Humphreys v Norilsk Nickel International (UK) Ltd

The defendant company, Norilsk Nickel International (UK) Ltd. (“Norilsk”) is a company incorporated in England and Wales and is a subsidiary of a company incorporated in the Russian Federation called, in English, Open Joint Stock Company “Mining and Metallurgical Company Norilsk Nickel” (“the Russian Parent”). Norimet Ltd. (“Norimet”), a company also incorporated in England and Wales, is another subsidiary of the Russian Parent.

At Note 1 to the consolidated financial statements of the Russian Parent for the year ended 31 December 2008 (“the Accounts”) the principal activities of the Russian Parent and its subsidiaries were described as “exploration, extraction, refining and sale of base and precious metals”.

The claimant, Dr. David Humphreys, is an economist. For many years he has specialised in the mining industry. He studied economics and politics at the University of Wales, graduating in 1974. He then undertook doctoral studies, again at the University of Wales. He was awarded his doctorate in 1978. For the next nine years he was employed in the public service in the United Kingdom, for six of them in the British Geological Survey. Between 1986 and 2004 he was employed by Rio Tinto Plc (“Rio Tinto”). From 1996 to 2004 he was the chief economist of Rio Tinto.

Towards the end of 2003 Dr. Humphreys was approached by, or on behalf of, the Russian Parent with a view to joining the Russian Parent as chief economist. He agreed to move to the group controlled by the Russian Parent. In fact he entered into an agreement (“the Norimet Agreement”) in writing dated 10 August 2004 with Norimet under which he agreed to be employed by Norimet.

In the Norimet Agreement Norimet was called “the Company” and Dr. Humphreys was called “the Executive”. For present purposes the material terms of the Norimet Agreement were:-

“1.1

In this Agreement, unless the context otherwise requires, words and phrases the definitions of which are contained or referred to in Part XXVI of the Companies Act 1985 as amended shall have the same meanings thereby attributed to them and the following expressions shall have the following meanings:

“Board” the Board of Directors of the Company (or any director or committee of Directors duly authorised by the Board);

…

“Commencement Date” a date on or before 19 November 2004, such date to be mutually agreed by the Parties;

…

“Expiry Date” the third anniversary of the Commencement Date;

“Group Company” any company which is for the time being a subsidiary of the Company or a holding company of the Company or a subsidiary of such holding company (and “Group Companies” shall be construed accordingly);

…

2.1

The Company hereby appoints the Executive and the Executive hereby agrees to serve the Company to the best of his ability as its Chief Economist and as Chief Economist of such Group Company as the Company shall from time to time nominate and notify in writing to the Executive during the term of his engagement under this Agreement.

2.2

The Company shall employ the Executive and the Executive shall serve the Company and any applicable Group Company from the Commencement Date (and compliance with the Commencement Date is a condition of this Agreement) for a period of 3 years (subject to the provisions of clauses 3.5, 7 and 14) (“the Fixed Term”) until the Expiry Date except that either Party may terminate this Agreement by giving not less than 6 months’ written notice to the other Party to expire at any time. …

3.1

The Executive shall faithfully and diligently perform the duties of Chief Economist of the Company. The Executive hereby acknowledges and accepts that he shall be provided with a list of duties in writing from the Company which shall not be exhaustive and that he will be required to perform, in addition, such duties as are consistent with his position and exercise such powers in relation to the business of the Company and any Group Company as may from time to time be assigned to or vested in him by the Board. Such duties may relate to the Company or any Group Company and will be performed by the Executive subject to such restrictions (consistent as aforesaid) as the Board may from time to time impose.

3.2

The Executive shall report to Mr. Michael Prokhorov, the President of the Company’s parent company MMC Norilsk Nickel, when reasonably required by Mr. Prokhorov and to such other persons as directed by the Board.

…

4.1

The Company shall pay to the Executive during the term of his employment a salary at the rate of £420,000 (four hundred and twenty thousand pounds) per annum (less all appropriate deductions). Such salary shall be paid in equal monthly instalments in arrears on or before the 20 ^th day of each month and shall be subject to review by the Board (with no obligation to award an increase in salary) during the last 3 months of the Fixed Term.

…

4.3

The Company shall pay to the Executive a Performance Bonus (less all appropriate deductions) in respect of each calendar year of the Executive’s employment with the Company. Each Performance Bonus shall be payable by 28 ^th February in the following calendar year. Subject to clauses 4.4 and 4.5, for the period from the Commencement Date to 31 ^st December 2004 the amount of the Performance Bonus shall be fixed at £100,000 (one hundred thousand pounds). For the period from 1 ^st January 2007 to the Expiry Date, the Performance Bonus will be pro-rated to the number of days worked. The amount of the Performance Bonus will be assessed by Mr. Prokhorov and the Board and depending on the performance level decided upon by Mr. Prokhorov and the Board, the Executive will be entitled to the following Performance Bonus:-

Performance Level		Amount of Award in £
	Grade	2005-2006	2007
‘Unsatisfactory’ or ‘Fails to meet Expectation’	1	£0	£0
‘Satisfactory’ or ‘At Expectation, meets all agreed objectives’	2	£200,000	£139,800
‘Above Average’ or ‘Exceeding Expectation on 25% of agreed objectives’	3	£360,000	£251,640
‘Excellent’ or ‘Exceeding expectation on 50% of agreed objectives’	4	£440,000	£307,560
‘Outstanding’ or ‘Exceeding expectation on 75% of agreed objectives’	5	£520,000	£363,480
‘Superior’ or ‘Exceeding expectation on 100% of agreed objectives’	6	£600,000	£419,400

Subject to clauses 4.4 and 4.5 the amount of the Performance Bonus for the year 2005 shall not be less than £200,000 (two hundred thousand pounds); …”

Dr. Humphreys was awarded a Performance Bonus in each year of the Norimet Agreement. His performance was assessed as Grade 4 on the table set out in clause 4.3 of the Norimet Agreement in each of 2005 and 2006. In 2007 his performance was assessed as Grade 5. It was unclear exactly how the assessments were made. It seemed that there may have been “agreed objectives”, at least at some period, but, if so, what they were did not emerge.

As the termination date of the Norimet Agreement approached the question arose of Dr. Humphreys’s employment continuing for a further year. Both sides were agreeable to that course, and a second agreement (“the Norilsk Agreement”) in writing dated 19 November 2007 was made. The parties to the Norilsk Agreement were Norilsk and Dr. Humphreys.

In the Norilsk Agreement Norilsk was called “the Company” and Dr. Humphreys was called “the Executive”. The Norilsk Agreement included the following provisions which were material to the issues in this action:-

“1.1

In this Agreement, unless the context otherwise requires, words and phrases the definitions of which are contained or referred to in Part 38 of the Companies Act 2006 shall have the same meanings thereby attributed to them and the following expressions shall have the following meanings:

“Board” the Board of Directors of the Company (or any director or committee of Directors duly authorised by the Board);

…

“Commencement Date” the date hereof;

…

“Expiry Date” 31 December 2008;

“Group Company” any company which is for the time being a subsidiary of the Company or a holding company of the Company or any subsidiary of such holding company (and “Group Companies” shall be construed accordingly);

…

2.1

The Company hereby appoints the Executive and the Executive hereby agrees to serve the Company to the best of his ability as its Chief Economist and as Chief Economist of such Group Company as the Company shall from time to time nominate and notify in writing to the Executive during the term of his engagement under this Agreement.

2.2

The Company shall employ the Executive and the Executive shall serve the Company and any applicable Group Company from the Commencement Date (subject to the provisions of clauses 3.5 and 13) until the Expiry Date (“the Fixed Term”). The Executive’s employment with the Company shall terminate instantly and without further notice being given by the Company on the Expiry Date. …

3.1

The Executive shall faithfully and diligently perform the duties of Chief Economist of the Company. The Executive [sic] non-exhaustive duties are set out at Appendix 1 to this Agreement. The duties contained in Appendix 1 are consistent with the Executive’s position and the Executive shall exercise such powers in relation to the business of the Company and any Group Company as may from time to time be assigned to or vested in him by the Board. Such duties may relate to the Company or any Group Company and will be performed by the Executive subject to such restrictions (consistent as aforesaid) as the Board may from time to time impose.

3.2

The Executive shall report to such persons as directed by the Management Board of OJSC MMC “Norilsk Nickel” [ie, the Russian Parent] (“the Management Board”).

…

4.1

The Company shall pay to the Executive during the term of his employment a salary at the rate of £462,000 per annum (less all appropriate deductions). Such salary shall be paid in equal monthly instalments in arrears on or before the 20 ^th day of each month and shall be subject to review by the Board (with no obligation to award an increase in salary) during the last 3 months of the Fixed Term.

4.2

The Company shall pay to the Executive a Performance Bonus (less all appropriate deductions) for 2008. The Performance Bonus shall be payable by 28 ^th February 2009 (the “Performance Bonus Payment Date”). The amount of the Performance Bonus will be assessed by the Management Board and depending on the performance level decided upon by the Management Board, the Executive will be entitled to the following Performance Bonus:-

Performance Level		Amount of Award in £
	Grade
‘Unsatisfactory’ or ‘Fails to meet Expectation’	1	£0
‘Satisfactory’, or ‘At Expectation, meets all agreed objectives’	2	£220,000
‘Above Average’, or ‘Exceeding Expectation on 25% of agreed objectives’	3	£396,000
‘Excellent’ or ‘Exceeding expectation on 50% of agreed objectives’	4	£484,000
‘Outstanding’ or ‘Exceeding expectation on 75% of agreed objectives’	5	£572,000
‘Superior’ or ‘Exceeding expectation on 100% of agreed objectives’	6	£660,000

There were no “agreed objectives” for the purposes of clause 4.2 of the Norilsk Agreement.

