong personality and a forthright style. That, however, was what they wanted. They were keen that managers should be challenged and taken outside their comfort zones. They thought that things should be shaken up a bit.

A written contract between Mr Looney (as “Kieran Looney & Associates”) and Trafigura was eventually signed on 14 January 2009. For the most part, this was in the terms Mr Looney had drafted. It includes, in particular, the early termination provision (clause 1.10). It also incorporates, however, a small number of manuscript amendments which Mr Wainwright and Mr Lorinet had asked for. One of these was inserted at the end of clause 1.10. The amendment was in the following terms:

“It is intended that the program is dynamic in nature and will evolve subject to the specific requests (within reason) of Trafigura BV.”

Another change concerned the next provision in the agreement, which related to the terms on which materials were to be made available by Mr Looney. In its amended form, the provision was in these terms:

“The terms of the Materials Agreements will be regarded as internal terms of this agreement, and will continue to apply after early termination of this agreement for any reason. KLA is entitled to refuse to start the Program if this is not done and may refuse to continue the Program if there is evidence of breach of the terms or conditions of the Materials, whilst acting reasonably in all cases.”

The last six words came from Mr Wainwright and Mr Lorinet. Another alteration involved increasing the number of those expected to participate in the KLA Program (referred to as “Attendees”) from 20 to 25. The Attendees were to comprise senior management in Trafigura’s back/mid office.

The financial terms were essentially unchanged; Mr Looney had said early on that these were non-negotiable. The contract thus provided for Mr Looney to be paid an annual licence fee of £3 million. In the first year, 80% of the fee was to be paid at once and the remaining £600,000 by 1 August 2009. However, Mr Looney agreed that the contract should incorporate his coaching agreement with Mr Runge and that he would refund payments received under that agreement (as to which, see paragraph 9 above).

The “Materials Agreements”, which all participants in the Program were to sign, imposed tight restrictions on the use of materials provided by Mr Looney. A signatory undertook, among other things, to ensure that materials were “used only by [him] as Trainer or Attendee preparatory to, during or in the course of the Program or otherwise as expressly licensed in writing by KLA and subject to the terms of any such written licence, and [would] not be communicated to or used by any other person, division …, company or other organisation for any purpose”. Signatories also agreed not to “add to, amend or change in any way any of the Materials or their contents or use the Materials in any amended form except to the extent (if at all) specifically previously agreed in writing by KLA”. The word “use” was, moreover, defined in wide terms, to include “any form of utilisation in any program, seminar or training or any copying or other reproduction, summary, abstraction, disclosure, permission/facilitation to any other persons to use or other form of transfer or adaptation of information in any written, electronic or other form now known or subsequently devised”. Mr Looney agreed, however, to grant Trafigura a “lifetime license” to use the materials “provided that the entire 36 month program is completed and the early termination provision is not invoked”.

It is common ground that there was no discussion between the parties of the early termination provision.

Once the contract had been signed, Mr Wainwright and Mr Lorinet were given copies of two handbooks, referred to as the “Train the Trainer Manual” and the “Black Book”, which were to form the basis of their coaching by Mr Looney. In the period which followed, Mr Wainwright and Mr Lorinet were in frequent contact with Mr Looney. The meetings were in part about planning the implementation of the KLA Program. Another purpose was to enable Mr Wainwright and Mr Lorinet to become accredited trainers in advance of a meeting with Attendees which was to take place at the beginning of April 2009. This was to be the first of a number of “offsite” meetings allowing Attendees to meet and be coached as a group; the “offsites” would also provide milestones in the KLA Program.

During this period, Mr Looney also prepared and provided a “Trafigura Leader Scorecard” which participants in the KLA Program were to be asked to complete. This was intended to help Trafigura track the performance of its senior managers. By March 2009, Mr Looney had begun to coach Attendees as well as Mr Wainwright and Mr Lorinet.

As planned, an “offsite” took place on 3 and 4 April 2009 at the Cumberland Hotel in London. During this offsite, Mr Wainwright and Mr Lorinet explained the KLA Program to the Attendees. Mr Looney was mostly at the back of the room, but he coached Mr Wainwright and Mr Lorinet during breaks; Mr Looney thought it important to keep a low profile in order to encourage Mr Wainwright’s and Mr Lorinet’s leadership. On the second day, Attendees were themselves provided with copies of the Black Book. Some exercises were conducted in small groups, giving participants the opportunity to coach each other.

Reactions to the offsite varied. Some Attendees found the approach novel and interesting. There were others who did not like the way in which Attendees were put on the spot.

In the course of the offsite, Mr Wainwright asked Attendees to complete 90-day plans and to email them to himself and Mr Lorinet. Mr Looney was present when this was said and considered that what was proposed would involve breach of the restrictions on use of the materials he had supplied. He did not object at the time lest that undermine Mr Wainwright, but he subsequently emailed Mr Wainwright and Mr Lorinet to ask them to request Attendees to use the “existing KLA materials” (i.e. the paper copies with which Attendees had been provided). Mr Looney having become aware that Attendees were creating electronic versions of KLA Program materials, he drafted an email, which Mr Lorinet sent out, referring to the need for “strict adherence to the terms of our agreement with KLA to protect the intellectual property and the integrity of the program”. The email also said that the “current working documents” would have to be destroyed.

