Elliston v Glencore Services (UK) Ltd  EWHC 3431 (QB)
Claim involving the payment of a 6 figure sum after the claimant was made redundant folllowing the merger of the defendant company with another. The claim was upheld.
The claimant, the company secretary, was made redundant following a merger of the defendant company and another. He was paid over £400,000 for his work on the merger (the 'transaction bonus'). His employment was pursuant to a service agreement which contained a clause saying that a 'Prescribed Sum' would become payable if the claimant was made redundant as a result of a merger or takeover. The prescribed sum was worth over £400,000. It was not paid, the defendant arguing that the receipt of the transaction bonus irrevocably waived all right and entitlement to receive a Prescribed Sum under the terms of the Employment Agreement.
The court rejected the defendant's construction and variation defences and ruled that the claimant was entitled to both the transaction bonus and the Prescribed Sum.
Neutral Citation Number:  EWHC 3431 (QB)
Case No: HQ13X04837
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.
(sitting as a Judge of the High Court)
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GLENCORE SERVICES (UK) LIMITED (Defendant)
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Akhlaq Choudhury (instructed by GRM Law) for the claimant
David Craig (instructed by Linklaters LLP) for the defendant
Hearing dates: 14, 15 and 16 October 2014
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I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HIS HONOUR JUDGE RICHARD SEYMOUR
His Honour Judge Richard Seymour Q.C. :
- Until 2 August 2013 the claimant, Mr. Elliston, was employed by the defendant, Glencore Services (UK) Ltd., at that time known by the name Xstrata Services (UK) Ltd., as company secretary pursuant to the terms of an agreement ("the Service Agreement") in writing dated 3 December 2007. Bearing in mind that the defendant did not change its name until after the employment of Mr. Elliston by it came to an end, it is convenient to refer to the defendant in this action as "Xstrata". Xstrata was, at all times material to this action until 2 May 2013, a subsidiary of a company called Xstrata plc. Xstrata plc merged with Glencore International plc on 2 May 2013. Xstrata changed its name to its present name on 21 August 2013.
- Clause 9 of the Service Agreement included the following provisions:-
"9.4 If any person obtains Control of Xstrata plc (being the power to secure that by virtue of the holding of shares, or the voting power in respect of shares, of Xstrata plc, or by virtue of the right to appoint or remove a majority of the board of directors of Xstrata plc that the affairs of Xstrata plc are conducted in accordance with the wishes of that person) as a result of:
(a) making an offer (whether a general offer or not) to acquire the whole of the issued share capital of Xstrata plc (other than that which is already owned by him) which is unconditional or which is made on a condition such that it is satisfied that the person making the offer will have Control of Xstrata plc; or
(b) making an offer (whether a general offer or not) to acquire all issued share capital (other than shares which are already owned by him) of Xstrata plc; or
(c) a Compromise or Arrangement between Xstrata plc and its members or Creditors or any class of either, which has been approved by the requisite number of shareholders or creditors, as the case may be, and sanctioned by the Court
(Change of Control) then so as to diminish the inevitable distraction to you by virtue of the personal uncertainties and risks created by such a pending or potential Change of Control and to encourage your full attention and dedication to the Company currently and in the event of any potential or pending Change of Control, you will be paid the 'Prescribed Sum' (defined below) if your Employment is terminated after a Change of Control event occurs.
9.5 You may, notwithstanding any other provision of this Agreement, resign and terminate this Agreement with immediate effect in any circumstance under which you cannot in good faith be expected to continue the Employment including, but not limited to the Company making a material change to the terms of the Agreement without your consent (a Valid Reason). In the event that you terminate the Agreement for a Valid Reason, or the Agreement is terminated by the Company without due notice and in breach of the terms of this Agreement, the Company will immediately following the termination date, pay to you the Prescribed Sum.
Valid Reason can include but is not limited to a reduction in your duties, responsibilities, authority, title, compensation or benefits, decision making authority or relocation beyond a reasonable distance.
9.6 The Prescribed Sum will be:
(a) an amount equal to 100% of your Annual Basic Salary, annual benefits and annual pensionable entitlements;
(b) an amount equal to the Annual Bonus, if any, you received for the financial year of the Company immediately preceding the year in which the termination occurred."
- The Service Agreement also contained these provisions as to payment of remuneration, and the provision of other benefits, to Mr. Elliston, and as to termination of his employment by the giving of notice:-
Your remuneration will be adjusted in accordance with Company policies or where there is a change to your pension.
5.1 Base Salary
Your Base Salary at the commencement of this Agreement for the position set out in Clause 1.3 is set at GBP One Hundred and Forty-three Thousand Pounds (£143,000) per annum. The salary will be reviewed annually.