Appendix 1 to the Norilsk Agreement was in these terms:-

“The Executive shall:

(i)

Provide regular briefings to the Management Board on the economic and market outlook;

(ii)

Supply price forecasts for planning and budgeting purposes, with supporting analysis;

(iii)

Research and issue long run prices and exchange rates for use in investment analysis;

(iv)

Initiate and direct research on relevant industry issues (e.g. resources, costs, structures);

(v)

Provide support to the rest of Strategy Group in relation to investment projects;

(vi)

Generate and research ideas for value-creating opportunities inside and outside Russia;

(vii)

Contribute to internal debate on strategic development of the company;

(viii)

Provide timely advice on economic and industry questions, as required, to other HQ functions, including Finance, Marketing, Business Development and Investor Relations;

(ix)

Manage and motivate Economics Department and effectively manage its budget;

(x)

Assess and procure external research and data in co-ordination with HQ departments;

(xi)

Develop and maintain close relations with external organisations in support of the department’s analytical activities, e.g. industry associations and consultants;

(xii)

Maintain dialogue on commodity and industry matters with investing community and press in London, in consultation with Investor and Public Relations departments;

(xiii)

Provide input to corporate presentations and publications, as required; and

(xiv)

Promote the profile and reputation of the company and build corporate contacts by attending and making presentations at professional and industry meetings.”

Norilsk did not pay Dr. Humphreys a Performance Bonus pursuant to the terms of clause 4.2 of the Norilsk Agreement. In this action Dr. Humphreys alleged that Norilsk was in breach of the Norilsk Agreement by not paying him a bonus. He claimed that he was entitled to payment of an amount of £572,000.

Before coming to precisely how the case for Dr. Humphreys was put it is convenient to notice such relevant correspondence as there was between Dr. Humphreys, or his solicitors, Charles Russell LLP (“Russell”), and the Russian Parent, or Norilsk’s solicitors, Salans LLP (“Salans”), before Dr. Humphreys was told that his performance in the calendar year 2008 was assessed at Grade 1, so that no bonus was payable.

As the time of the departure of Dr. Humphreys from Norilsk approached Mr. Denis Morozov, who had been the General (that is, Managing) Director of the Russian Parent, sent him an e-mail in which he said:-

“I have very mixed feelings about the news that you are leaving Norilsk. On the one hand I am convinced that your departure is a big loss for the Company, but on the other hand I can understand how difficult it was for you working in such an environment during last months.

Nevertheless, I want personally to thank you for the work you have done and your support during the days we were working together. Let me wish you good luck and let’s stay in touch. Also please accept my warmest greetings with the upcoming Christmas and the New Year.”

Having heard nothing from Norilsk about any bonus, Dr. Humphreys sent an e-mail dated 27 February 2009 to Mr. Kirill Parinov, Head of Corporate, Proprietary and Legal Issues:-

“You will recall that I communicated to the management of Norilsk Nickel in December last year the details of my work activities during 2008 to assist with the determination of my bonus for that year.

Under the terms of my contract, paragraph 4.2, this bonus is payable “by 28 ^th February 2009”.

I should be grateful for an early indication of what has been decided regarding my bonus and when I might expect it to be paid.”

Mr. Parinov replied the same day, also by e-mail:-

“I will review the situation and come back.”

Having heard nothing, Dr. Humphreys sent a further e-mail to Mr. Parinov on 30 March 2009:-

“Is there any progress to report on this matter?

A month has now passed since the bonus was due to be paid.”

Again Mr. Parinov replied promptly, the same day:-

“David, many thanks. I believe it is a topic for Mr. Matvienko. I will speak with him today.”

Mr. Matvienko was, by that time, the Deputy General Director of the Russian Parent.

After another couple of weeks without any news, Dr. Humphreys sent yet a further e-mail to Mr. Parinov on 14 April 2009:-

“Despite your assurances that it is under consideration, I have had nothing back from the company on this matter. This is the fourth time I have been obliged to make contact regarding my bonus and payment is now a month and a half overdue.

When my initial contract ended late in 2007, I agreed to stay on at Norilsk Nickel to the end of 2008 at the specific request of the General Director and on terms agreed with him directly and incorporated into my contract.

Unless I see some action on the matter before the end of the month, I propose taking legal action on how to progress things.”

As usual, Mr. Parinov replied by e-mail the same day:-

“David, many thanks. I would like to emphasize again that this is not the matter within my jurisdiction. I include Mr. Matvienko in this email. Please deal with him on this matter.”

Having received that e-mail, Dr. Humphreys sent an e-mail, also on 14 April 2009, to Mr. Matvienko:-

“I regret having to address you on this matter without having had the opportunity to meet but Norilsk Nickel is in default of certain legal undertakings made with me and Mr. Parinov informs me that this matter comes within your jurisdiction.

Mr. Parinov is in possession of all the documentation relevant to this case but the simple facts are these.

I had a three-year contract with Norilsk Nickel which expired in November 2007. This contract was made under UK law.

At the specific request of the General-Director, Denis Morozov, I agreed to extend my contract to the end of 2008.

This contract included provision for a bonus for 2008 to be paid before the end of February 2009.

The bonus was due to be paid without regard to whether or not I was still in the employment of the company.

I fulfilled my side of the agreement to the best of my abilities. My past bonus awards attest to the high level of my performance.

Norilsk Nickel have held me to the terms of my contract, denying me the opportunity to work for a competitor in the three months following my departure.

Since the payment of this bonus is now a month and a half overdue, I should be grateful if you could authorise a quick resolution of this matter. I do not want to have to go to law to settle it, but am prepared to do so should that become necessary.”

The next communication which Dr. Humphreys received from the Russian Parent was from Mr. Vladimir Zhivoy, Director of the International Corporate Governance Department. In an e-mail sent on 27 April 2009 Mr. Zhivoy wrote:-

“I’m writing you at the instance of Mr. Kirill Parinov to inform you that the issue concerning the bonus payments for the year 2008 was transferred for approval to Mr. Matvienko and in a few days he will contact you to discuss the matter in-depth.

In the meanwhile, I kindly ask you to provide me with a copy of your advice and presentation on the middle- and long-term economic development of nickel market, that you’ve prepared for the Meeting of the Management Board of MMC Norilsk Nickel held on 26-th of April, 2007 as well as your proposals for use of forward-looking projections on prices of nonferrous and precious metals for budgeting, financing of investment projects and acquisition of assets (the relevant request was made during the said meeting of Management board).

I clearly understand that currently you are not employed by Norilsk Nickel, but I will highly appreciate your assistance.”

Dr. Humphreys replied by e-mail the same day, attaching the documents requested. Apart from commenting on the documents attached, he said, “I look forward to talking with Mr. Matvienko on the subject of my bonus soon.”

Further lack of action prompted Dr. Humphreys to instruct Russell. Russell wrote a letter dated 19 May 2009 to Mr. Matvienko on behalf of Dr. Humphreys. The letter concluded:-

“Our client has been more than patient in the circumstances in waiting for payment of his bonus for this long. We therefore await your confirmation by the end of the working month (i.e. by close of business on Friday 29 May 2009) that our client will receive his bonus within 14 days from today’s date. If we do not receive such confirmation from you by this time, we shall be advising our client on his options for enforcing payment of his bonus through the High Court.”

There was no response to that letter. Russell sent a chasing letter dated 3 June 2009. Following continued silence Russell sent a further chasing letter dated 16 July 2009. That drew forth a reply from Salans dated 22 July 2009. The material part of that letter was in these terms:-

“Turning to the substance of this case, your client’s entitlement to a bonus under Clause 4.2 of the contract is not, as you suggest in your letter of 19 May 2009, unconditional and absolute. The award of any bonus is expressly conditional on the assessment of the Management Board, and dependent on the performance level decided upon by the Board. Clause 4.2 specifically provides for the possibility that your client will not be entitled to any bonus whatsoever if his performance is judged to be “unsatisfactory” or “fails to meet expectation”.

We have been instructed that when the market was buoyant your client, unsurprisingly, was able to predict relatively safely that the price of nickel would rise. In effect, he was doing little other than following the market trends when making his forecasts. However, once the economic landscape changed your client’s performance was not that of the leading-edge, incisive economist that in an easier climate he had appeared to be. Your client’s forecasts of nickel were more than 50% off the actual price in the last quarter of 2008. Whilst your client’s predictions were often supported by other economists, for example Ernst & Young, being as wrong as everyone else does not justify a performance bonus. Therefore the reasonable decision was made, taking into account all factors including the effect of your client’s advice on the strategy of the Company, that your client’s performance was unsatisfactory and fell within Level 1.

The fact that your client submitted “a more detailed summary of his activities” (as stated in the draft Particulars of Claim) than he had in 2007 is, with respect, of no consequence. The bonus was not awarded on the level of effort that went into compiling the summary, but on the performance level of your client throughout the year 2008.

It is therefore denied that your client is entitled to a bonus at Level 5. As stated above, your client’s performance was assessed as Level 1, and accordingly no payment is due.”

This action was commenced by a claim form issued on 3 September 2009. Particulars of Claim were served with the claim form. In the conventional way the Particulars of Claim set out descriptions of the parties and the material terms of the Norilsk Agreement. The remainder of the Particulars of Claim was set out beneath the rubric “Termination of Agreement”. In that section of the Particulars of Claim the date of the expiration of the Norilsk Agreement was pleaded, and then followed this:-

“6.

Two weeks previously, on 16 December 2008, the Claimant sent Mr. Sergey Batekin (the Deputy Chairman of the Management Board), Mr. Oleg Lobanov (Deputy General Director for Economy and Finance) and Mr. Kirill Parinov (Deputy General Director for Corporate, Proprietary and Legal) a detailed summary of his activities during 2008.

7.

In 2005, 2006 and 2007 the Claimant had also submitted a detailed summary of his activities during each respective year for the purposes of his Performance Bonus. Following receipt of the detailed summaries of his activities the Claimant was graded for the purposes of the Performance Bonus as follows:

7.1

2005 – Grade 4: ‘Excellent’ or ‘Exceeding expectation on 50% of agreed objectives’;

7.2

2006 – Grade 4: ‘Excellent’ or ‘Exceeding expectation on 50% of agreed objectives’;

7.3

2007 – Grade 5: ‘Outstanding’ or ‘Exceeding expectation on 75% of agreed objectives’.

8.

Despite the receipt of the detailed summary of his activities during 2008 the Defendant failed to award the Claimant any Performance Bonus for 2008 on the Performance Bonus date on 28 February 2009 or at all.

9.