This was not the first time that Mr Looney had complained of the restrictions on the materials he supplied being breached. Earlier in the year, Mr Lorinet had created smaller copies of such materials which would be easier to carry when travelling. When Mr Looney had become aware of this, he had asked Mr Lorinet for the copies, and Mr Lorinet had given them to him.

When giving evidence, Mr Looney suggested that Mr Lorinet had made the “travelling” copies to test the boundaries. In my view, however, there is no substantial basis for this theory. It was not put to Mr Lorinet in cross-examination.

It is understandable that Mr Looney should have been concerned to protect materials associated with the KLA Program, not least because the ability of a person in Mr Looney’s position to market his programme is liable to be impaired if materials used for the programme are disseminated in an uncontrolled way. I can also, however, well understand why the restrictions on the materials supplied by Mr Looney were found to be irksome. The use of computers is, of course, routine nowadays. Further, as Mr Torrance pointed out, it is easier to revise and correct drafts on computers than if each person has a single hard copy. The use of electronic versions of the materials was also likely to facilitate their communication to others concerned with the KLA Program within Trafigura (Mr Wainwright or Mr Lorinet, perhaps), especially as Trafigura operated from offices in more than one country. As I understand it, Mr Looney took the view that an Attendee was not entitled even to email a scanned copy of an original paper form. Mr Craig Smallbone (“Mr Smallbone”), who joined Trafigura’s human resources department in 2007 and became global head of human resources in 2009, said in cross-examination:

“working in a modern-day organisation in any company, I think that to expect people to fill in their objectives and the work that they are doing in a paper-based form and not to have it available to edit and to work on, I think is archaic. And I found that incredibly difficult as did everyone on the programme and it led to an awful lot of the problems …. ”

Similarly, Mr Dominic Watters (“Mr Watters”), Trafigura’s head of structured finance in London, said in evidence that he found Mr Looney’s approach to the use of his materials “impractical, inefficient and a nonsense”. I can see why.

I should perhaps add that the evidence does not show there to have been any deliberate breach of the restrictions on the use of the KLA Program materials. While those receiving such materials had to sign “Materials Agreements”, I do not think that that was of itself sufficient to alert the recipients to, say, the existence of a bar on creating online templates. Further, Attendees were not told at the first offsite that they could not copy the templates for the purpose of completing them.

In an attempt to clarify what was permissible, Mr Wainwright sent Mr Looney an email on 4 June 2009 in which he said that he and Mr Lorinet needed to see “a detailed summary of what we are not allowed to do with respect to our existing contract when it comes to potential copy right issues in how we use paperwork”. Rather unhelpfully, Mr Looney replied:

“The answer to your question is made explicit in the various agreements incl[uding] materials agreements. Best you refer your question to your in-house lawyer and that PL [i.e. Mr Lorinet] in particular starts to understand copyright law and infringements therein.”

Another source of difficulty in mid-2009 related to the extent to which the KLA Program was to be disseminated through Trafigura. Mr Wainwright and Mr Lorinet have each explained in evidence that what they envisaged was essentially that concepts from the KLA Program should be passed on by means of what Mr Looney terms “cascading”. It was not intended, Mr Lorinet said, that the materials from the KLA Program would be made available more widely, although there was a desire to have “the ability to use 90-day plans within the organisation i.e. objective setting within the organisation”. Mr Lorinet went on:

“KLA materials is a collection of documents and a book which we had no intention of cascading anywhere. What we had intention to do was to have objectives. I don't know how we can have a group of 15 individuals setting themselves objectives for the year … and having them set up in a vacuum where none of their direct reports are aware of these objectives, none of these direct reports have to basically implement part of these objectives because I can be as good as I want, I can have all the objectives I want, if my team doesn't have the same objectives as me, I think we are not going to be able to achieve the outcome that I need.”

Mr Lorinet added, “Objectives are not part of the KLA forms.”

Mr Looney saw matters very differently. His perception was that Mr Wainwright and Mr Lorinet were contemplating something more than “cascading”. In particular, he thought that Mr Wainwright and Mr Lorinet intended direct reports of Attendees (of whom, I gather, there were some 150 to 200) to have access to the KLA Program materials and to become accredited. On that basis, Mr Looney considered that he should receive an increased fee. Mr Wainwright and Mr Lorinet were, however, clear that there was no question of any extra payment to Mr Looney.

Mr Looney referred in evidence to a “month of madness” in June. He explained:

“There was a period, I call it a moment of madness, a month of madness I would call it, where they [i.e. Trafigura] were intimidating me, pressurising me, cajoling me, from my perspective hustling me to roll [out] my programme to the entire back and mid office for no consideration, because they had no budget, electronically.”

For my part, I have not been persuaded that that is a fair or accurate characterisation of Trafigura’s behaviour during this period. I found the account given by Mr Lorinet, in particular, more persuasive. He said that he felt that he, Mr Wainwright and Mr Looney were all talking at cross purposes for about a month. The confusion can perhaps be attributed in part to terminology. As far as Mr Looney was concerned, the terms “accredit”, “embed” and “roll out” connoted something beyond mere cascading. It may be that Mr Wainwright and Mr Lorinet spoke of “embedding”, “roll out” and even “accreditation” more loosely. Mr Lorinet said at one point in cross-examination, “for me roll-out and cascade is one and the same”.