5.2 Pension/Life Assurance
You will be eligible to be a member of the company pension and life assurance scheme subject to the provisions governing the scheme and any applicable law. The pension scheme is a defined contribution scheme, with the Company paying 15% of your basic salary into the scheme by way of employer contributions. The scheme will provide you with life cover of 4 x basic salary.
6.1 You will be eligible to participate in the Company's Short Term Incentive Plan (annual bonus) and Long Term Incentive Plan (share/option plan). Awards under both Plans are at the sole discretion of the Chief Executive Officer.
8.4 The company also provides private medical expenses insurance and permanent health insurance arrangements. The Company will:
(i) pay for the benefit of you, your wife and any dependent children under the age of 18 subscriptions to the Company's private medical expenses insurance arrangements on the appropriate scale;
(ii) pay for your benefit subscriptions to a permanent health insurance arrangement which it is intended will provide cover of 75% of your basic salary.
9.0 TERMINATION OF EMPLOYMENT*
9.1 Your Employment will continue until either party gives to the other not less than 3 months' written notice."
- In a letter to Mr. Elliston dated 4 December 2012 Mr. Michael Davis, Chief Executive Officer of Xstrata plc, wrote, on the printed stationery of Xstrata, as follows:-
"The past year has been without doubt one of the most challenging for employees in Xstrata's history. It has also been a very unsettling time. The task of achieving a merger between Xstrata and Glencore has brought with it many hurdles along the way and [it] has been a real test of our character to rise up and meet such challenges.
I would like to thank you for the contribution you have made to get Xstrata to this point of the merger and am pleased to inform you that you have been awarded a transaction bonus of GBP 487,925 in recognition of this."
- The sum of £487,925 ("the December Bonus") was paid to Mr. Elliston on 14 December 2012.
- In a letter dated 29 April 2013 written to Mr. Elliston by Mr. Dominic O'Brien, at that time General Manager Human Resources and Legal of Xstrata plc, on behalf of Xstrata, Mr. O'Brien said, so far as is presently material:-
"We write further to our various discussions and meetings during which the Company consulted with you on your potential redundancy in the context of the proposed merger of Glencore International plc (Glencore) and Xstrata plc (Xstrata) to be effected by means of a Scheme of Arrangement of Xstrata under Part 26 of the Companies Act 2006, the terms of which are reflected in a document sent to shareholders in Xstrata dated 25 October 2012, and which was approved by shareholders at a meeting of Xstrata on 20 November 2012 (the New Scheme).
As you know, the Company has explored ways in which your redundancy could be avoided, and the possibility of alternative employment. Unfortunately it has not been able to identify any alternative employment for you and any way in which your redundancy could be avoided. As a result, your position will be redundant following a short transition period after completion of the merger between Glencore and Xstrata. The Company is, therefore, terminating your employment by reason of redundancy with effect on and from 2 August 2013 (the Termination Date). The Termination Date may be extended by the Company provided that you have given your prior written agreement to any such extension of the Termination Date.
In recognition of your receipt of a transaction bonus for your work regarding the proposed merger of Xstrata with Glencore, you hereby irrevocably waive all right and entitlement to receive a Prescribed Sum under the terms of your Employment Agreement, whether such right or entitlement exists now or in the future. You hereby release the Company from its obligations under the corresponding clauses of the Employment Agreement.
- The last quoted paragraph was written in contemplation of Mr. Elliston signing a copy of the letter, which also contained other terms relevant to his departure from Xstrata, to indicate his agreement with the various terms included in the letter. Mr. Elliston did not in fact sign such a copy.
- As I have indicated, Mr. Elliston's employment by Xstrata came to an end on 2 August 2013 by reason of the notice given in the letter dated 29 April 2013. Xstrata did not pay Mr. Elliston any amount in respect of the "Prescribed Sum" referred to in clause 9.4 of the Service Agreement.
- This action was commenced by a claim form issued on 2 October 2013. In it Mr. Elliston claimed payment of a "Prescribed Sum" in the amount of £418,980. By the date of the trial it had been agreed that, if a "Prescribed Sum" was properly payable, the correct amount was £418,774.
- The claim of Mr. Elliston was resisted on behalf of Xstrata upon two separate bases.
