Royal Courts of Justice
Strand
London WC2A 2LL
BEFORE:
MR JUSTICE PENRY-DAVEY
BETWEEN:
MR S KHATRI
Claimant
- and -
CO-OPERATIVE CENTRALE RAIFFEISEN - BOERENLEENBANK BA
Defendant
Digital Transcript of Wordwave International, a Merrill Communications Company
101 Finsbury Pavement London EC2A 1ER
Tel No: 020 7422 6131 Fax No: 020 7422 6134
Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com
(Official Shorthand Writers to the Court)
MR JAMES GOUDIE QC (instructed by Gannons Solicitors) appeared on behalf of the Claimant
MR D CRAIG (instructed by Allen & Overy LLP) appeared on behalf of the Defendant
Judgment
MR JUSTICE PENRY-DAVEY: The claimant was employed by the defendant bank as a derivatives trader from May 1998 until 13 January 2009. By his contract of employment he was entitled to a performance-related bonus. It is in respect of that bonus, calculated at approximately €1.6 million, that this application is made.
The claimant seeks summary judgment on the basis that the defendant has no real prospect of defending the claim. The defendant submits that this is not an appropriate case for summary judgment and that he has a real prospect of successfully defending the claim. Additionally, there are factual disputes between the parties that cannot be resolved on a summary judgment application.
The issue, as I have indicated, is whether the claimant is entitled to be paid the bonus in respect of his employment in 2008. He says he is; the defendant disputes it.
He commenced employment in June 1998, his contract providing that he would participate in the defendant’s annual discretionary bonus scheme. By letter dated 18 March 2008 that contract was varied in that his basic salary was increased to £100,000, he was awarded a guaranteed bonus of £50,000 and became eligible to receive a performance-related bonus, set out in the following terms, and I refer to page 30 of the bundle of documents:
:
“You will also be eligible to receive a performance-related bonus from the bank, subject to your individual revenue generation. Any payment due will be made at the time the bank makes its annual performance bonus payment, but in any event no later than 31st March in the year following the performance year for which you are being awarded, i.e. 31st March 2009 in respect of 2008.
The formula used to calculate the bonus due to you will be as follows and will be calculated for 2008. [It is not necessary to set out the formula in detail, but it goes on] The above table is applicable to your 2008 bonus. The bank maintains the right to review or remove this formula-linked bonus arrangement at any time.”
The claimant’s case is that the express contractual provision that he would receive performance-related bonus for 2008 in accordance with that table is clear and unqualified, subject only to his individual performance threshold being reached (as it is accepted it was in 2008) and the bank’s bonus deferral arrangements which it is conceded are not relevant to this claim.
In July 2008 the claimant was notified that he was at risk of redundancy, but the suggestion was withdrawn by letter on 23 July. The letter (at page 33 of the bundle) is in these terms:
“I write further to our recent meetings of 21st and 22nd July, at which you were advised that your position was at risk of redundancy. The bank can now confirm that the selection process is now complete. As a result I can advise that you are no longer at risk of redundancy. I can also confirm that you have been successfully redeployed as a trader within the Global Financial Markets, Position Management, Interest Rate Derivatives Desk.
A further letter detailing the amended terms and conditions of your employment which will apply to your change in role will follow.
The first three months from today’s date will be regarded as a trial period for your new role. This will provide an opportunity for the bank and yourself to assess your suitability for the role. Once the trial period has been completed successfully your appointment would be confirmed. Should your trial period not be successful, the bank will offer you redundancy terms on a without prejudice basis, subject to the signing of a settlement and compromise agreement. If you have any questions please do not hesitate to contact me.”
That was followed by a letter the following day (page 34 onwards of the bundle). It reads materially as follows:
“Further to your recent meetings with Henk Rozendaal and Julie Fitzgerald, I am writing detailed amendments to your original contract of employment, dated 29 May 1998 following your successful appointment as trader within the Global Financial Markets, Position Management, Interest Rate Derivatives Desk.”
It then goes on to set out the status and duties in the numbered paragraph 1:
“[In relation to remuneration guaranteed bonus] The terms relating to the guaranteed bonus attributable to the 2008 calendar year continue to apply, as per the letter dated 18 March 2008.