It was Mr Wainwright’s and Mr Lorinet’s perception that Mr Looney was (in Mr Lorinet’s phrase) “always angling for more business and more fees whenever the subject of roll out was raised”. Mr Looney did not accept this, but the evidence does indicate at least that Mr Looney anticipated that he might be able to charge Trafigura fees substantially in excess of those to which he was entitled under his existing agreement with Trafigura. Thus, notes Mr Looney made for himself at this time refer to him wanting £10 million “now”, in July 2009, another £10 million in July 2010 and a final £10 million in July 2011. On the same page, there is reference to annual sums of £13 million, suggesting that the £10 million payments were to be additional to the £3 million sums for which the existing contract provided. The page also includes the comments “I refuse to compromise”, “They have no idea how much it all costs” and “I have the formula”. Further, an email Mr Wainwright sent to Mr Runge and Mr Lorinet on 5 June referred to Mr Looney having “asked for an additional £1.9m”, as to which Mr Wainwright observed in the email:

“I feel we are at end, a big shame, but I refuse to ask company for more money, I just cannot justify it to myself. Also get feeling that whatever we do, he will now end up trying to sue us, which clearly we do not need.”

The evidence also suggests that, at this period, Mr Looney thought of doing no more for Trafigura than was strictly required. A sheet prepared by Mr Looney identifies by ticks and crosses “Authorised/fully paid for work”. At the top of the sheet, Mr Looney wrote the following:

“Minimum – the smallest [amount] possible

Not increase my workload without paying in advance

What is included in the smaller program scope”

Asked in cross-examination about such evidence, Mr Looney observed:

“Paying me £3 million does not entitle them to relate to me, to treat me as an employee, which was my experience.”

Elsewhere in his evidence, Mr Looney explained that he had “ultimately … got to the point where [he] felt guilty if [he] wasn’t attending Trafigura” and that “the demands that Trafigura placed on [him] were exorbitant and extraordinary”. Mr Looney said, however, that he had not in fact disengaged or done the minimum, and he observed:

“Just because I write down something on a piece of paper doesn’t mean that it is the case.”

That is obviously true, and it does not appear from the evidence that Mr Looney ever in fact adopted a “work to rule” approach. What matters, though, is that he considered doing so. That testifies to a deterioration in the relationship between Mr Looney and Trafigura.

In this connection, Mr Looney noted in evidence that his relationship with Mr Wainwright and Mr Lorinet “deteriorated rapidly in June 2009”. The tensions between the parties at this stage are apparent from an email that Mr Looney sent to Mr Wainwright on 11 June 2009. In it, he said:

“Mike- valuable time has been lost on both sides. Your message radiates a lack of partnership/trust.

I am not used to working/being controlled this way, or having to deal with so much dis-trust/upset/confusion/personal slights on my character. My health is suffering as a result.

The program needs to be exciting and enjoyable, and everyone needs to feel acknowledged and one team. The current tension and stress in our relationship is destructive.

I would like to meet you alone to discuss the above, including the early termination provision.”

Despite Mr Looney’s reference to the early termination provision, this was not in fact invoked at this point. Instead, the parties entered into a written agreement varying their January contract. By this agreement, which is dated 16 July 2009 but which the parties appear to have signed on 18 July, Mr Looney agreed, among other things, to provide certain materials in electronic format without extra consideration.

This agreement meant, as Mr Lorinet agreed in evidence, that the “immediate problem [had] gone away”. However, Mr Lorinet also said, and I accept, that “the damage done as part of the wrangling for the past month [had not] gone away”.

Despite the difficulties which had arisen between the parties, the accreditation of a number of Attendees had proceeded in June 2009. Mr Looney also provided at around this time forms to serve as a “performance tracker” and an “improvement log”.

A second offsite was held, in Lucerne, on 17 and 18 July 2009. Like the first offsite, this included presentation of concepts by Mr Wainwright and Mr Lorinet (with coaching from Mr Looney), small group exercises and broader group discussions. In addition, there was a presentation from Mr Looney on intellectual property rights and on how the KLA Program was to be disseminated. Mr Looney was also more active in coaching the Attendees.

Although in general a supporter of Mr Looney, Mr Torrance found that the content of the second offsite rather repeated that of the first offsite. There was, he said, no sense of the program having evolved significantly, although he accepted that the offsite could be said to have been consolidating. He felt, too, that the offsite seemed unstructured. Mr Smallbone, another supporter of the KLA Program, also said in evidence that there was a general feeling that matters had not moved forward. In similar vein, Mr Lorinet said in cross-examination:

“at the second off-site we were still going through the same ground. Still going over IP issues, [what] could and could not be done, still trying to design adequate objectives. It was very repetitive in form ….”

Following the second offsite, Mr Looney continued to hold coaching sessions with Attendees and to speak to Mr Wainwright and Mr Lorinet.

Views of Mr Looney and the KLA Program still differed. Of those who gave evidence in these proceedings, Mr Runge liked Mr Looney and his coaching style. Mr Torrance and Mr Smallbone were also relatively enthusiastic. In contrast, Mr Watters never warmed to the KLA Program. More than one witness spoke of Mr Looney as a “Marmite” character whom people either loved or hated.