- What was logically the first which needed to be considered, but was pleaded as a secondary case, was explained at paragraph 26 of the Amended Defence in this way:-
"… it is, in the alternative, denied in any event that the Claimant is entitled to the Prescribed Sum for the following reasons:
(1) clause 9.4 is void for uncertainty. In particular, clause 9.4 of the Employment Agreement contains no provision as to the time at which the Claimant's employment had to be terminated after a Change of Control in order for him to become entitled to payment of the Prescribed Sum. It was not the intention of the parties that the Claimant would be entitled to payment of the Prescribed Sum if his employment terminated many years after a Change of Control and/or for reasons wholly unrelated to it. Accordingly, and in the absence of any provision as to the timeframe within which the Claimant's employment had to terminate after a Change of Control the clause is void for uncertainty;
(2) in the alternative, clauses 9.4 and 9.5 have to be read together, and in particular, on a proper construction of the Employment Agreement, the right to payment of the Prescribed Sum only arose if there was both a Change of Control (as defined in clause 9.4) and (pursuant to clause 9.5) either: (i) the Claimant resigned and terminated the Agreement in circumstances in which he could not in good faith be expected to continue his employment; or (ii) the Agreement was terminated by the Defendant without due notice and in breach of the terms of the Agreement. The Claimant was not dismissed without due notice nor in breach of the terms of the Employment Agreement. Accordingly, on a proper construction of the Employment Agreement, he was not entitled to payment of the Prescribed Sum."
- In this judgment I shall call the points raised in these sub-paragraphs of paragraph 26 of the Amended Defence "the Construction Points".
- The principal line of defence expounded in the Amended Defence, which I shall call in this judgment "the Variation Defence", was pleaded in paragraphs 17 to 19, inclusive, of the Amended Defence:-
"17. At a meeting between the Claimant and Mr. O'Brien on 10 December 2012, Mr. O'Brien, inter alia informed the Claimant that he was going to be awarded a bonus (i.e. the Transaction Bonus [which I have called the December Bonus]) in the light of the proposed merger between Xstrata and Glencore. Mr. O'Brien further informed the Claimant that this bonus would be in substitution for the Claimant's entitlement to a Prescribed Sum under his contract of employment, and that it would have been inappropriate for employees to "double-dip" by receiving a Transaction Bonus and a Prescribed Sum payment.
18. It was, accordingly, an express term of the award of the Transaction Bonus that it was in substitution for the Prescribed Sum payment under the Claimant's Employment Agreement, and accordingly that the Claimant had to forego [sic] any entitlement (and/or any claim) that he might have to the payment of a Prescribed Sum pursuant to his Employment Agreement.
19. The Claimant did not demur from this, and he clearly understood that it was a condition of the payment of the Transaction Bonus that he would not be entitled to, and would effectively forego [sic] any entitlement that he might otherwise have to, a Prescribed Sum payment pursuant to the Employment Agreement."
- The legal consequences of what was alleged in these paragraphs were characterised variously in paragraph 23 of the Amended Defence:-
"Accordingly, the Defendant avers that:
(1) it was an express term of the award to the Claimant of the Transaction Bonus that the Claimant would forego [sic] any entitlement to and/or claim to a Prescribed Sum payment, alternatively it was a condition precedent of the award of the Transaction Bonus that he did so; alternatively,
(2) there was a collateral contract between the Claimant and the Defendant pursuant to which in consideration for the payment to him of a Transaction Bonus, the Claimant agreed to forego [sic] any entitlement that he might have to a Prescribed Sum payment pursuant to the terms of his Employment Agreement; and/or (in either case),
(3) the Claimant agreed, inter alia by his conduct in accepting the Transaction Bonus payment, to a variation to the Employment Agreement, pursuant to which he gave up any entitlement that he had to a Prescribed Sum payment in consideration for receiving the Transaction Bonus."
- Perhaps the most conventional way of analysing what seemed to be the Variation Defence was that, in consideration of the payment of the December Bonus, Mr. Elliston agreed that the Service Agreement should be varied to the effect that clauses 9.4, 9.5 and 9.6 of the Service Agreement be deleted. But however analysed, it was difficult to see how the pleaded legal consequences could flow, as a matter of law, from the alleged facts set out at paragraph 17 and paragraph 19 of the Amended Defence. It was not alleged that at the meeting on 10 December 2012 Mr. O'Brien offered that Xstrata would make payment of the December Bonus if Mr. Elliston agreed to the deletion of clauses 9.4, 9.5 and 9.6 of the Service Agreement. It was not alleged that Mr. O'Brien made any offer at all to Mr. Elliston. All that was pleaded as having been said was that Mr. O'Brien "informed the Claimant that this bonus would be in substitution for the Claimant's entitlement to a Prescribed Sum under his contract of employment". Mr. O'Brien could "inform" Mr. Elliston of whatever he liked, but unless such information took the form of an offer to vary the Service Agreement in terms to which Mr. Elliston agreed, the giving of the "information" was a futile waste of time. It was also pleaded that Mr. O'Brien said to Mr. Elliston at their meeting on 10 December 2012 that "it would have been inappropriate for employees to "double-dip" by receiving a Transaction Bonus and a Prescribed Sum payment". No doubt Mr. O'Brien is entitled to his opinions. However, whatever Mr. O'Brien thought about the morality of Mr. Elliston seeking to rely upon the provisions of clause 9.4, 9.5 and 9.6 of the Service Agreement, Mr. Elliston was entitled to rely upon them as a matter of contract unless the Service Agreement had been varied so as to delete those clauses. It was specifically not alleged in paragraph 19 of the Amended Defence that Mr. Elliston actually agreed to any thoughts expressed by Mr. O'Brien. Rather what was contended was that he "did not demur from this". In other words, he remained silent. The proposition that acceptance cannot be inferred from silence in a contractual context is so trite as a matter of English law that it is almost embarrassing to have to mention it.