Moreover the Defendant failed to respond to the Claimant’s detailed summary of his activities during 2008.”

The reason for the inclusion of these allegations in the Particulars of Claim was obscure. The allegations, on a first reading, created the impression that the case of Dr. Humphreys was that all he had to do to be entitled to a bonus under clause 4.2 of the Norilsk Agreement was to submit a “detailed summary of his activities” (a “Summary”). However, when he was called to give evidence on his own behalf Dr. Humphreys accepted that that was not in fact his case. It seemed, from his evidence, that he considered that his performance in 2008 was as good as his performance had been in 2007, and that, presumably, was the reason for the pleas in paragraph 7 of the Particulars of Claim. Strictly those pleas seemed to me to be immaterial to the case of Dr. Humphreys on any view. His entitlement, or not, to a bonus in 2008 had to depend upon the terms of the Norilsk Agreement, and not its predecessor, the Norimet Agreement, and on his performance in 2008, not his performance in previous years. The point that he was not entitled to a bonus in 2008 by reason of his performance in 2007 is an obvious one.

Paragraphs 10 to 18 inclusive of the Particulars of Claim set out the effect of the correspondence between 27 February 2009 and the receipt of the letter dated 22 July 2009 from Salans to Russell, to which I have already referred.

The final substantive paragraph of the Particulars of Claim was paragraph 19. The actual last paragraph, paragraph 20, was simply a claim for interest. Paragraph 19 was in these terms:-

“As a result of the matters set out above the Defendant has acted in breach of clause 4.2 [of] the Agreement, causing the Claimant loss and damage.

PARTICULARS

In 2007 the Claimant was graded as Grade 5: ‘Outstanding’ or ‘Exceeding expectation on 75% of agreed objectives’. In 2008 the Claimant submitted a more detailed summary of his activities during 2008 than the summary of activities during 2007. In both years the Claimant evidenced that he had developed and issued editions of quarterly reports, researched and issued price assumptions, given in-person briefings to the Management Board, researched and issued annual set of long run metals prices, participated in different meetings, provided general support to Moscow and also provided examples of management and representation. Accordingly the Claimant claims that he ought to have been graded by the Defendant as Grade 5 for 2008 and, pursuant to clause 4.2 of the Agreement, is entitled to a sum of £572,000 by way of Performance Bonus.”

From reading that paragraph it was extremely difficult to understand what was the case of Dr. Humphreys. In the Particulars under paragraph 19 essentially three elements were identified: the grading of Dr. Humphreys in 2007; the alleged contention that the Summary submitted for 2008 was more detailed than the Summary submitted for 2007; and a list of activities which seemed to be comprehended within Appendix 1 to the Norilsk Agreement, that is to say, activities falling within the ordinary scope of the duties of his employment as chief economist. There was no identification of any alleged feature of the work undertaken by Dr. Humphreys in 2008 which was said to justify the assessment of his performance in that year as ‘Outstanding’, ‘Excellent’, ‘Above Average’, or, indeed, ‘Satisfactory’. The Particulars of Claim in fact disclosed no basis upon which it could be said that Dr. Humphreys was entitled to any bonus at all, pursuant to the provisions of clause 4.2 of the Norilsk Agreement.

No doubt for that reason, attention was focused, on behalf of Dr. Humphreys, at the trial, on the matters which were said, on behalf of Norilsk, to have resulted in the conclusion that his performance in 2008 was ‘Unsatisfactory’ . The core of the answers on behalf of Norilsk to the pleaded case of Dr. Humphreys was to be found in paragraphs 11 and 17 of the Defence:-

“11.

The Claimant’s performance in 2008 was unsatisfactory and/or failed to meet the Defendant’s expectations:

a.

The Claimant’s forecasts for the price of non-ferrous metals, exchange rates and rates of inflation were far removed from the actual figures for the relevant periods in 2008;

b.

The Claimant’s forecast for the price of nickel, in particular, was more than 50% off the actual price for the relevant period (fourth quarter of 2008);

c.

Consequently, the evaluation of Defendant’s and the Group’s strategies options in 2008 as well as formation of budget for the year 2009 were based on fundamentally flawed forecast provided by the Claimant;

d.

The Group’s financial position suffered a dramatic decline from a US$5,276 million profit in 2007 to a US$555 million loss in 2008;

e.

The Claimant had clearly failed to act or carry out his duties so as to place the Defendant and the Group in a favourable position notwithstanding the market conditions in 2008.

…

17.

Paragraph 19 is denied. The Defendant repeats paragraphs 8(b) and 9 to 13 above. The Defendant will further say that:

a.

The assertion that the 2008 summary of activities was “more detailed” than that for 2007 is irrelevant. For reasons already set out, the contents of the summary and/or the level of detail thereof bore no direct relation to an assessment by the Management Board of whether the Claimant met the expectations of him set out in paragraph 6 above;

b.

The developing and issuing of quarterly reports, the researching and issuing of price assumptions, the giving of in-person briefings to the Management Board, the researching and issuing of an annual set of long run metal prices, the participation in different meetings, the provision of general support to Moscow and the examples of management and representation set out in the summary amount to little more than a list of the Claimant’s normal day-to-day duties as Chief Economist. The list fails to demonstrate that performance exceeded or even met the expectations referred to in paragraph 6 above and fails to show that his performance as a Chief Economist was satisfactory so as to warrant a bonus payment;

c.

In any event, the Defendant will say that there are no circumstances in which the Claimant as Chief Economist would have been awarded a Grade 5 in a year when the Claimant’s performance and/or the consequences for the Group were as set out in paragraph 11 above.”

In my judgment the criticisms of the Summary for 2008 pleaded at paragraph 17 of the Defence were well – founded. The Summary simply contained a list of activities, with no attempt to evaluate the quality of the performance of those activities by Dr. Humphreys. It ran to two and a half pages of A4 typescript, as compared to two and a third pages of A4 covered by the equivalent list of activities in the Summary for 2007, so for practical purposes no more detailed. The activities listed in the Summary for 2008 were:-

“ Analysis and advice: helping to improve decision-making

Developed and issued four editions of a new, consolidated, quarterly report containing quarterly, annual and long run metal prices, and associated exchange rate assumptions, for use in planning and investment analysis by Norilsk Nickel business units worldwide;

Researched and issued price assumptions for the 2008 Plan, with an October update.

Supervised compilation of monthly ‘supplementary price information’ reports (consensus metal price forecasts and forward market prices) to assist with planning and budgeting.

Gave three in-person briefings to Management Board on economic and market outlook and one briefing remotely by telephone.

Researched and issued third annual set of long run metals prices for use in project evaluation for approval by Management Board in April.

Directed development of detailed industry analysis back-up tables for above for nickel and PGMs.

Prepared paper on forecasts errors for July Management Board meeting.

Prepared Norilsk Nickel responses to questionnaires from the European Commission on competitive implications for copper of BHP Billiton – Rio Tinto merger in consultation with company lawyers.

Provided general support for Strategy Group in Moscow and NNI, e.g. assistance with information on chromium ore, ferrochrome and sulphur and sulphuric acid etc., provision of data and analysis in relation to evaluation of Boliden and BCL smelters (including input to work by H&H and an analysis of the plants’ sources of raw mats), provision of analysis on the economic importance of nickel to selected economies in connection with the Nickel Institute’s work on the 30 ^th and 31 ^st ATP of the Dangerous Substances Directive, provision of data on salary escalators for NNI businesses.

Developed and made a presentation on economic and industry outlook for NNI strategy meeting in Singapore (July). Had several follow-up discussions with NNI managers.

Passed project ideas through to Moscow (e.g. Pamodzi, Kansteiner on Tanzania).

Extensive internal discussions on Nautilus Project (Rusal). Developed a series of position papers relating to Rusal, including an assessment of its competitiveness, an outlook for the aluminium market (with updates), an evaluation of Rusal’s public statements relating to its performance, a review of its expansion plans, aluminium industry profit drivers and the assessment of Glencore’s market shares of Ni and Co. Assisted with work on iron ore in relation to discussions with Metalloinvest, including acquisition of CRU iron ore study.

Prepared, at the request of Moscow, two parts of a strategy review, the first part analysing the economic background for a NN strategy to 2025, the second part (draft only) strategic development options amongst NN’s existing commodity businesses.

Participated in various meetings and conferences to keep informed about economic and industry developments, source ideas and make contacts, e.g. IWCC, meetings of the Society of Business Economists, Stellenbosch Group, ICBE, Mines & Money.

Management: developing and maintaining the organisation and function

Directed, developed and motivated members of Economics Department.

Managed operation and budget of Economics. Liaised with NNEL management on London office matters and transfer of Economics from Norimet Ltd. to NNI (UK) Ltd.

Prepared paper for new management on the objectives and functions of Economics Department. Discussed with management in Moscow the role of Economics Department and co-operated on plans for the work of the department subsequent to my departure.

Maintained and developed relations with data suppliers (CRU, Brook Hunt, GFMS, WBMS, MEG, INSO, OEF, SFA, JM, Urandaline, Simon Hunt etc.) and corporate contacts, and coordinated purchases of consultants’ materials with Moscow office to ensure cost effective acquisition and use of bought-in research and information.

Representation: helping to give Norilsk Nickel visibility and credibility

Provided support to Moscow’s investor relations (IR) function by supplying input to presentations, writing commodity sections for annual report, company fact book, market briefings for road shows, etc.

Collaborated with UBS and others in preparation of materials for October roadshow (which never took place). Met and talked with IR consultants, Brunswick.

Undertook numerous one-on-one and group meetings with members of the broking community and investment funds.

Presented at investor relations meetings organised by Diapason (January), BNP Paribas (February), Goldman Sachs (June), Desjardins Securities (February and October).

Participated in investor conference, BMO Nesbitt Burns (Florida), in support of General Director and Deputy General Director of Norilsk Nickel in February.

Participated in, and wrote speeches for, Norilsk Nickel’s General Director, Denis Morozov, to present at EuroNickel conference held in Moscow in April.

Contributed to several press events, including interviews in sidelines of World Mining Investment Congress, Norilsk Nickel press briefing in LME week (Oct), and interviews with Bloomberg and Japan Metal Bulletin during visit to Tokyo.