By September 2009, Mr Wainwright was coming to think that Trafigura should exercise the early termination provision. He raised the possibility with Mr Lorinet at about the end of September. Mr Wainwright expressed concern that the KLA Program was time-consuming and inflexible and was not evolving. He indicated that he was not convinced that the benefits Trafigura would derive from the Program over the next two years warranted the fees it would have to pay. It was agreed between Mr Wainwright and Mr Lorinet that they would canvass the opinions of others. On 12 October, Mr Wainwright forwarded to Mr Lorinet some email correspondence he had by then had about whether to proceed with the KLA Program, and a decision to cancel the Program was endorsed at an impromptu meeting of members of Trafigura’s board on 15 October. A little later that day, Mr Wainwright told Mr Looney at a meeting that a forthcoming offsite would be cancelled because Trafigura wanted to terminate its agreement with him. Mr Wainwright described Mr Looney’s reaction as one of shock.

The 15 October meeting with Mr Looney was followed up by a letter dated 20 October 2009, in which Trafigura gave Mr Looney “notice of early termination and cancellation of the Agreement with immediate effect” and stated that arrangements had been made for the early termination fee of £1 million to be remitted to him. The £1 million was paid on 29 October (so that, in total, Mr Looney had received £4 million pursuant to his contract with Trafigura). Trafigura also returned KLA Program materials to Mr Looney.

The decision to terminate was taken when it was because a third offsite was due to be held on 16 and 17 October 2009 and also because the early termination provision could not be exercised after 1 November.

As regards the decision to terminate, Mr Lorinet said in his witness statement:

“It was clear to me … that the negatives of the KLA Program had started to outweigh the positives. The question was whether we really thought that we were going to learn more and get value for money from the KLA Program over the next couple of years. We were battle-weary and fed up with the constant tug of war with [Mr Looney] and the time [Mr Wainwright] and I had to devote not only to the KLA Program but also to dealing with [Mr Looney’s] issues, such as his copyright concerns.”

In one of his witness statements, Mr Wainwright said:

“[W]hat we had hoped for, but did not receive, was more focus, structure and development of the KLA Program from [Mr Looney …. [T]he KLA Program … had become repetitive, and had failed to develop and evolve as [Mr Lorinet] and I had been led to believe it would. If anything was too complex, it was my day to day dealings with [Mr Looney] and his attitude to his [intellectual property] rights. His needy style was all encompassing and his sense of priorities warped; he considered the KLA initiative to be the most important thing in Trafigura. The simple fact is that [Mr Lorinet] and I did not consider that the KLA Program offered value for money and we could no longer justify to ourselves or the board the time and expense required for the KLA Program to continue for a further two years.”

During his oral evidence, Mr Wainwright said that he and Mr Lorinet “didn’t believe that the KLA programme in its existing concept was delivering enough value for the business”. He also said:

“myself as an individual, I wasn’t in favour of continuing the programme because I did not have the heart in it, I couldn’t be seen to be going through the motions ….”

On 6 November 2009, Olswang sent a letter before action to Trafigura on Mr Looney’s behalf. The proceedings now before me were issued in the following month.

There was extensive reference in both the letter before action and, in due course, the particulars of claim to “TrafiTalent”.

TrafiTalent derived from software which Trafigura bought from the StepStone group of companies. In March 2008, StepStone provided Trafigura with a proposal for the supply to Trafigura of what was described as “StepStone Solutions – Software for Total Talent Management”. The proposal explained that a number of modules could be purchased. The modules were summarised in these terms:

“First of all the Employee and Position Core modules form the backbone of the system and information about people and their jobs are seen throughout the entire rest of the application ….

The Skills and Competencies module allows you to profile jobs and individuals against a pre-defined Competency Catalogue. The Best Fit Search in this module uses Selection and Matching (both competency and experience based) to find the best candidates for a profiled position of job family – the results of this search on your internal talent pool can feed into a shortlist of candidates to be used in the Succession Planning module.

The Development Management module also links into the Skills and Competencies module in that if an individual is scoring low in a certain required competency, this may be defined as a Need. Development Management records both Strengths and Needs and any development activities recorded in the Development Plan (e.g. training, job rotation, mentoring, coaching) can be set up to address a particular need, thus knitting these two modules closely together.

The Performance Management module links into Self Service where supervisors can rate their teams via Manager Self Service and individual can add comments via Employee Self Service. Performance Management can also feed into Compensation for merit awards.”

A later section of the proposal devoted to performance management explained that this module included “Performance objective and assessment process” and “Support for periodic reviews throughout the year”. One of the “primary benefits” of the module was given as “the way in which individual goals can be linked with company-wide objectives to ensure that the necessary strategic alignment is achieved”. The proposal went on to describe the benefits for managers and employees as follows:

“Benefits for Managers

This module helps managers to move the appraisal process from a form filling exercise to a process in which more professional and rigorous discussions about individual objectives and development are taking place. Self-service enables managers to hold their team members accountable and to know their departmental status at any point in time from anywhere. The on-line process including standard templates, objective catalogues, automatic email reminders, manager ‘dashboard’ and other features saves time for both managers and employees.

Benefits for Employees

Employees are involved in the development of their performance plan in a transparent and empowered manner. They’re able to view the status of their plan, suggest amendments, rate themselves on agreed competence criteria and suggest related development needs.”

Trafigura (through, as I understand it, its Singapore office) signed an agreement with StepStone on 1 October 2008. The plan at that stage was to go live with the core modules in January 2009, the training and development module (i.e. the “Development Management” module mentioned in paragraph 48 above) in February 2009 and the performance management module in July 2009. In November 2008 it was agreed that the system would be known within Trafigura as “TrafiTalent”.

In March 2009, Ms Denise Timns (“Miss Timns”) joined Trafigura as group learning and development manager in its human resources department. She found that group learning and development (“Group L&D”) was pursuing a myriad of projects and concluded that she needed to re-think and re-prioritise the projects.