- Notwithstanding what seemed to me to be the manifest deficiencies in the pleaded case of Xstrata as to the Variation Defence, I was not invited to strike it out, and so, de bene esse, I heard the evidence which was said to be relevant to the pleas in paragraphs 17 to 19, inclusive, of the Amended Defence. I shall come to that evidence later in this judgment.
- However, first it is convenient to consider the Construction Points.
The Construction Points
- It was common ground before me that the principles to be applied to the construction of clauses 9.4 and 9.5 of the Service Agreement were summarised by Lord Clarke in Rainy Sky SA v. Kookmin Bank  1 WLR 2900 at paragraph 14 of his speech:-
"The principles have been discussed in many cases, notably of course, as Lord Neuberger MR said in Pink Floyd Music Ltd. v. EMI Records Ltd.  EWCA Civ 1429,  1 WLR 770 at para 17, by Lord Hoffmann in Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd.  AC 749, passim in Investors Compensation Scheme Ltd. v. West Bromwich Building Society  1 WLR 896, 912F-913G and in Chartbrook Ltd. v. Persimmon Homes Ltd.  1 AC 1101, paras 21-6. I agree with Lord Neuberger (also at para 17) that those cases now show that the ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. As Lord Hoffmann made clear in the first of the principles he summarised in the Investors Compensation Scheme case at page 912H, the relevant reasonable person is the one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract."
- The guidance of Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society  1 WLR 896 at pages 912F to 913G is well-known, but will bear repetition in this judgment:-
"The principles may be summarised as follows.
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd.  AC 749.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera SA v. Salen Rederierna AB  AC 191, 201:
"if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion which flouts business commonsense, it must be made to yield to business commonsense."
- The case for Xstrata focused upon the provision in clause 9.4 that a "Prescribed Sum" should be paid "if your Employment is terminated after a Change of Control event occurs". It was contended that that meant, on the face of it, that a "Prescribed Sum" had to be paid simply if the employment was terminated after a "Change of Control event", regardless of the circumstances giving rise to the termination, and no matter how many years may have elapsed since the "Change of Control event". That, it was said, was too uncertain to give rise to any contractual obligation.
- However, it was important, in my judgment, to have regard to the rationale stated in clause 9.4 for the provision which it made, namely, "so as to diminish the inevitable distraction to you by virtue of the personal uncertainties and risks created by such a pending or potential Change of Control and to encourage your full attention and dedication to the Company currently and in the event of any potential or pending Change of Control". In the light of that explanation, as it seemed to me, it was plain that, in order for Mr. Elliston to be entitled to the "Prescribed Sum" by virtue of clause 9.4 of the Service Agreement the termination of his employment "after a Change of Control event occurs" must be as a consequence of that "Change of Control event". That situation prevailed in the circumstances in which the employment of Mr. Elliston was terminated by the notice given by the letter dated 29 April 2013.
- Consequently, there was nothing at all uncertain about the operation of clause 9.4 of the Service Agreement when properly construed.
- Given what seemed to me to be the proper construction of clause 9.4 of the Service Agreement, there was no justification for the contention that clause 9.4 should be read together with clause 9.5 so as to reach the conclusion that Mr. Elliston was only entitled to the "Prescribed Sum" if his employment was not terminated by proper notice, but as a result of a repudiatory breach of the Service Agreement on the part of Xstrata. It would be bizarre, in the light of the rationale for the provisions of clause 9.4 set out in that provision itself, if the obligation to pay the "Prescribed Sum" could be avoided by the simple expedient of dismissing Mr. Elliston on three months' notice. That conclusion, in my judgment, is certainly not "what a reasonable person would have understood the parties to have meant".
- In the result the Construction Points fail, and it is necessary to return to consider further the Variation Defence.