Cultivated and maintained relations with influential third-party organisations in academia, government and the financial sector, including the Centre for Energy, Petroleum and Mineral Law & Policy in Dundee, UNCTAD in Geneva, the Raw Materials Group of Sweden, and the Emerging Markets network of the OECD.

Conference speeches:

•

International Wrought Copper Council, Vienna (May)

•

World Mining Investment Congress, London (June)

•

Symposium at Metal Economic Research Institute, Tokyo (Oct)

Publications:

•

Article on state of commodity cycle in ‘Global Capital’ magazine (Feb)

•

Article on copper industry in Russia in ‘Mining Journal’ (Sept)

•

Commodities Viewpoint for ‘Commodities Now’ (LME week edition, Oct)

•

Book review on UNCTAD’s World Investment Report for ‘Resources Policy’

•

Chapter on ‘Pricing and Trading of Metals and Minerals’ for SME Mining Engineering Handbook (the so-called Mining Bible) (forthcoming)”

Before coming to consider in more detail the quality of the forecasts made by Dr. Humphreys, upon which so much of the focus at the trial was directed, it is appropriate to consider the approach in law which should be adopted to a case in which it is said that a claimant is entitled to a discretionary bonus which has not been paid to him.

It was, I think, common ground between Mr. John Mehrzad, who appeared on behalf of Dr. Humphreys, and Mr. Akhlaq Choudhury, who appeared on behalf of Norilsk, that the principal relevant authorities were the decision of Timothy Walker J in Clark v. BET Plc [1997] IRLR 348; the decision of Burton J in Clark v. Nomura International Plc [2000] IRLR 766; the decision of the Court of Appeal in Horkulak v. Cantor Fitzgerald International [2004] IRLR 942; and the decision of the Court of Appeal in Commerzbank AG v. Keen [2007] IRLR 132. However, Mr. Choudhury also drew to my attention the decision in Stadhard v. Lee (1863) 3 Best & Smith 364 and the decision of the Court of Appeal in Wishart v. National Association of Citizens Advice Bureaux Ltd. [1990] ICR 794.

It is convenient to begin my consideration of the relevant authorities with the decision in Stadhard v. Lee. It was not a case about a discretionary bonus, but about a contract under which the plaintiff agreed to undertake works “rapidly and satisfactorily”, and, if they did not, the defendants had the powers to employ labourers to complete the works and to deduct the cost of doing so from sums otherwise due to the plaintiff. The defendants sought to exercise those powers. The plaintiff contended that the defendants had acted unreasonably in doing so. The issue before the court was in fact whether, as a matter of pleading, it was sufficient for the plaintiff to contend merely that the defendants had acted unreasonably in engaging additional labour. Cockburn CJ, delivering the judgment of the court, said, at pages 372 – 373 of the report:-

“Now, on carefully considering the contract between these parties, we are satisfied that the intention was that the defendants, if dissatisfied, whether with or without sufficient reason, with the progress of the work, should have the absolute and unqualified power to put on additional hands and get the work done, and deduct the cost from the contract price payable to the plaintiff, and therefore, if these terms had been ever so unreasonable, we should have felt bound to give effect to them, and to hold that, so long as the defendants were acting bona fide under an honest sense of dissatisfaction, although that dissatisfaction might be ill-founded and unreasonable, they were entitled to insist on the condition, and consequently that the replication, which only alleges that their dissatisfaction was unreasonable and capricious, but which stops short of alleging mala fides in the defendants in acting as is stated in the plea, is insufficient. ”

Mr. Choudhury submitted that the decision in Stadhard v. Lee was authority for the proposition that where, under a contract, something falls to be done to the “satisfaction” of a party, the party whose satisfaction is required is the sole judge of whether what has been done was to his satisfaction. It was not necessary for the “satisfaction”, or the lack of it, to be objectively justifiable or reasonable. He supported his submission by reference to the decision in Wishart v. National Association of Citizens Advice Bureaux Ltd. In that case the issue was whether an offer of employment “subject to receipt of satisfactory references” had resulted in a contract after references had been produced which the prospective employer considered not to be satisfactory. The leading judgment was that of Mustill LJ. At page 800D – 801E he said:-

“The first issue is whether the plaintiff has an arguable case to the effect that he is now a party to an unconditional contract of employment. The defendants say that he has [sic] not. They maintain that they made an offer which never became unconditional and hence never became capable of acceptance unless and until satisfactory references were furnished, and that meant “satisfactory to the defendants”. Alternatively, if there was a concluded bargain it was subject to a suspensive condition which would discharge it if the references were not satisfactory. On either view, since the defendants were not satisfied with the references, and since it is not suggested that they acted otherwise than in good faith, the plaintiff has never had an enforceable contract of employment.

In response the plaintiff contends that this subjective approach to his rights is incorrect. It is not enough for the defendants to feel dissatisfaction. The facts must be such that a reasonable person, in their position, with this particular post to fill, would regard the references as a satisfactory basis on which to appoint the plaintiff. Furthermore, so the defendants contend, if the references appeared ambiguous or incomplete, as the defendants evidently found them to be, they should either have investigated further, both with the referees and the plaintiff himself, and reconsidered the matter in the light of what they had learned; or, if they chose not to make this investigation, they should have taken the plaintiff on the references as they stood.

I confess to feeling little doubt that on this short point of construction the defendants are right. It is true that Diggle v. Ogston Motor Co. (1915) 84 LJKB 2165 may be distinguishable on the ground that the dispute concerned not the making of a contract, but the meaning of a provision which entitled the employers to terminate – a provision, moreover, which expressly stipulated that the satisfaction was to be that of the employers. I also accept that Astra Trust Ltd. v. Adams [1969] 1 Lloyd’s Rep 81 and other cases concerned with expressions such as “subject to satisfactory survey” and the like are not conclusive, since they merely illustrate that “satisfactory” can have a subjective connotation, and do not go so far as to establish that such words must always have that connotation. Nevertheless, my own strong inclination is to give the words of the defendants’ letter a subjective meaning here, since I believe that the natural reading of a communication, the purpose of which is to tell the prospective employee that part of the decision on whether he is firmly to be offered the post has yet to be made, is that the employer is reserving the right to make up his own mind when the references have been received and studied. Undeniably, it is possible for an employer to make an offer conditional on something to be objectively determined (for example, the passing of a medical examination), but I find it very hard to see that the defendants’ letter falls into this category.

Nevertheless, I have been persuaded by Mr. Westgate that this point is just about arguable, and have also been persuaded that if the plaintiff is right on the issue of construction, so that the test is objective in the sense for which he contends, there is an argument for saying that it was not fulfilled. Thus, although I cannot disguise that I would assess the plaintiff’s prospects of success at the trial as poor at best, I am willing to recognise that a trial judge might take a different view, and that it would accordingly be wrong to halt the inquiry into the grant of the injunction at the first stage.”

Ralph Gibson LJ expressed the same view on the issue of construction at page 805B – E.

Mr. Choudhury pointed out that the assessment under clause 4.2 of the Norilsk Agreement of whether Dr. Humphreys fell within Grade 1 depended on the view being taken that his performance in 2008 was “unsatisfactory” or “fails to meet expectation”, matters which, he contended, could only be judged subjectively. Even in relation to an assessment that Dr. Humphreys fell within Grade 2 depended, absent any agreed objectives, on whether his performance was assessed as “satisfactory”, again, Mr. Choudhury said, a subjective condition. I accept those submissions. In my judgment, in the circumstances of the Norilsk Agreement, and absent any agreed objectives, there was simply no basis upon which an objective assessment of whether the performance of Dr. Humphreys in 2008 was “satisfactory” or “unsatisfactory” could be made. These issues fell to be determined, insofar as they arose, solely by the Management Board. The only sensible issue which could arise in relation to an assessment of the Management Board that the performance of Dr. Humphreys in 2008 was “unsatisfactory” was whether that was the actual view of the board – that is to say, whether, as Cockburn CJ put it, the board “were acting bona fide under an honest sense of dissatisfaction”.

Apart from the question whether “satisfactory” for the purposes of clause 4.2 of the Norilsk Agreement was to be assessed subjectively or objectively, Mr. Choudhury submitted that, for the purposes of the sub-clause, the concept of “satisfactory” fell to be interpreted as meaning, in effect, “sufficiently satisfactory to justify payment of a bonus”. Again I accept that submission. The issue only arose in the context of whether a bonus should be paid in the light of the actual performance of Dr. Humphreys. Under clause 4.1 he was paid a substantial salary, to which any bonus was an addition. Although, in re-examination, Dr. Humphreys seemed to suggest that simply by carrying out the tasks of his employment adequately, in the sense of not drawing justified criticism, he should have been assessed as falling in Grade 2, I do not think that that could possibly be right. If it were, simply for performing adequately the tasks of his employment, and no more, Dr. Humphreys would have been entitled to be paid not merely the basic salary of £462,000, but £220,000 (47.62%) more. If that had been the intention of the parties to the Norilsk Agreement they would simply have agreed that the payment provided for in clause 4.1 was £682,000, and the Grade 2 line in the table in clause 4.2 would have been omitted.

Each written contract plainly falls to be construed having regard to its particular terms and against the factual matrix in which it was made. I have already indicated my conclusions on the submissions as to construction of clause 4.2 of the Norilsk Agreement made by Mr. Choudhury. However, as against the possibility that I might not accept those submissions Mr. Choudhury made further submissions of a more general nature concerning the obligations of an employer in relation to the exercise of a discretion to make a payment of a bonus to an employee. In case it should be considered that I have erred in accepting the submissions of Mr. Choudhury as to the proper construction of clause 4.2 of the Norilsk Agreement, it is appropriate that I should consider his more general submissions.