When Ms Timns joined Trafigura, the project team had agreed the core modules and overseen the migration of some data onto TrafiTalent. However, the data migration process was not yet complete and a number of technical issues relating to basic functionality of the system remained to be resolved. Work had begun on the development of the training and development module, but it was far from complete.

Mr Wainwright was TrafiTalent’s project sponsor at board level. His involvement was, however, high level. On a day-to-day basis, the project was run by Ms Timns and Ms Sarah Attwell-Griffiths (“Ms Attwell-Griffiths”) or, later, Ms Stephanie Peskett (“Ms Peskett”).

On 24 March 2009 Ms Timns emailed Mr Looney to suggest a meeting to ensure that management development initiatives being undertaken by Group L&D or elsewhere within Trafigura did not overlap or conflict with the KLA Program. A meeting between the two took place on 31 March. In the course of that meeting, Ms Timns described the different management training programmes underway within Trafigura. She also discussed (in broad terms) the projects she was proposing to prioritise. As part of this discussion, Ms Timns told Mr Looney that Group L&D intended to implement an online performance management system to include the introduction of a review form for all back and mid office staff globally. She also said that the project was in a pretty disastrous state at the time.

Miss Timns’ evidence about this meeting is corroborated by notes which Mr Looney made for himself at the time. These include:

“‘Trafi-talent’ – incl. perf. mgt. system”

Following the meeting, Mr Looney sent Mr Wainwright an email which included “Trafi Talent” in a list of “Global L & O D Initiatives planned/underway”. A week or so later, Ms Timns forwarded to Mr Looney a copy of a note she had sent Mr Wainwright identifying as a “key” priority “Performance Management Review Process / Skills & TraFiTalent PM module”. The note explained:

“TraFiTalent is a major systems implementation and so far has not had adequate resource available to be delivered. In addition to the systems implementation there are many aspects to the project from the business perspective e.g. process, messaging, context.

The priority phase of TraFiTalent is the Performance Review module – this needs to be delivered in three months time in order to be used for this years review cycle. The project should not just be a technical implementation. Its focus needs to be on the business processes of the reviews, any changes from previous years, clear definition of what performance management means to Traf, what is expected of managers / employees, guidance around ratings and what performance should be seen to be in order to fit within a rating etc ….”

Mr Looney explained in cross-examination that he “didn’t really pay any attention to what they were implementing and what they weren’t”, and that may well be right. It remains the case, however, that there is no question of TrafiTalent having been concealed from him.

On 8 April 2009 Ms Timns discussed with Mr Wainwright on the telephone her proposal that TrafiTalent and two other projects should be given priority. Mr Wainwright agreed.

Ms Timns met Mr Wainwright on 27 April 2009. They discussed moving Trafigura’s contractual relationship with StepStone from Trafigura’s Singapore office to London and re-negotiating the contract terms and pricing to reflect the new emphasis on the performance management module and delayed roll out of the training and development management module. There was also discussion of the need to have a simple performance review form on the system for all regions of the back and mid office to use and, at a high level, the steps that should be taken to move from Trafigura’s existing system of performance review to the new online system provided by TrafiTalent.

Ms Timns and Ms Attwell-Griffiths decided that they needed to “close out” the old system of performance review before staff were moved onto the online system. There were to be three workshops with senior managers to help Ms Timns and Ms Attwell-Griffiths understand what information managers wanted to be captured on the close-out form, the new online performance review form and the new performance management process.

On 26 May 2009 Ms Timns and Ms Attwell-Griffiths ran the first such workshop, with managers and heads of office from Singapore, Shanghai, Athens, Amsterdam and London. It was not a success. When giving oral evidence, Ms Timns described the workshop as a “very unpleasant experience” and said that she had been quite emotional after it. Following the workshop, Miss Timns commented in an email to Mr Smallbone, “Initial feedback has been that it was a waste of time”. A tidied-up version of the email that was subsequently sent to Mr Wainwright said, “Initial feedback verbally has been that the session today was not a good use of the participants’ time”.

One of the lessons drawn from the first workshop was that the project would not readily be accepted if presented by the human resources department. The second and third workshops, held on 27 and 28 May 2009, were thus led by Mr Torrance and Mr Matthew Botell, Trafigura’s chief operating officer of non-ferrous.

Following the workshops, Ms Timns and Ms Attwell-Griffiths developed a “close-out” form. In conjunction with Ms Peskett, who joined the Trafigura team at the end of May 2009, Ms Timns also finalised the annual performance management cycle which TrafiTalent was to deliver. This was to involve an interim review after six months and a final review at the end of the year. At an earlier stage, there had been reference to “90-day plans”, but it came to be decided that there should be half-yearly reviews instead.

During July 2009, after a meeting attended by Ms Timns and Ms Peskett from Trafigura and representatives of StepStone, StepStone provided Trafigura with a “functional specification” for the performance management module. This sought to refine exactly what StepStone was to provide. When asked about the functional specification during her evidence, Ms Timns explained:

“When developing each of the modules for Stepstone, you have to sit down with a project team from Stepstone and go through exactly every single screen, every single point, every single question, every single word to decide how you actually want it to look, and then they will go away and configure it for you on that basis.”