The Variation Defence
- I have already commented upon the pleaded case of Xstrata as to the Variation Defence. Unless that case was improved by the evidence of Mr. O'Brien, it was bound to fail. However, if the Variation Defence was, on the face of it, improved by the evidence of Mr. O'Brien, there existed the problems that what he said differed from the pleaded case, which had presumably been based on information provided by him, and from the obvious conclusion to be drawn from the attempt in the letter dated 29 April 2013 which Mr. O'Brien wrote to Mr. Elliston to obtain from Mr. Elliston agreement to waive his entitlement to the "Prescribed Sum". The terms in which the waiver was sought indicated that this was the first occasion upon which the question of wanting a waiver had arisen. While it may be, as was suggested by Mr. David Craig, who appeared at the trial on behalf of Xstrata, that the question of waiver was raised, as it were to make assurance doubly sure, it was strange, if actually Mr. Elliston was considered already to have agreed not to claim the "Prescribed Sum", that that was not asserted in terms in the letter.
- In his witness statement dated 6 August 2014 prepared for the purposes of this action Mr. O'Brien was a bit more definite about his discussion with Mr. Elliston alleged to have taken place on 10 December 2012 than the pleas in paragraphs 17 to 19, inclusive, of the Amended Defence might have led one to expect. What he said was this:-
"13. During early December 2012, Trevor Reid (the Finance Director of Xstrata) told me that that [sic] he had spoken to the Claimant about whether the Claimant should be engaged as a consultant following completion of the Merger to assist with integration. Trevor Reid, amongst others, had agreed in principle: i) termination of employment to be effective upon completion of the merger; and ii) a consultancy agreement to provide services to Glencore to assist with integration for six months following completion of the Merger, the financial terms of which consultancy broadly reflected the Claimant's then existing employment terms. I believe that Trevor Reid expected that John Burton would be company secretary of Glencore but Trevor Reid considered that the integration efforts could be assisted by the Claimant continuing to provide his skills and capabilities to Glencore in a company secretary support function and that the Claimant should perhaps be engaged in the same way that Trevor Reid had agreed in principle to be engaged. Trevor Reid therefore asked me to speak to the Claimant about the possibility of him providing services to the Defendant under a six month consultancy agreement.
14. I met with the Claimant around 11 am on Monday 10 December 2012 in Xstrata's boardroom in London. This meeting took place immediately after a meeting with Jason Wilkins, Head of IT for Xstrata plc.
15. The Claimant told me that he had had a brief discussion with Trevor Reid about his future and Trevor Reid had raised the issue of a possible consultancy agreement but the Claimant was not sure whether to enter into a consultancy agreement with Glencore following the Merger and he wanted to explore the available options with me. I told the Claimant that we could explore the available options but he should first understand how the payment of a proposed Transaction Bonus impacts on his thoughts about the future. I explained to the Claimant that prior to the proposed Merger he would be awarded a Transaction Bonus in an amount equal to his total 2012 remuneration and that this would be paid on the condition that the Claimant would no longer have an entitlement to a Prescribed Sum under his contract of employment if his employment was terminated following the Merger. I said that the effect of this proposed payment was to provide the Claimant with a clean slate for making decisions about the future, i.e., the Transaction Bonus would put the Claimant in a position where he had in effect received his Prescribed Sum so he could then make a decision whether and in what capacity and for how long he might want to carry on following completion of the Merger without concern about what impact any decision might have on his Prescribed Sum. As part of this discussion, I used the term double-dipping (I used this term as it was the phraseology used by Mick Davis) to emphasise that the Claimant could not receive the Transaction Bonus and then later claim an entitlement to a Prescribed Sum as well, i.e., the Claimant could not double-dip.
16. I then asked the Claimant whether he wanted a role with Glencore longer term or whether he wished to move onto something different, and, if so, whether he was agreeable to a short term role for assisting with integration. The Claimant was not sure what he wanted to do longer term. He stated that he expected that John Burton would need some assistance but he would have to understand what role there might be and for how long. I told the Claimant he would be best to discuss this directly with John Burton and make up his mind about what he wanted to do in the shorter and/or longer term and that decision could guide arriving at the right form of any ongoing engagement. I explained to the Claimant that if he was thinking of only staying on short term, his existing employment contract could continue and he could agree that the notice period under his contract would run its course. Alternatively, he could enter into a consultancy agreement for a defined period with monthly consultancy payments set at the same gross amount as his then existing fixed monthly remuneration amounts. If he felt he wanted a longer term role assisting John Burton in some capacity, he would be best to take that up with John Burton and seek new terms of employment. Finally, if he decided he wanted to move on and seek opportunities elsewhere, that was equally open to him. I said to the Claimant that he had this range of possibilities because the proposed payment of the Transaction Bonus effectively satisfied any Prescribed Sum entitlement he might have so he would be best to make a decision about his future based on any considerations that may be important to him other than Prescribed Sum entitlement considerations, which would no longer be relevant.