In the area of discretionary bonuses the general approach which has commended itself to the Court of Appeal, and was specifically approved in Horkulak v. Cantor Fitzgerald International by Potter LJ, giving the judgment of the Court, at paragraph 46 on page 949, was that explained by Burton J at paragraph 40 on pages 774 – 775 in Clark v. Nomura International Plc:-

“Quite apart from the additional contractual straightjacket for the discretion in this case, the employer’s discretion is in any event, as a result of the authorities, not unfettered, as both sides have accepted to be the law in this case. Even a simple discretion whether to award a bonus must not be exercised capriciously (United Bank Ltd. v. Akhtar [1989] IRLR 507 EAT, Clark v. BET plc [1997] IRLR 348 and Midland Bank plc v. McCann 5/6//1998 unreported EAT) or without reasonable or sufficient grounds (White v. Reflecting Roadstuds Ltd. [1991] IRLR 331 EAT, and McClory v. Post Office [1993] IRLR 159). I do not consider that either of these definitions of the obligation are entirely apt, when considering whether an employer was in breach of contract in having exercised a discretion which on the face of the contract is unfettered or absolute, or indeed even one which is contractually fettered such as the one here considered. Capriciousness, it seems to me, is not very easy to define: and I have been referred to Harper v. National Coal Board [1980] IRLR 260 and Cheall v. APEX [1982] IRLR 362. It can carry with it aspects of arbitrariness or domineeringness, or whimsicality and abstractedness. On the other hand the concept of ‘without reasonable or sufficient grounds’ seems to me to be too low a test. I do not consider it is right that there be simply a contractual obligation on an employer to act reasonably in the exercise of his discretion, which would suggest that the court can simply substitute its own view for that of the employer. My conclusion is that the right test is one of irrationality or perversity (of which caprice or capriciousness would be a good example) ie that no reasonable employer would have exercised his discretion in this way. I canvassed this provisional view in the course of argument with both counsel, and neither appeared to dissent, and indeed Mr. Temple QC in his closing submissions expressly adopted and used a test of irrationality. Such a test of perversity or irrationality is not only one which is simple, or at any rate simpler, to understand and apply, but it is a familiar one, being that regularly applied in the Crown Office or, as it is soon to be, the Administrative Court. In reaching its conclusion, what the court does is thus not to substitute its own view, but to ask the question whether any reasonable employer could have come to such a conclusion. Of course, if and when the court concludes that the employer was in breach of contract, then it will be necessary to reach a conclusion, on the balance of probabilities, as to what would have occurred had the employer complied with its contractual obligations, or, as Timothy Walker J put it in Clark v. BET plc [1997] IRLR 348, assess, without unrealistic assumptions, what position the employee would have been in had the employer performed its obligation. That will involve the court in assessing the employee’s bonus, on the basis of the evidence before it, and thus to that extent putting itself in the position of the employer; but it will only do it if it is first satisfied, on the higher test, not that the employer acted unreasonably, but that no reasonable employer would have reached the conclusion it did acting in accordance with its contractual obligations, and the assessment of the bonus then of course is by way of an award of damages.”

In Horkulak v. Cantor Fitzgerald International Potter LJ cited the observations of Burton J as to how the assessment of damages fell to be undertaken, if a breach of contract was proved, and seemed to approve that approach, based, as it was, on the decision of Timothy Walker J in Clark v. BET Plc. Certainly that was how Mummery LJ, at paragraph 53 of his judgment in Commerzbank AG v. Keen, interpreted the judgment in Horkulak v. Cantor Fitzgerald International.

The judgment of Mummery LJ in Commerzbank AG v. Keen was the leading judgment. Both Jacob LJ and Moses LJ agreed with it. In the course of his judgment Mummery LJ made, at page 136, two observations material to the issues in this action:-

“59.

First and foremost, the bank has a very wide contractual discretion. Mr. Keen has to show that the discretion has been exercised irrationally. It cannot be said that the decisions of the bank on bonuses for 2003 and 2004 are irrational on their face. The burden of establishing that no rational bank in the City would have paid him a bonus of less than his line manager recommended is a very high one. It would require an overwhelming case to persuade the court to find that the level of a discretionary bonus payment was irrational or perverse in an area where so much must depend on the discretionary judgment of the bank in fluctuating market and labour conditions.

60.

Secondly, there is no independent evidence, expert or otherwise, lending any support to his claim of irrationality in the size of the bonus pools for the two years.”

While Jacob LJ simply agreed with the judgment of Mummery LJ, Moses LJ did add some observations of his own, including, at page 139:-

“111.

… An employee must establish, at least, a prima facie case of irrationality, before an employer is required to justify his decision. For example, an employee would be able to rely upon a refusal to pay an award, despite the success of his department, or a significantly lower award than one awarded to comparable fellow-employees. It is likely that such cases can only be met by a sustainable explanation from the employer. The need to provide reasons arises, not to give the right to challenge content, but because, without any explanation, the employee is likely to succeed. In short, in cases which do not rely upon a breach of the implied duty of trust and confidence, the absence of reasons is only of evidential significance. The absence of reasons is not dispositive of the issue of rationality.

112.

Similarly, a failure to identify the decision-maker will only be of significance if there is some other feature of the award which suggests irrationality. If the employer fails to identify who decided what award should be made, it is likely to cast doubt on the value of any subsequent explanation which attempts to justify the decision. It may suggest either that the person providing the reasons is not the same person as the decision-maker, as in the instant appeal, or that the decision-maker could not by himself think of any good reason for his conclusion. Reasoning provided after a decision is much more likely to trigger a suspicion that there was no good reason for the decision at the time it was made. Thus, a failure to identify the decision-maker does not, of itself, demonstrate irrationality but will provide powerful support for a prima facie case.”

In fact in Commerzbank AG v. Keen the decision-maker was not identified, but the Court of Appeal still allowed an appeal against the failure of the judge at first instance to strike out the claim. It is true to say that in that case, the complaint about bonuses was not that none had been paid, but that the bonuses paid were not large enough.

The case for Dr. Humphreys did not really grapple with whether the Management Board actually formed the view, bona fide, that his performance in 2008 was unsatisfactory. This aspect of the case of Norilsk was essentially overlooked. I shall come to the points made on behalf of Dr. Humphreys as to whether the Management Board actually made any assessment at all of his performance in 2008. However, there was no positive case that, if the Management Board did in fact assess the performance of Dr. Humphreys in 2008 as unsatisfactory, it did not genuinely hold that view. That said, it would be naïve of the Court not to recognise the possibility that the Management Board might have reached a decision as to the assessment of the performance of Dr. Humphreys which was influenced by the knowledge that, if the assessment was Grade 1, no bonus was payable.

The only evidence suggestive of irrationality on the part of Norilsk to which Dr. Humphreys could point was the fact that Norilsk had decided not to pay him a bonus for 2008. However, that fact, as it seemed to me, was entirely neutral. There may have been grounds for such decision which were not irrational. Equally, in theory, and before investigation, it was possible that the decision was irrational. Essentially, therefore, Dr. Humphreys had no positive case that the decision not to award him a bonus for 2008 was irrational.

Although recognising that the burden upon Dr. Humphreys, if his claim was to succeed, necessitated him demonstrating, on the evidence, at very least that the decision of Norilsk not to pay a bonus for 2008 was irrational, the submissions and cross-examination of Mr. Mehrzad seemed to concentrate more on whether the decision was reasonable.

In particular, a point which was emphasised was that the performance of Dr. Humphreys had not been criticised by anyone on behalf of Norilsk or the Russian Parent during the currency of the Norilsk Agreement. The contrary was not suggested, but much was made of the point in the Reply:-

“4.

The consideration of that duty [forecasting] alone cannot amount to the reasonable exercise of the discretion vested in the Management Board as contended at paragraph 5 of the Defence. In addition, with respect to the assessment of the Claimant’s forecasting performance, the Defendant is highly selective, making reference to only one single forecast.

5.

Further, throughout the duration of the Agreement, the Defendant, its employees or agents did not inform the Claimant either orally or in writing that he was underperforming in relation to forecasting or at all.

6.

Moreover the Defendant, its employees or agents did not issue the Claimant with any form of warning and/or reprimand about his performance in relation to forecasting or at all.

7.

In particular, at the material time, the Claimant received no criticism whatsoever that:

a.

The Claimant’s forecasts for the price of non-ferrous metals, exchange rates and rate of inflation were far removed from the actual figures for the relevant periods in 2008, as contended at paragraph 11 a of the Defence; and/or,

b.

The Claimant’s forecast for the price of nickel was more than 50% off the actual price for the relevant period (fourth quarter of 2008), as contended at paragraph 11 b of the Defence; and/or,

c.

The evaluation of the Defendant’s and the Group’s strategies options in 2008 as well as formation of budget for the year 2009 were based on fundamentally flawed forecasts provided by the Claimant, as contended at paragraph 11 c of the Defence; and/or,

d.

The Claimant had in any way caused or contributed to the Group’s financial position suffering a dramatic decline US$5,276 million profit in 2007 to a US$555 million loss in 2008, as implied at paragraph 11 d of the Defence; and/or,

e.

The Claimant had clearly failed to act or carry out his duties so as to place the Defendant and the Group in a favourable position notwithstanding the market conditions in 2008, as contended at paragraph 11 e of the Defence.

8.

Further, the actions of the Defendant during the duration of the Agreement were inconsistent with its pleaded case that the Claimant was performing unsatisfactorily and/or was failing to meet expectations.

9.

For the majority of 2008 the Claimant worked closely with the General Director and Deputy General Director of the Defendant on strategic and policy issues, including attending investor meetings with them and providing them with briefings and research.

10.

For the avoidance of any doubt neither the General Director nor the Deputy General Director at any stage informed the Claimant either expressly or in implied terms that he was not performing satisfactorily and/or was failing to meet expectations in relation to forecasting or at all.”

The fact that no complaints were made during the currency of the Norilsk Agreement was, as it seemed to me, material to the issues in this action only insofar as it might suggest that the criticism of the quality of the forecasts made by Dr. Humphreys was not a genuine criticism. If Dr. Humphreys had been dismissed by reason of the alleged deficiencies in the quality of his forecasts, and the issue was whether Norilsk had acted reasonably in dismissing him without informing him of his alleged lack of performance, lack of complaints could, independently, have been relevant. However, that was not this case.