[For a discretionary bonus] For future calendar years you will also be eligible to participate in the bank’s annual discretionary performance-related bonus scheme. This scheme will vary from year to year. Bonuses which are made entirely at the discretion of the bank on the basis of a number of factors including your individual performance, the performance of the business area in which you work and the performance of the bank.
The bank may also take into account your strategic importance and the need to retain your future services in deciding the level of any bonus. Any bonus may be subject to partial deferral, in accordance with the bank’s deferral policy in operation at the time of each payment.
The bank reserves the right to vary or withdraw its discretionary performance-related bonus scheme at any time in its complete discretion. Payment of a bonus in any year does not guarantee payment of a bonus in subsequent years. Any bonus payment is usually paid in the March following the end of the relevant calendar year. You must be employed on the bonus payment date and not under notice of termination, given or received, or subject to disciplinary sanction, to receive a bonus payment.
For clarification please note that following the closure of the London desk the formula-driven bonus relating to the desk will cease with immediate effect and you will be eligible to participate in the discretionary bonus for 2008.”
That letter is considerably longer than the passage that I have read out, but it concludes:
“I should be grateful if you would sign below to indicate your acceptance of this offer. Should you have any questions then please do not hesitate to contact me.”
There is an area for signing and dating which follows the signature of Kate Richardson ..
The claimant was invited to sign the letter but he did not do so. He continued, however, to work and to receive his salary. Eventually by email dated 21 October he wrote stating that following the closure of the proprietary desk he had been asked to and had continued to trade as before. His books were reporting profit of just over €1 million, with further profits anticipated. He stated that he rejected the amendment to his contract of employment proposed in the letter of 23 July and said that he had continued to work under the terms of his contract dated 18 March.
The claimant’s case is that he rejected those amendments within the three-month trial period and at the end of that period made it clear that he would not accept the redeployment.
The defendant submits that it was contractually entitled unilaterally to remove the performance-related bonus at any time, but the submission of the claimant is that the words, “at any time” relate to the years after 2008 and not to 2008 itself.
As to the question of variation, the claimant suggests that the offer documentation provided for the manner in which such could be accepted, namely by signing by the claimant. It is clear that he did not do so and he submits, therefore, that the variation was not accepted.
The claimant further submits that his continuing to work and receive a salary does not imply consent to a contractual variation (see Rigby v Ferodo (1988) ICR 29)
On the variation issue the defendant asserts that it has a good prospect of establishing that the claimant did accept the varied offer of employment by his conduct, in that he continued to work without protest or reservation of rights at the new desk, rather than at his original trading desk, which had been closed. He reported to a different individual and continued to receive his salary and benefits, paid each month. That it is suggested implies acceptance of the variation.
Part 24 of the Civil Procedure Rules provides for the granting of summary judgment only where the court considers that (1) the defendant has no real prospect of successfully defending the claim and (2) there is no other compelling reason why the claim should be disposed of at trial.
The principles relating to that exercise are well established and some were set out by Lewison J in Nigeria v Santolina Investment Corporation (2007) EWHC 437, Chancery:
1. The court must consider whether the defendant has a “realistic” as opposed to a “fanciful” prospect of success.
2 A “realistic” defence is one that carries some degree of conviction. This means a defence that is more than merely arguable.
3. In reaching its conclusion the court must not conduct a “mini-trial”.
4. This does not mean that the court must take at face value and without analysis everything that a defendant says. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents.
5. However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial.
6. Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without a fuller investigation into the facts at trial than is possible or permissible on an application for summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case.”
In addition, in relation to the court’s function in applications of this kind, Lotd Hope concisely pointed out in Three Rivers District Council v Governor and Company of the Bank of England (No 3)[2003] 2 AC 1 at page 261, that the procedure is essentially designed to deal with cases that are not fit for trial at all.
There are thus two issues, identified as the construction issue, namely the meaning of the words “at any time”, and the variation issue, that is the question of whether or not there were variations to the contract which were accepted.