17. I did not ask the Claimant for a specific acknowledgement or consent to the "no double-dipping" principle as I did not feel I had to; it was clear to me that the Claimant understood the basis on which the Transaction Bonus would be paid and at no stage did he indicate any disagreement with the proposed payment arrangements.
19. Following my discussion with the Claimant on 10 December 2012, I understood that a letter would be delivered to the Claimant and other recipients of the Transaction Bonus confirming payment. This was the usual practice for salary reviews, annual bonuses and special bonuses whereby letters would be prepared and signed by Mick Davis in Zug and then couriered to the relevant distributors (in the case of the London office, to Gurjit Sekhon, Financial Controller and Payroll Administrator for the Defendant) who personally handed them out and then arranged for payment through the payroll."
- It was common ground that, apart from Mr. Elliston, eleven other executives had entered into contracts of employment with Xstrata which contained provisions mutatis mutandis like clauses 9.4, 9.5 and 9.6 of the Service Agreement. It was also common ground that all of the executives who had entered into such contracts also received a "Transaction Bonus" in December 2012, along with a further eleven executives whose contracts of employment made no such provision. The evidence of Mr. O'Brien was that he had spoken to all of these executives in December 2012 to explain that the payment of a "Transaction Bonus" was on the footing that none of the recipients would be entitled to claim a "Prescribed Sum" or any redundancy payment in the event of his contract being terminated after the merger of Xstrata plc and Glencore International plc. Mr. O'Brien was called to give evidence on behalf of Xstrata at the trial. He accepted in cross-examination that he had made no notes of any of the conversations with executives, including Mr. Elliston, which he said that he had had. He also had no written or electronic record of the date or time of any of the alleged meetings of which he spoke.
- Naturally Mr. Elliston was called to give evidence on his own behalf. In advance of the giving of his evidence he made a witness statement dated 18 July 2014. His account of the meeting which he accepted he had had with Mr. O'Brien was rather different from Mr. O'Brien's account. Mr. Elliston accepted in cross-examination that he was in error in his witness statement as to the date of his meeting with Mr. O'Brien, which must have been on 10 or 11 December 2012, and not as he had remembered the date. Again, in cross-examination Mr. Elliston put the duration of the meeting at about five minutes, with only about 30 seconds devoted to discussion of the matter of the December Bonus. Mr. O'Brien, in his cross-examination, told me that in fact the meeting was of some length.
- What Mr. Elliston said in his witness statement about the meeting with Mr. O'Brien in December 2012 was:-
"22. On Thursday or Friday, 13th or 14th December 2012, Xstrata plc's head of Human Resources, Mr. Dominic O'Brien, who is based in Switzerland, came into my office in London. In the Defence in this claim it states that he met with me on Monday 10th December 2012, but I deny this on the basis that my recollection is that there were a significant number of days between the two events of receiving the Transaction Bonus letter and the day when Mr. O'Brien came into my office. I had received the Transaction Bonus letter prior to any meeting with Mr. O'Brien and deny otherwise as maintained by Glencore Services (UK) Limited in their Defence.
23. As a result of the forthcoming Merger, it was suggested to me by Mr. Trevor Reid, Chief Financial Officer and executive director of Xstrata plc that as Glencore plc would have a continuing role for me in helping to wind-up Xstrata and other matters, Xstrata Services (UK) Limited should enter into a six months consultancy agreement with me to take effect from completion of the merger. Mr. O'Brien had confirmed by email on 5th December 2012 that when he is in the office the following week he would sign up the documents with me. Therefore when he came into my office on either 13th or 14th December I asked him whether he had prepared my Consultancy Agreement and when would this be signed. He replied that it had been decided that, after discussion with Freshfields, Solicitors, it would be better for me to make my own arrangements with Glencore plc.
24. I note that in an email disclosed by the Defendant from Mr. O'Brien to Mr. Mehra, Human Resources, (reports to Mr. O'Brien) and also based in Switzerland, of Sunday 9th December 2012 at 16.35 it states "Richard Elliston and […] will terminate their employment and enter into a 6 month Consultancy Agreement following completion. Please can you figure out their monthly total fixed remuneration for 2013 so that we can use such amount as the consultancy fee." So, if my meeting with Mr. O'Brien had been on Monday, 10th December 2012, as alleged by Glencore Services (UK) Limited the decision concerning any consultancy agreement had already changed since the previous evening.