Dr. Humphreys accepted that his forecasts in 2008, in particular his forecasts of the prices of nickel on the metal markets in the third and fourth quarters of 2008, had not been accurate. For the purposes of this action Dr. Humphreys produced a document entitled “Summary of nickel price forecasting performance of David Humphreys (DH) for forecasts made in, or relating to, 2008” (“the Forecast Summary”). The purpose behind producing the Forecast Summary appeared to be to seek to demonstrate that Dr. Humphreys’s forecasts were less inaccurate than what was described as “Consensus Forecast”. From that perspective the exercise was of little value, because the “Consensus Forecast” was in fact an average of widely differing forecasts made by 19 separate organisations described as “brokers”, but most of which were well-known investment banks. What the Forecast Summary did reveal, however, in convenient form, was the extent to which Dr. Humphreys accepted that his forecasts of nickel prices had been inaccurate.

Five separate forecasts were recorded, in October 2007, February 2008, June 2008, September 2008 and October 2008.

At the time of the October 2007 forecasts the average price of nickel on the London Metal Exchange (“LME”) for the month immediately preceding the forecast was US$29,526 per tonne. Dr. Humphreys forecast that the price in the first two quarters of 2008 would be US$27,000 per tonne, the price in the last two quarters would be US$23,000 per tonne, and the average price for the year would be an unsurprising US$25,000 per tonne. As matters turned out the actual prices were:

The percentages of difference between the forecasts and the outcome I have taken from the Forecast Summary and are Dr. Humphreys’s calculations. The calculations appear to have been undertaken by expressing the forecast figure as a percentage of the outcome figure, but deducting 100 where the result is in excess of 100%, and rounding the result. Thus, looking at the second quarter forecast made in October 2007, US$27,000 per tonne, that is actually 105.16% of the outcome figure, US$25,675 per tonne. I accept that the way in which Dr. Humphreys has expressed the figures is the correct way of expressing the percentage difference of the outcome figures from the forecast figures.

In February 2008 Dr. Humphreys made forecasts for the second, third and fourth quarters of 2008 and for the whole of the year. At the date of the forecasts the average LME price for nickel for the immediately preceding month was US$27,680 per tonne. The forecasts were US$27,000 per tonne for the second quarter (i.e. unchanged from October 2007), US$25,000 per tonne for each of the third and fourth quarters, and US$26,000 per tonne for the year. Each of those forecasts was too high, as matters turned out. For the second quarter the forecast was 5% too high, for the third quarter 32%, for the fourth quarter 131%, and for the year 23%.

The average LME price for nickel in the month immediately preceding the forecasts made by Dr. Humphreys in June 2008 was US$25,729 per tonne. In June 2008 Dr. Humphreys forecast the prices for the third and fourth quarters and for the whole year. His forecast was US$23,000 per tonne for each of the third and fourth quarters (as it had been in October 2007), and US$25,688 per tonne for the year. Again those forecasts turned out to be too high. For the third quarter by 21%, for the fourth quarter by 112%, and for the year by 22%.

In September 2008 all Dr. Humphreys forecast was the price of nickel for the fourth quarter of 2008. In the immediately preceding month the average LME price for nickel had been US$18,917 per tonne. Dr. Humphreys’s forecast was US$23,217 per tonne, which was 103% too high as matters turned out. In October 2008, when the average LME price of nickel for the immediately preceding month was US$17,789 per tonne, Dr. Humphreys forecast that the price of nickel in each of the two first quarters of 2009 would be US$12,000 per tonne. In the first quarter the price was US$10,466 per tonne, in the second quarter it was US$12,914 per tonne, and over the first half of the year, US$11,690 per tonne. Dr. Humphreys’s forecasts were 15% too high for the first quarter, 7% too low for the second quarter, and taking the first half of 2009 as a whole, 3% too high.

What Dr. Humphreys’s own figures in the Forecast Summary showed was that his forecasts for the third and fourth quarters of 2008, as matters turned out, were inaccurate, to the extent of more than 20% for the third quarter, regardless of the date of the forecast, and to the extent of more than 100% - that is, the actual price was less than half what Dr. Humphreys had forecast – again regardless of the date of the forecast, for the fourth quarter.

The answer of Dr. Humphreys in cross-examination to the criticism that the forecasts of the prices of nickel for the third and fourth quarters of 2008 were seriously inaccurate was to point out that forecasting is a difficult process and accuracy cannot be guaranteed. Those points are obvious. If the issue in this action had been whether Dr. Humphreys had been professionally negligent in failing to predict the financial crisis which overtook the world at the end of 2008, no doubt the points which he made would be material. However, it would seem irrational to assess as ‘Outstanding’, in the context of clause 4.2 of the Norilsk Agreement, someone whose job included forecasting metal prices but whose forecasts of nickel prices proved to be as erroneous as those of Dr. Humphreys. Perhaps he cannot be blamed for failing to predict the financial crisis, but why should he be paid a substantial bonus for failing to do so?

Dr. Humphreys in his cross-examination sought to suggest that in fact the forecasting of short-term metal prices was not of much interest or concern to Norilsk and the Russian Parent. The business of the group as a whole, as I understood it, is the production of metals for sale, not simply trading in metals. One of the principal metals produced by the group of which the Russian Parent was head was nickel.

In his submissions Mr. Mehrzad contended that forecasting was but one element of fourteen identified in Appendix 1 to the Norilsk Agreement as “The Executive’s Non-exhaustive duties”. He submitted that each of the fourteen should be attributed equal weight in assessing the performance of Dr. Humphreys in 2008. Put shortly, the point urged on me by Mr. Mehrzad was that, even if there was some substance in criticism of Dr. Humphreys’s forecasts of nickel prices, nonetheless there was no suggested criticism of his performance of other thirteen elements listed in Appendix 1.

It is not for the Court to determine what is, or is not, important to a commercial employer. The employer can, and must, be the judge of its own best interests. If there were a dispute about what, as a matter of fact, a commercial employer had decided was important to it, then the Court could, and would, decide such contested issue on the evidence put before it. Consequently, it cannot be said, just as a matter of logic or assertion, that Norilsk must have considered that each of the fourteen elements identified in Appendix 1 to the Norilsk Agreement was of equal importance to it. Insofar as it mattered what significance Norilsk or the Russian Parent attributed to each element, it fell to me to make findings of fact based on the evidence led before me.

In fact it was the evidence of Dr. Humphreys himself which subverted the contention that each of the elements listed in Appendix 1 to the Norilsk Agreement should be considered as having equal significance to Norilsk and the Russian Parent, and the contention that forecasting was of little significance to Norilsk and the Russian Parent.

On a change of management within the Russian Parent Dr. Humphreys produced a paper, entitled “Economics Department: functions and organisation” (“the Departmental Paper”) in which he set out to explain his role within the group of which the Russian Parent was the head. The Departmental Paper included:-

“The chief economist of Norilsk Nickel, David Humphreys, was recruited into the company in 2004 to fulfil three specific functions and to institutionalise these functions by setting up an Economics Department in London. The decision to locate the activity in London was because London is the best place in the world to undertake this kind of work but also because it was deemed useful to have a head office function in London headed by someone known to London’s financial community. (David Humphreys was chief economist of Rio Tinto for eight years.)

The three core functions of Economics Department are as follows:

Economic and market analysis

To provide briefings to the Management Board and senior management of Norilsk Nickel on the outlook for the world economy and for metals markets. To generate and circulate price and exchange rate forecasts for planning, budgeting and investment purposes throughout the Norilsk Nickel group worldwide.

Specific activities:

•

Present a report on the market outlook to the Management Board four times a year.

•

Issue a comprehensive set of price & exchange rate forecasts (for quarterly, annual and long term horizons) on a quarterly basis.

•

Develop and present once a year a report on long run prices for use in investment analysis.

•

Issue a summary of consensus price forecasts on a monthly basis.

Industry analysis

…

Public presentation ”

From the Departmental Paper, as it seemed to me, it was clear that, notwithstanding the fourteen elements included in Appendix 1 to the Norilsk Agreement, in fact Dr. Humphreys was employed by Norilsk to undertake three core functions, as identified in the Departmental Paper, of which the first-mentioned, and presumably most important, was economic and market analysis, including forecasts.

The Accounts, audited by ZAO Deloitte & Touche CIS, were produced on 21 May 2009. A copy was put in evidence. In the usual fashion, the figures for the previous year were included for comparative purposes. The consolidated income statement reported information expressed in millions of United States dollars. That statement confirmed that the Russian Parent had made a profit in the year ended 31 December 2007 of US$5,276 million. In the year ended 31 December 2008 it made a loss of US$555 million. The consolidated statement revealed a number of reasons for this dramatic reversal of fortune. One was a reduction in income from metal sales from US$15,909 million to US$11,799 million, a reduction of US$4,110 million, or 70.48% of the aggregate difference between the profit in the year ended 31 December 2007 and the loss in the year ended 31 December 2008. However, an increase in the cost of sales transformed a gross profit of US$11,237 million in the year ended 31 December 2007 into a gross profit of US$6,534 million. Another large divergence between the performance in the year ended 31 December 2007 and the year ended 31 December 2008 was an increase in “impairment of non-financial assets” from a loss of US$1,879 million to a loss of US$4,728 million, an increase of US$2,849 million.

Mr. Mehrzad submitted that it appeared from the Accounts that the loss in the year ended 31 December 2008 would have been avoided but for the increase in the loss on “impairment of non-financial assets”, a matter in respect of which Dr. Humphreys had no responsibility. Consequently, Mr. Mehrzad contended, it would be wrong for Norilsk or the Management Board to have had regard to the losses sustained by the Russian Parent in deciding whether to award a bonus to Dr. Humphreys. With all respect to Mr. Mehrzad that submission seemed to me to be misdirected. What was important to the Russian Parent was not simply that it had made a loss, but also that it had failed to make a profit, as it had done in the year ended 31 December 2007. If one added the profit made in the year ended 31 December 2007 to the loss made in the year ended 31 December 2008, the transformation in the fortunes of the Russian Parent was a move in a negative direction by US$5,831 million. As I have pointed out, the greater part of that negative move was attributable to a very significantly reduced gross profit.

In cross-examination Dr. Humphreys accepted that the losses of metal sales income sustained by the Russian Parent might have been reduced by forward selling, and that, if his forecasts of prices in the third and fourth quarters of 2008 had been accurate, and the Russian Parent had acted upon them, the losses could have been reduced.