As to the first issue, the conflict between the parties is stark. The claimant contends that the only conditions to which payment of the performance-related bonus by the bank to the claimant is subject are the claimant’s individual revenue generation and the bank’s bonus deferral arrangements. The bonus, it is submitted, in respect of 2008 became payable on 31 March 2009 or earlier, the table was applicable and the bonus was not limited to 2008. The claimant relies on the defendant’s e-mails of 7 March, which I have not set out in detail, referring to the claimant’s successful trading, the fact that he had been underpaid in their estimation, and that it was in the bank’s interest to retain him. It is submitted that it would be unusual, on the evidence, to negotiate a bonus structure on a year-by-year basis but usual for there to be a formula, which was then applied each year.
The defendant submits that the words “at any time” mean simply that, and there is no proper basis for departing from their plain and ordinary meaning. It is pointed out that the defendant reserved the right “to review or remove this performance-linked bonus arrangement at any time” and thus submitted that on proper construction the word “this” is clearly referable to 2008.
As to the claimant’s submission that this construction renders the clause worthless, that is disputed by the defendant on the basis that the claimant was given a performance-related bonus as he wished, albeit one that could be reviewed or removed.
The defendant equally accepts that the right to removal or review was not unfettered, in that there could not be removal that was irrational, perverse or in bad faith(see Horkulak v Cantor Fitzgerald International[2005] ICR 402). There is, however, no suggestion in this case that the removal was irrational, perverse or in bad faith.
The defendant submits that further weight is given to its construction by the fact that where the parties wanted to guarantee a particular position they did so. The claimant was guaranteed a bonus payment of £50,000 in 2008, subject to certain conditions. . Had the parties wanted to guarantee the formula bonus arrangement for the year so that it could not be reviewed or removed in respect of that year they would, the defendant submits, have been expected to do so by words such as, “except in respect of 2008”.
The defendant, if the claimant’s construction is correct, asks why the position for 2008 should be guaranteed so that it could not be reviewed or removed for that year but could for years thereafter.
If the defendant’s construction of the words is correct the claimant’s claim necessarily fails. Thus, if the defendant was entitled to review or remove the formula bonus arrangement in 2008 it clearly did so in July, and it is not suggested that it acted irrationally, perversely or in bad faith.
In relation to the construction issue, in my judgment the claimant has failed to demonstrate that the defendant has no real prospect of successfully defending the claim. There is considerable force in the submissions made on behalf of the defendant and I consider that the defendant has a realistic, as opposed to a fanciful or lesser prospect, of success on the basis that the right to remove the performance-related bonus at any time included the right to remove for 2008 and did not exclude that year..
That conclusion is sufficient on its own for the defendant to succeed and for the application for summary judgment to fail, but I should also deal with the second issue .
29 The claimant’s case is that the defendant purported unilaterally to amend his contract of employment by the letter dated 24 July which included the statement that his performance-related bonus would cease with immediate effect and be replaced for 2008 and future years with a discretionary bonus.
As I have indicated the claimant contends that he did not accept the variation, and within the three-month trial period referred to in the letter said in terms that he rejected the variation. He did not, he submits, by his conduct accept the variation because there was in the letter express provision for the way in which the offer could be accepted, namely by signing, and he did not do so.
Further, as I pointed out, he submits that his continuing to work and to receive his previous salary did not imply consent to any purported contractual variation. He says that it was understood that he had not accepted the removal of the performance-related bonus, that is was initially implicit but made explicit in his email of 21 October, expressly rejecting the trial period, the proposed contract amendment and affirming that he was working formally to his contract of 18 March 2008.
Those contentions are disputed by the defendant, who submits that there was acceptance of the variations by the claimant by his conduct in continuing to work without protest or reservation of rights, and continuing to receive his salary and benefits each month.
On this issue also I conclude that the defendant has a real prospect of success in defending the claim, but the issue of acceptance is very dependent upon the facts relating to the defendant’s conduct and activities between July and October 2008. As a very fact-sensitive issue it is not the sort of issue that can or should properly be resolved on an application for summary judgment.
Accordingly, for all the reasons that I have set out, the application for summary judgment is dismissed.