26. Following the discussion about the promised Consultancy Agreement with Mr. O'Brien, I said I was surprised/delighted to be paid a Transaction Bonus, at which point Mr. O'Brien said "we prefer that people don't double-dip or waste money on legal fees". I was confused by this statement for the reasons that:-
(a) the Transaction Bonus letter that I had already received prior to any meeting with Mr. O'Brien, was clear and explicit;
(b) the Transaction Bonus amount was equal to the MIA (which I knew had been turned down by the shareholders) and my immediate thought was that this was paid in lieu of the MIA Initial Retention Bonus contrary to shareholders' wishes;
(c) the amount of the Transaction Bonus was neither the same amount as the Prescribed Sum would be if it became payable in 2012 or 2013.
I decided, in the moment, simply to change the subject to other matters, for example to the status of the competition authority approvals and the likely completion dates.
27. Contrary to the Defence document, paragraph 17, Mr. O'Brien did not explain that I was going to be awarded a Transaction Bonus or the amount of the bonus. He did not need to as I had already received the Transaction Bonus letter. Moreover there was no mention of the Prescribed Sum. Nor did he explain:-
(a) that the Transaction Bonus was in lieu of the Prescribed Sum;
(b) or that payment of the award was conditional on my agreement to waive my Prescribed Sum rights;
(c) or that the Transaction Bonus would operate as an amendment of my contract of employment;
(d) or why the letter was written as a Transaction Bonus letter instead of a payment in lieu of the Prescribed Sum, or alternatively as an advance payment of the Prescribed Sum, or why the letter did not include a waiver of rights;
(e) or that the payment of the Transaction Bonus would be made on 14th December 2012 and required my acceptance before that date, otherwise acceptance would be implied;
(f) or any other such condition."
- The Variation Defence stood or fell on Xstrata's pleaded case as improved by the evidence of Mr. O'Brien. I am afraid that I felt unable to accept the evidence of Mr. O'Brien, insofar as it differed from that of Mr. Elliston as to the substance of the conversation on 10 or 11 December 2012 – the precise date was not important. I was impressed by the way Mr. Elliston gave his evidence, which was measured and careful, despite a forceful cross-examination from Mr. Craig. I have already indicated that the pleaded case of Xstrata, insofar as Mr. O'Brien's evidence seemed to be an improvement upon it, actually cast doubt on the accuracy of the evidence of Mr. O'Brien. I have also pointed out that what was written in Mr. O'Brien's letter to Mr. Elliston dated 29 April 2013, in the passage adverting to the waiver of any right to the "Prescribed Sum", did not support the case advanced on behalf of Xstrata at trial. However, these features were not the only material put before me at the trial which led to my conclusion that the evidence of Mr. Elliston as to the substance of his conversation with Mr. O'Brien should be accepted, and the evidence of Mr. O'Brien be rejected.
- The evidence of Mr. Elliston as to the state of play concerning a likely consultancy agreement for him after the merger, as at 10 December 2012, was supported, and the evidence on that point of Mr. O'Brien discredited, by copies of contemporaneous documents which were adduced at the trial.
- That the issue of a consultancy agreement was not a vague thought, but a positive wish of Mr. Elliston as at 10 December 2012, was borne out, first, by an e-mail sent by Mr. Reid to Mr. Davis and Mr. O'Brien at 10.23 hours on 5 December 2012:-
"I had a chat with Richard Elliston this morning. He is understandably anxious about his future and has had no contact from Glencore.
He would like, and I would support, his resigning at closure with a 6 month consultancy on a pro-rata monthly rate. I think that there will be a lot of secretarial issues that will need to be resolved in the winding up of X plc and G will need him in a consultancy role.
If this arrangement is ok with you can I ask Richard to call Dom and set the wheels in motion."
- Mr. O'Brien himself replied in an e-mail to Mr. Davis and Mr. Reid sent at 12.20 hours on 5 December 2012:-
"I'll sit down with Richard when I am in the office next week and sign up the docs."
- As Mr. Elliston noted in his witness statement, at 16.35 hours on 9 December 2012 Mr. O'Brien sent an e-mail to Mr. Mehra in which he said:-
"Richard Elliston and Jason Wilkins will terminate their employment and enter into a 6 month consultancy agreement following completion. Please can you figure out their monthly total fixed remuneration for 2013 so we can use such amount as the consultancy fee."
- It was implicit in the evidence of Mr. O'Brien that an intended recipient of a "Transaction Bonus" like the December Bonus would not receive it unless he first agreed not to make any claim subsequently for the "Prescribed Sum". However, the evidence adduced during the trial showed plainly that arrangements were made for the making of such bonuses without any regard to the obtaining of any such agreements from any intended recipient.
- The first obvious point is that each of the letters by which a recipient was notified that he was to receive a "Transaction Bonus" was apparently dated, as was the letter to Mr. Elliston, 4 December 2012, a date before it was suggested by Mr. O'Brien he had spoken to anyone, and in particular not Mr. Elliston, in London who was intended to receive a "Transaction Bonus".