At paragraph 14 b of the Reply it was pleaded on behalf of Dr. Humphreys that:-

“In April 2008 the Claimant expressly warned the Management Board in a written report, and in person, that nickel stocks were standing at their highest level since 1999 and that prices were being supported by high levels of buying of commodities by investment funds. Contrary to the consensus forecast the Claimant, therefore, expressly informed the Management Board that the market was inflated, which may be subject to correction [i.e. fall] to prices. In the premises (and contrary to the opinion of many respected global economists at the time) the warning of the Claimant was proved correct;”

When investigated in cross-examination of Dr. Humphreys the alleged warning proved to be somewhat elusive. Insofar as in writing it was alleged to be contained in a report entitled “Economic and Metals Market Outlook” dated 14 April 2008 and prepared for a meeting of the Management Board on 24 April 2008. One page of the report was specifically concerned with nickel. What was said about nickel was:-

“ * Nickel prices remained well supported through the first quarter of the year despite LME stocks standing at their highest level since 1999. Support came from the expectation that nickel demand would rebound as a result of restocking by stainless steel producers and distributors, from the need to keep high-cost NPI in production, and from high levels of buying of all commodities by investment funds.

•

Producers of stainless steel in Europe are increasing their operating rates and physical premiums for nickel have firmed. However, demand is not as strong as hoped and there are concerns about substitution of nickel in stainless steel and about the strength of final demand for stainless-containing products in the second half of the year. Prices of stainless steel in both Europe and Asia have been edging upwards but this mostly reflects the rise in raw material costs, not demand strength.

•

China’s output of stainless steel this year is forecast to grow around 25%. Although some nickel needs are being met by producers of nickel pig iron, output of this product is being constrained by power shortages and high coke prices. Imports of refined nickel into China were at record levels in January and February.

•

Meanwhile, nickel is expected to face an acceleration of production through into 2009, with output growing from Jinchuan in China, Vale Inco in Canada and from the start up of BHPB’s Ravensthorpe. Our expectation remains that market will be in balance for 2008 as a whole, but a balance tending towards surplus.”

It seemed to me that, on a fair reading, the report, at any rate, contained no express warning of any sort, and in particular not of the risk of a significant fall in the market price of nickel. In the end I think that the position of Dr. Humphreys in cross-examination was that it was implicit in the statements that LME nickel stocks were at their highest level since 1999 and that investment funds were buying commodities that nickel prices might fall back.

The only witnesses called to give evidence at the trial were Dr. Humphreys himself and Mr. Adam Esah, the sole director of Norilsk. Apart from the evidence of Dr. Humphreys which I have already noted, the evidence of live witnesses of fact was not of much assistance in addressing the issues in this action.

As I have explained, Dr. Humphreys really made no effort to justify the proposition that his performance in 2008 for Norilsk was ‘Outstanding’ or achieved any other particular level of quality. In his closing submissions Mr. Mehrzad contended that I should conclude from the recitation in Dr. Humphreys’s witness statement of his actual activities in 2008 – which was a somewhat expanded version of the Summary relating to 2008, organised by reference to the individual elements set out in Appendix 1 to the Norilsk Agreement – and from three other matters, that Dr. Humphreys’s performance had indeed been ‘Outstanding’, and ought to have been so assessed by the Management Board, had it been acting reasonably.

One of the three matters was the fact that there was no evidence that the performance of Dr. Humphreys in 2008 in respect of activities other than forecasting was worse than it had been in 2007. There was indeed no such evidence. However, as it seemed to me, that did not assist Dr. Humphreys. The burden was on him to justify an assessment of ‘Outstanding’. It was not for Norilsk to demonstrate that such an assessment was not justified. An aspect of the point about performance in 2007 was that it seemed that in October 2006 Dr. Humphreys had forecast that the price of nickel in October 2007 would be US$20,000 per tonne, and in fact it had been US$37,296 per tonne, 86.48% higher. The relevance of this point was somewhat obscure. The forecast in question was made in 2006, not 2007, and I think that it is fairly obvious that underestimating the market price of a commodity produced by a commercial entity for sale is unlikely to be of any particular significance to that entity, whilst overestimating the price substantially could create real problems.

The second matter upon which Mr. Mehrzad placed reliance in relation to seeking to persuade me that, in truth, if the Management Board had acted reasonably, it would have assessed the performance of Dr. Humphreys in 2008 as ‘Outstanding’, was what Dr. Humphreys said at paragraph 77 of his witness statement:-

“In any event, at no stage during 2008 was I subject to any criticism regarding my price forecasting performance. Most senior managers in Norilsk well understood the extreme difficulty of price forecasting in such volatile economic times. At the Management Board meeting of October 2008, when I presented my report on the markets, I offered up my usual comparison of my price forecasts of a year ago and the subsequent actual price outcomes. Specifically, I compared my forecast of the average nickel price in 2008 made in October 2007 with an estimate of the likely average outcome in 2008 based on ten months data. Following the presentation of my report, the CEO [i.e. General Director], Mr. Vladimir Strzhalkovsky, asked why there was a discrepancy between my price forecast and the price outcome. I was surprised by the question since there are always discrepancies between forecasts and outcomes. In the event, I was excused from having to respond since, whilst I was awaiting interpretation, the Head of Marketing and the Head of Legal Affairs quickly reassured the CEO that the forecasts were in fact quite good.”

The suggestion seemed to be that the dissatisfaction initially expressed by Mr. Strzhalkovsky was based on ignorance which was dispelled by his colleagues. I am not quite sure how that was thought to lead to the conclusion that the performance of Dr. Humphreys in 2008 should have been considered by the Management Board, if acting reasonably, to have been ‘Outstanding’.

The third matter upon which Mr. Mehrzad relied as justifying the conclusion that the performance of Dr. Humphreys in 2008 should have been assessed by the Management Board as ‘Outstanding’, had it acted reasonably, was a comment in a presentation dated 30 June 2009 made by Mr. Strzhalkovsky at the Annual General Meeting of shareholders. That comment was:-

“Metal price forecasts made by the Company for the first quarter of this year proved to be almost 100% accurate, which confirms that we are on the right road.”

On Dr. Humphreys’s own figures the forecast which he made in October 2008 of market prices for nickel in the first quarter of 2009 was 15% too high, he predicting a price of US$12,000 per tonne and the actual price being US$10,466 per tonne. Thus the comment of Mr. Strzhalkovsky to shareholders was not accurate, at least in relation to nickel, and was presumably massaged for public consumption. Even if it had been literally true, it is difficult to see why a correct forecast for the first quarter of 2009 could, of itself, lead a reasonable employer to conclude that the performance of Dr. Humphreys in 2008 was ‘Outstanding’. Equally that conclusion would not seem to follow from taking that matter into account in conjunction with the other matters urged upon me by Mr. Mehrzad.

The evidence of Dr. Humphreys was of little significance in relation to the issue of whether the decision of Norilsk to assess his performance as Grade 1, so that no bonus was payable, was irrational.

Mr. Esah professed no personal direct knowledge of any relevant alleged fact. Although he had made a witness statement for the purposes of this action, the entire contents, save some short passages concerned with his own position within Norilsk and his employment history, had been provided to him by Norilsk’s lawyers – I think principally, at least, the in-house lawyers of the Russian Parent. At paragraph 20 of his witness statement Mr. Esah said:-

“I understand that the Management Board never formally met to assess David’s performance in 2008. However, I am informed that, in the light of all the matters summarised or referred to in this Witness Statement, each and every one of the members of the Management Board has determined that David’s performance in 2008 was ‘unsatisfactory’ and/or ‘failed to meet expectations’ and that, had a formal meeting taken place, that would unequivocally have been the Management Board’s conclusion.”

I was very impressed by Mr. Esah as a witness. He was open and frank about how little he could contribute from his own personal knowledge. I am sure that he had been told what he recorded at paragraph 20 of his witness statement. However, he candidly told me that a few days before the trial he had been given what may be slightly different information, to the effect that there had been some informal meeting of the Management Board to decide how the performance of Dr. Humphreys in 2008 should be assessed. Obviously Mr. Esah could not assist as to which of these possibly contradictory pieces of information was correct, or, indeed, whether either of them was.

There was put in evidence a witness statement of Mr. Sergey Batekhin, who was the General Director and Chairman of the Management Board of the Russian Parent between July and August 2008, and then First Deputy General Director and Deputy Chairman of the Management Board until December 2008. From December 2008 until June 2009 Mr. Batekhin was a member of the Board of Directors and Chairman of the Strategy Committee of the Supervisory Board of the Russian Parent. The relationship, if any, of the Management Board to the Board of Directors or the Supervisory Board, was not explained in evidence. On the first day of the trial I was told that Mr. Batekhin was in Paris, but had not been able to obtain a visa to enter the United Kingdom to give evidence at the trial. It was explained to me that Mr. Batekhin had an appointment at the British Embassy in Paris on the morning two days after the first day of the trial to see a Consular official with a view to obtaining a visa. I decided to adjourn the trial at the end of the first day, having heard the only other evidence which either party desired to call, for three days to enable Mr. Batekhin to obtain a visa and to travel to London. The day after my decision I was told that it was not intended to call Mr. Batekhin to give evidence. The trial thus resumed two days after the first day. Mr. Choudhury submitted that I should have regard to the witness statement of Mr. Batekhin, despite him not having been called to give evidence. Mr. Choudhury accepted that, in the circumstances, the question would arise of the weight to be given to the evidence of Mr. Batekhin. Mr. Mehrzad accepted that, pursuant to the provisions of Civil Evidence Act 1995, he could not object to the admissibility of the witness statement of Mr. Batekhin, but he urged me to attribute to it no weight at all. Whilst I do not accept that submission as put, it did seem to me that I should evaluate the evidence of Mr. Batekhin on the basis that the Court was disposed to make arrangements to accommodate him, if he attended to give live evidence, but that the defendant had elected not to submit him to cross-examination.

The essence of the witness statement of Mr. Batekhin was set out in paragraphs 10 to 18 inclusive:-

“10.