The functional specification recorded that, whereas existing software had buttons for “Draft”, “Approved”, “Review”, “Evaluate” and “Complete”, Trafigura wanted buttons for “Draft”, “Approved”, “Interim Review (6 Months”, “Final Review” and “Complete” (so the third and fourth buttons were to be changed). Another innovation was the introduction of a button to notify managers when a direct report entered a new objective or updated existing objectives. Overall, the alterations to what StepStone provided as standard were, as I see it, relatively limited.

On 27 July 2009 Mr Wainwright sent an email to senior managers stating that TrafiTalent would be formally launched on 14 September and that “every manager and employee in scope (that is all Trafigura staff excluding Traders)” would attend “a short introductory workshop”. Mr Wainwright explained that he wanted “to see that every session is opened by a senior manager for the region”. The email had been drafted for Mr Wainwright by Ms Timns.

The workshops were held from mid-September. As Mr Wainwright had wanted, sessions were opened by senior managers. In some cases, the relevant managers were also KLA Attendees. In other cases, that was not so.

In advance of the third KLA Program offsite, which was to start on 16 October 2009, Mr Smallbone offered Mr Looney a “walk through” of TrafiTalent. On 9 October, Mr Smallbone sent Mr Wainwright an email about this. Headed “TrafiTalent and the KLA Programme”, it read:

“Can we discuss with Denise [Timns] next week by VC [i.e. video conference]/when you are in London prior to the off-site as I know this topic will come up. I want to establish with you an agreed way forward on this as we need KLA participants to put their objectives into TrafiTalent.

Kieran [Looney] has yet to see TrafiTalent but is quite negative about the objective setting process. In some respects he is right in that we need to look at how we integrate the 2 but in my opinion he clearly wants to develop his relationship with us and it is in his interests to criticise TrafiTalent. I have offered to have a walk through with him and Denise on Monday as I want him to make an informed comment on the system.”

In the correspondence which followed, Mr Wainwright said that he did “not want KLA involved in Trafitalent” as it was “none of his business, and do not want hassle”. In response to a further query from Mr Smallbone, Mr Wainwright said that he did “[n]ot particularly” want Mr Smallbone to do the walk through with Mr Looney. By this stage, of course, Mr Wainwright was thinking of exercising the early termination provision.

Nevertheless, Mr Smallbone and Ms Timns in fact gave Mr Looney what was described as a “helicopter view” of TrafiTalent in a meeting lasting about 45 minutes on 12 October 2009. Mr Smallbone and Ms Timns each said, and I accept, that Mr Looney was given a visual demonstration of TrafiTalent, using Ms Timns’ TrafiTalent account as an example. In the course of this, Mr Looney was shown key screens on the training and development management and performance management modules of TrafiTalent, including Ms Timns’ performance plan and objectives. Mr Looney was also shown a copy of the annual performance management cycle that had been developed by Ms Timns, Ms Attwell-Griffiths and Ms Peskett.

TrafiTalent has been in use within Trafigura since late 2009. It costs, I gather, of the order of £100,000 a year.

In cross-examination, Mr Looney spoke of TrafiTalent in favourable terms. He said, for example:

“Trafitalent … is very organised, … very specific, very focused. It’s a series of steps organised in a particular way, ‘Draft’, ‘Approved’, ‘Interim review’, ‘Final review’, ‘Complete’. So that is a series of stages and behind each of those stages is an emphasis, is some communication. So it’s a series of steps that someone needs [to] follow. It’s hard to get lost in something like this.”

Mr Looney went on to say, in a passage going to the heart of his case:

“[I]f by purchasing my programme, my product, if I was able to educate them as to actually the fact that they had something sitting on the shelf all along that they could take advantage of now, and end my contract, frankly … what chance do I have as an entrepreneur going into a company, whether it's BP, whether it's Citigroup or whether it's Trafigura, presenting my wares so to speak, opening it up, introducing my methodology, what is to stop any other company going: actually we have something up here on the shelf already and it's not that different; why don't we just modify it and then actually we don't even need the rest of this programme. There is nothing to stop them.”

Witnesses who gave evidence on behalf of Trafigura explained that they saw TrafiTalent as quite distinct from the KLA Program. Mr Lorinet, for example, said that Mr Looney’s “suggestion that TrafiTalent competes with the KLA Program, or that we somehow modified TrafiTalent in light of what we learned from him, is ludicrous”. Mr Wainwright said:

“TrafiTalent was developed completely independently of the KLA Program, by a team which was uninvolved with Kieran [Looney]. The only similarity between the KLA Program and TrafiTalent is the use of objectives.”

Mr Smallbone said:

“… TrafiTalent and KLA were separate streams of work carried out and developed entirely independently of one another at Trafigura.”

For her part, Ms Timns gave evidence to the effect that the KLA Program had no impact on the development of the performance management module on TrafiTalent or any of the modifications and reconfigurations made to the software system on which TrafiTalent is based under her watch. More specifically, she said that no reference was made to Mr Looney, the KLA Program or the KLA templates when devising the performance rating system for the new online performance review form on TrafiTalent or any other feature or part of the performance review module on TrafiTalent. She said, too, that there was no input from Mr Looney on the development or design of the close-out form. As far as Ms Timns was concerned, the KLA Program was “a leadership development piece for high level leaders in the organisation carried out entirely separately from the TrafiTalent work stream and unconnected to it”.