I agree with Dr. Humphreys that the deterioration in the Norilsk Group’s financial position in 2008 was only “partly accounted for by the direct effect of falling prices on Norilsk’s revenues”. However, it is still the case that Dr. Humphreys’ forecasts were one of the major contributing factors to the remainder of the decline. In those circumstances, and given the Norilsk Group’s losses, the Management Board could not sanction a bonus to reward Dr. Humphreys for his poor performance.

11.

Moreover, in previous years, including 2008, the office of the Chief Economist in London consisted of three employees and was primarily in charge of producing quarterly forecasts and proving analysis of metal production. As far as I know, the budget of the said office was in excess of £3 million per year. At the same time, the Norilsk Group’s yearly subscription for more extensive and in-depth quarterly bulletins and analysis prepared by major research firms like Brook Hunt, CRU, GFMS cost somewhere in the region of US$50 thousand per year. However, the analysis (on 168 pages) conducted by Brook Hunt for the 4-th quarter of 2008 was better than Dr. Humphreys’ forecasts. The forecasts provided by Dr. Humphreys were, however, in-line with the forecasts of investment banks, which were distributed free of charge. On that basis, I do not accept that the value or level of Dr. Humphreys’ performance was ‘outstanding’ or “exceeded expectations”.

12.

Dr. Humphrey’s [sic] accepts that “better forecasting would have allowed Norilsk to have taken some evasive action by selling metal forward or by closing down high cost capacity more quickly”. I entirely agree with Dr. Humphreys. However, in my capacity as First Deputy General Director and Deputy Chairman of the Management Board and then as Chairman of the Strategy Committee for the Supervisory Board, and therefore having been directly and heavily involved in the strategic decisions that were made based on Dr. Humphreys’ input, the simple fact of the matter is that the Norilsk Group was unable to take that or any other evasive action. The simple reason for that was Dr. Humphreys failed to forecast that the markets would crash in the way that they did.

13.

Dr. Humphreys goes on to say that this: “assumes not only that I could have outperformed the consensus by a greater margin with my forecasts, but that management were fully convinced by my price forecasts at the time, and were able and prepared to act on them. All of these are highly questionable assumptions, particularly given the extensive management changes that occurred in the second half of 2008”.

14.

I am surprised that Dr. Humphreys would say this, given the importance he himself and the Norilsk Group placed on his role and opinions as Chief Economist, as evidenced by the fact that he was being paid a basic salary of £462,000 a year. Also, I can confirm that Dr. Humphreys is wrong to suggest that the Management Board would have failed to respond to a forecast of an impending crash in the metal markets, whether because of extensive changes in the Management Board’s composition or for any other reason. As the then Deputy Chairman of the Management Board, I am in a position to confirm that had Dr. Humphreys forecast and therefore warned the Management Board of the impending crash, for example, of a 62 percent drop in the price of nickel in 2008, I would have taken such a forecast very seriously indeed and acted upon it as described in paragraph 8 above.

15.

Moreover, during the very difficult economic crisis of 2008, Dr. Humphreys failed to make any proposals on the strategic development of the Norilsk Group or, so far as I am aware, initiate any decisions of the Management to respond to the unfolding crisis. In my opinion, the role of Chief Economist, as one of the Norilsk Group’s senior employees, should have played a proactive role in decision making process. Dr. Humphreys did not.

16.

Lastly, Dr. Humphreys says, as regards the forward selling of metal, that “it was simply not Norilsk’s practice to do this. In common with many large mining companies (this largely because their investors want direct exposure to commodity prices), Norilsk chose to sell its metal at the prevailing market price. This was not a decision of the chief economist but of the Management Board itself”.

17.

It is correct that such a decision would have to be approved by the Management Board. However, this decision was not made in the past due to the fact that the production costs for the Norilsk Group were lower than market prices. Dr. Humphreys’ failure to predict the crash in the price of metals meant that the Norilsk Group had to suspend its production in Australia as its cost [sic] were substantially higher than in its Russian operations. It is possible that, had Dr. Humphreys forecast the impending crash, the Management Board would have decided on strategic hedging through forward selling or other financial instruments. However, by failing to deliver such a forecast to the Management Board, Dr. Humphreys prevented the Board from reviewing the matter and giving consideration to the possibility of the forward selling of metal.

18.

At paragraph 74 of Dr. Humphreys’ Witness Statement, he says that “within the confines of the forecasting world, it is hard to see how it would have been possible to do much better than this, so even on the very limited basis that Norilsk has chosen to assess my performance, the charge that my performance was unsatisfactory is unsustainable.” This seems to sum up Dr. Humphreys’ approach and attitude to the £572,000 bonus to which he says that he was entitled. However, Norilsk, like every other employer and business, is interested in results and the harsh reality is that Dr. Humphreys failed to deliver results that had any value to the Norilsk Group. The Norilsk Group found itself in an exceptionally difficult economic and financial position at the end of 2008 and, when it looked back at Dr. Humphreys’ input during that year, it came to the inescapable conclusion that he had failed to give any adequate warning of the difficulties that the Norilsk Group was to face.”

It is noteworthy that Mr. Batekhin did not, in his witness statement, say that he had participated in the assessment of the performance of Dr. Humphreys in 2008, or that he knew who had, or that he knew when or how the assessment that Dr. Humphreys be graded 1 had been made. On the face of the witness statement, therefore, Mr. Batekhin contributed little to the resolution of the issues in this action. At best his evidence provided something of a context, from the perspective of the Russian Parent, for the making of the assessment. In the event, what Mr. Batekhin actually said did not seem to me to be especially controversial, or to necessitate less weight being given to it than it would have received if he had attended court and been cross-examined.

While the pleaded case of Dr. Humphreys did not identify such issue, in the course of his submissions Mr. Mehrzad contended that the evidence suggested that in fact the Management Board had not actually made a decision to assess Dr. Humphreys as Grade 1. Had I accepted that submission, it would have been necessary for me to consider what conclusion the Management Board would have reached, acting reasonably, if it had considered the assessment of Dr. Humphreys for the purposes of clause 4.2 of the Norilsk Agreement. If I had had to consider that issue I should have been grievously handicapped by the lack of any evidence as to how an assessment of a chief economist of an organisation like the group controlled by the Russian Parent ought properly to have been undertaken. In fact, however, it does not seem to me that the need to consider how the assessment of Dr. Humphreys ought reasonably to have been undertaken, and with what result, arose because I am satisfied on the evidence that the Management Board did make an assessment of Dr. Humphreys’s performance for the purposes of clause 4.2 of the Norilsk Agreement, it did conclude that he should be assessed as Grade 1, and that decision had not been shown to be irrational.

I think that it was clear from the correspondence between Dr. Humphreys and the Russian Parent that no decision on the question of a bonus for Dr. Humphreys had been made by 27 April 2009, when Mr. Zhivoy told Dr. Humphreys that the issue had been transferred to Mr. Matvienko. Technically, as payment of any sum due was to be made no later than 28 February 2009, such delay in making a decision was a breach of contract, but only nominal damages would flow from such breach, if it were the only breach of the Norilsk Agreement. By the date of the letter dated 22 July 2009 written by Salans to Russell Salans had been instructed that a decision had been made, that the decision was to assess Dr. Humphreys as Grade 1, and that that decision had been made on the ground of the inaccuracy in Dr. Humphreys’s forecasts of nickel prices in the last quarter of 2008. Those forecasts were, as Dr. Humphreys did not dispute, inaccurate in envisaging that nickel prices would be twice as high, or more, than they were. I am therefore satisfied that, prompted, no doubt, by correspondence from Russell, and, I daresay, with the benefit of its own legal advice, the Management Board did decide to assess Dr. Humphreys’s performance for the purposes of clause 4.2 of the Norilsk Agreement, did assess his performance as Grade 1, and did so for the reason stated in the letter dated 22 July 2009. The evidence did not enable me to conclude which individuals participated in whatever consideration by the Management Board there was of the case of Dr. Humphreys, what form that consideration took (whether a meeting, or a series of discussions or telephone conversations, or how else it was done), or when, precisely (save that it was between about 27 April 2009 and about 22 July 2009) the ultimate decision was taken. As Moses LJ pointed out in his judgment in Commerzbank AG v. Keen, none of these difficulties provided any assistance to Dr. Humphreys in pursuing his case, assuming, contrary to my finding, that it was necessary to consider irrationality because the matter was not concluded by the simple decision of the Management Board that the performance of Dr. Humphreys in 2008 was unsatisfactory in its view.

In the end I think that the only arguable point in this action, assuming that I was wrong in holding that it was entirely a matter for the Management Board to determine whether it considered that the performance of Dr. Humphreys in 2008 was unsatisfactory to it, was whether it could be said that it was irrational for the Management Board to determine that, because of the serious inaccuracies, as matters turned out, in the forecasts made by Dr. Humphreys of nickel prices in the fourth quarter of 2008 his performance as chief economist of the group controlled by the Russian Parent was ‘Unsatisfactory’. For the reasons which I have explained, I am satisfied that an important part of the duties of Dr. Humphreys as chief economist of the group was the making of forecasts of metal prices. It is obvious that the purpose for which those forecasts were required was so that the Russian Parent could make business decisions in the light of the forecasts. As the Russian Parent and some of its subsidiaries are primary producers of metal, an obvious option, if circumstances appear to necessitate it, is to scale back, or to cease, production of metal, pending an increase in market prices. Such action could preserve resources to be exploited in future, more favourable, economic circumstances. It could also reduce costs, a course especially desirable if costs of production exceed prevailing selling prices of the metal produced. Dr. Humphreys accepted that, if he had provided forecasts which were accurate, the very substantial losses which the Russian Parent sustained in the year ended 31 December 2008 might have been mitigated to some extent. Another way of looking at the issue of rationality might be, was it irrational for the Management Board of a company which had lost some US$5,831 million in the year ended 31 December 2008 as compared with the previous year, in part, it seemed, as a result of the failure of the chief economist to forecast the global financial downturn at the end of 2008, to decide not to add to the losses by paying an amount, perhaps as much as the claimed sum of £572,000, to the chief economist? Put that way, I think that it must be obvious that the answer is negative.

For the reasons which I have given the claim of Dr. Humphreys fails and is dismissed.