Ms Timns explained that she was not herself an Attendee and that she had not seen the Black Book until the trial. It was also Ms Timns’ recollection that neither she nor anyone else involved in the development of TrafiTalent had seen any KLA templates until late in the day. She thought that Mr Smallbone had sent her his scorecard and 90-day plan in August 2009.

While not suggesting that Ms Timns had intended to be anything other than truthful in her evidence, Mr Collings submitted that the human resources department had had more access to KLA Program materials than Ms Timns remembered. The evidence bears out this suggestion. The clearest example is to be found in a message that Ms Attwell-Griffiths sent to Ms Timns on 26 May 2009, in which she attributed a use of the words “hot button” to “Kieran’s form” and said that they were to be found in the “table beneath ‘radiates sharpness’”. It also seems likely that the (later abandoned) reference to “90-day plans” when the annual performance management cycle was being drafted (see paragraph 63 above) was influenced by Mr Looney’s use of the term.

Mr Wainwright was given a demonstration of the structure of the training and development management module in March 2009. That apart, neither he nor Mr Lorinet saw TrafiTalent until it was launched in the middle of September. Mr Lorinet had no involvement with the TrafiTalent project at all. For his part, Mr Wainwright knew what was happening in general terms, but he was not involved in the detail or in the design of TrafiTalent.

It is Mr Looney’s case that Trafigura was not entitled to exercise clause 1.10 (the early termination provision, set out in paragraph 11 above) and that, by purporting to do so, it repudiated its contract with him. Mr Matthew Collings QC, who appears with Mr Philip Roberts for Mr Looney, argued that, construed objectively in the context of the agreement as a whole and against the relevant background, clause 1.10 did not entitle Trafigura to terminate its contract with Mr Looney whatever the circumstances and whatever its reasons. The construction of a contract (including the implication of terms) involves, said Mr Collings, ascertaining what a reasonable person would have understood the parties to have meant. In the present case, a reasonable person would not have thought that Trafigura was to have “carte blanche”. Had it been the case that the KLA Program had become inappropriate because Trafigura was undergoing reorganisation, there would have been a valid reason for terminating. There would also have been a proper and reasonable basis for termination if “the KLA Program was not working or delivering because Trafigura could not deliver the resources necessary to make it work”. On the other hand, Trafigura was not entitled to terminate irrationally (though Mr Collings did not suggest that it had done so). Nor – more relevantly – was Trafigura entitled to exercise the termination provision in circumstances where Mr Looney’s ideas and methodology had migrated into TrafiTalent. The clause could, Mr Collings argued, be operated only on “proper and reasonable grounds” (to quote from the particulars of claim) or in “proper and reasonable commercial circumstances” (to quote from Mr Collings’ opening submissions).

The skeleton argument served on Mr Looney’s behalf before the trial argued that clause 1.10 was not operative “in circumstances … where Trafigura secretly developed TrafiTalent to become a performance management system by drawing heavily on the KLA program, and then purportedly terminated the Agreement because it perceived that it had got what it needed without having to pay the full price for it”. In his closing submissions, Mr Collings made it clear that he was not alleging a conspiracy or that Mr Looney’s ideas and methodology had migrated into TrafiTalent pursuant to any conscious decision. He also accepted that the fact that (as he alleged) the development of TrafiTalent had been influenced by the KLA Program did not mean that Trafigura had committed any legal wrong up to (say) the end of September 2009. What it did mean, he submitted, was that Trafigura could not operate the early termination provision; the reasonable person would, he argued, say that termination was not permissible in such circumstances.

I should perhaps add that, in the past, Mr Looney advanced an alternative case that Trafigura was in repudiatory breach of contract prior to its purported exercise of the termination provision. In this regard, it was alleged in the skeleton argument on behalf of Mr Looney that “Trafigura’s secret development of TrafiTalent by reference to the KLA Program, and in having no intention of fulfilling its part of the 3 year contract, amount to repudiatory breach”. However, this way of putting the case was not pursued in closing submissions.

Trafigura’s case is that it was entitled to exercise the early termination provision as it did. Mr Guy Morpuss QC, who appears with Mr Andrew Lykiardopoulos for Trafigura, submitted that clause 1.10 meant what it said and was not subject to any reasonableness requirement. There would, Mr Morpuss argued, have to be exceptional circumstances for such a requirement to be read into a “simple break clause” (as he described clause 1.10), and no such circumstances existed. In any case, Trafigura had proper and reasonable grounds for invoking the termination provision: according to Mr Morpuss, Mr Wainwright and Mr Lorinet:

“reasonably concluded that it was not in Trafigura’s interests to continue with the KLA programme, because: (i) it was becoming repetitive; (ii) Mr Looney was not easy to work with; (iii) the endless battles about intellectual property rights were wearing and time consuming; (iv) the programme was not as well-prepared as they had expected; (v) continuing the programme for a further two years would be very expensive; and (vi) the majority of the board remained unconvinced of the benefits of the programme”.

As for migration from the KLA Program to TrafiTalent, Mr Morpuss denied that there had been any of any significance. If those on the KLA Program had had their thinking sharpened by Mr Looney’s teaching, that was unsurprising and unexceptionable. In no other way, Mr Morpuss maintained, had there been any migration.

There is little or no dispute between the parties as to the relevant legal principles.

Mr Looney’s skeleton argument took as its starting-point the well known decision of the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. Summarising the principles by which contractual documents are nowadays construed, Lord Hoffmann there said (at 912-913):

“(1)

Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having 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 ....

(4)

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax ....

(5)

The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201:

‘if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense’ ....”

In Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988, the Privy Council explained that the implication of terms was similarly concerned with what the instrument, read against the relevant background, would reasonably be understood to mean. Lord Hoffmann, delivering the judgment of the Board, said:

“17

The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so ....

18

In some cases, however, the reasonable addressee would understand the instrument to mean something else. He would consider that the only meaning consistent with the other provisions of the instrument, read against the relevant background, is that something is to happen. The event in question is to affect the rights of the parties. The instrument may not have expressly said so, but this is what it must mean. In such a case, it is said that the court implies a term as to what will happen if the event in question occurs. But the implication of the term is not an addition to the instrument. It only spells out what the instrument means.”

A term will not be implied merely because it would be reasonable. In Belize, Lord Hoffmann said (in paragraph 22):

“ ... it is not enough for a court to consider that the implied term expresses what it would have been reasonable for the parties to agree to. It must be satisfied that it is what the contract actually means.”

In Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc [2009] EWCA Civ 531, [2009] 2 Lloyd’s Rep 639, Lord Clarke MR said (in paragraph 15):

“as I read Lord Hoffmann's analysis, although he is emphasising that the process of implication is part of the process of construction of the contract, he is not in any way resiling from the often stated proposition that it must be necessary to imply the proposed term. It is never sufficient that it should be reasonable.”

The present case concerns a termination clause. The parties to a contract “may expressly provide in their contract that either or one of them is to have an option to terminate the contract”, and the right of termination “may be exercisable upon a breach of contract by the other party (whether or not the breach would amount to a repudiation of the contract), or upon the occurrence or non-occurrence of a specified event other than breach, or simply at the will of the party upon whom the right is conferred” (Chitty on Contracts, paragraph 22-048).

However, in Dominion Corporate Trustees Ltd v Debenhams Properties Ltd [2010] EWHC 1193 (Ch), a case on which Mr Collings placed some emphasis, a termination provision was construed restrictively. The clause in question (clause 19) entitled a party to a contract to terminate it if the other party “in any respect” failed or neglected to observe or perform any of the provisions of the contract. Kitchin J observed (in paragraph 29) that:

“stripped of their context and the relevant background, the words of clause 19 may be understood to mean that either party may terminate the Agreement if the other party fails or neglects to perform any provision of the Agreement in any respect, however minor the provision and however insignificant the failure or neglect may be.”

Kitchin J nevertheless concluded that a breach of contract would not give the other party a right to terminate unless it amounted to a repudiatory breach. He considered that the rival construction “flouts business commonsense”, and he noted (in paragraph 23) that:

“the courts have shown some reluctance to interpret a termination clause in a complex contract containing many innominate terms as providing a party with the right to terminate for any breach, however minor.”

I have concluded that there was no relevant restriction on Trafigura’s ability to terminate the contract under clause 1.10. In particular, I have not been persuaded that Trafigura was entitled to terminate the contract only on “proper and reasonable grounds” or in “proper and reasonable commercial circumstances”.

My reasons include these:

In the circumstances, Trafigura was, in my judgment, entitled to bring its contract with Mr Looney to an end pursuant to clause 1.10.

My conclusions on the construction of clause 1.10 are of themselves fatal to Mr Looney’s claim. I shall nevertheless make some brief comments on why Trafigura operated clause 1.10.

I have referred above (paragraph 45) to the explanations which Mr Wainwright and Mr Lorinet gave for deciding to terminate the contract with Mr Looney. I accept that the decision was taken for the reasons Mr Wainwright and Mr Lorinet gave.

Someone else might possibly have chosen not to exercise the right to terminate. It is no part of Trafigura’s case that the services Mr Looney provided were of no value, and there were some who were enthusiastic about the KLA Program (see paragraph 41 above). To say, however, that Trafigura might reasonably have elected to continue with the contract is by no means to say that it was unreasonable for Trafigura to terminate it. To the contrary, I can well understand why Trafigura elected to invoke clause 1.10. In my judgment, there were reasonable and proper grounds for doing so.

With regard to TrafiTalent, Trafigura was interested in acquiring what was to become TrafiTalent before it was even aware of Mr Looney, and it did not enter into any contract for the provision of the KLA Program until several months after it had contracted to buy TrafiTalent. TrafiTalent and the KLA Program were, moreover, fully capable of co-existing. Trafigura’s contract with Mr Looney allowed for no more than 25 Attendees; there was a need to cater for Trafigura’s hundreds of other employees. Further, I do not consider that the KLA Program had any significant impact on the development of TrafiTalent. When asked to identify features of TrafiTalent which originated in the KLA Program, Mr Collings referred to the change in the review process reflected in the buttons mentioned in the first sentence of paragraph 65 above, but I have not been persuaded that this alteration can be traced back to the KLA Program. It may well be that the KLA Program had an influence on how participants approached objective-setting, but I agree with Mr Morpuss that that is unexceptionable; after all, Trafigura paid £3 million (£4 million if the termination fee is included) for participants to be trained by Mr Looney. It is important to note, too, that it is not alleged that there was any conspiracy, that Mr Looney’s ideas and methodology migrated into TrafiTalent pursuant to any conscious decision or that Trafigura had committed any legal wrong up to (say) the end of September 2009 (see paragraph 80 above). Finally, TrafiTalent had, in my judgment, no bearing on Trafigura’s decision to terminate its contract with Mr Looney.

I shall dismiss the claim.