- Mr. Akhlaq Choudhury, who appeared on behalf of Mr. Elliston, also emphasised, rightly, that the terms of the letter notifying Mr. Elliston that he was to receive the December Bonus did not in any way foreshadow a suggestion that he would only receive it if he agreed to give up any entitlement to the "Prescribed Sum".
- Joyce Margarit, the personal assistant to Mr. Davis, sent an e-mail at 17.31 hours on 6 December 2012 to Gurjit Sekhon in which she said, so far as is presently material:-
"As mentioned earlier, attached please find:
2013 Salary Increase Schedules (including Noclaf)*
Copies of the 2013 Salary Increase Letters – for your records*
2012 Performance Bonus Schedules (including Noclaf)*
Transaction Bonus Schedules*
Copies of the Bonus Letters – for your records*
It would be appreciated if the December salary plus the bonus payments can be made mid-December."
- There was no suggestion in that e-mail that the making of the bonus payments might be conditional upon anything, or that some, or all, of them might not be made, for example if an intended recipient did not agree to forgo any entitlement to a "Prescribed Sum".
- At 6.44 p.m. on 6 December 2012 Joyce Margarit sent an e-mail to Trevor Reid in which she said, inter alia:-
"The London salary increase letters, performance and transaction bonus letters, are being couriered to London this evening – just for your info. Gurjit will hand them out tomorrow, and I've asked if she can arrange payment of the bonuses mid-December."
- Mr. Reid replied at 19.52 hours on the same day, and made no comment to the effect that "Transaction Bonuses" were not to be paid unless and until intended recipients agreed not to make any claim for a "Prescribed Sum".
- There were, however, some exchanges of a rather elliptical nature between Joyce Margarit and Trevor Reid which demonstrated an awareness of the fact that some, at least, of the intended recipients of a "Transaction Bonus" could also, potentially, claim a "Prescribed Sum".
- Thus in responding to Mr. Reid's e-mail sent at 19.52 hours on 6 December 2012 Joyce Margarit commented that, "Also we need to chat to you about what we've done re bonuses so that we're all on the same page". What that might mean was suggested by an e-mail which Joyce Margarit sent to Mr. Reid at 06.36 hours on 7 December 2012, in which she wrote, "I will need to explain what was decided re the transaction bonuses in the first attachment", but that still left obscure what had been decided about "Transaction Bonuses". What that had been did not appear to have been clear to Mr. Reid. In an e-mail which he sent to Joyce Margarit at 06.52 hours on 7 December 2012 he wrote:-
"In relation to the transaction bonuses can I please see the transaction bonuses we are paying to other employees (Usmar.Irvine etc)
Also we agreed transaction bonuses for other corporate employees who were not on prescribed sum contracts – I presume these are also being paid now. Do you have a schedule of these payments."
- A minute later Mr. Reid sent another e-mail to Joyce Margarit saying, "Ignore second comment".
- No other e-mails were exchanged between Joyce Margarit and Mr. Reid, or between any other representatives of Xstrata, concerning payment of a "Transaction Bonus" and any reference to a "Prescribed Sum" before the meeting between Mr. Elliston and Mr. O'Brien on 10 or 11 December 2012 on the face of the documents copies of which were adduced in evidence. Thus there was no evidence in any contemporaneous document to suggest that the December Bonus was only going to be paid to Mr. Elliston if Mr. Elliston agreed to forgo his entitlement under clauses 9.4, 9.5 and 9.6 of the Service Agreement. In other words, there was no contemporaneous documentary evidence to support the evidence of Mr. O'Brien that there was any such condition, or to foreshadow his evidence that he raised that matter in clear terms with Mr. Elliston.
- In his closing submissions Mr. Craig relied upon an e-mail sent by Richard Marshall, General Counsel of Glencore International plc, to Mr. Ivan Glasenberg, Chief Executive Officer of Glencore International plc, at 16.50 hours on 12 December 2012, as supporting the evidence of Mr. O'Brien. What Mr. Marshall wrote was:-
"You will recall we discussed Sunday night that those Xstrata employees who do not have a change in the terms of their employment contracts do not have an entitlement to the Prescribed Sum as a result of a Change in Control.
I have now been told confidentially that Xstrata has taken the position that because it is not clear whether employees are entitled to the payment on a Change in Control, they are just going to pay the Prescribed Sum now anyway in the form of transaction bonuses."
- It was not clear what exactly I should make of that e-mail. Mr. Marshall did not reveal his source of information. He did not indicate in what circumstances the information had come to him, for example, whether in answer to a question from him, or as a result of it being volunteered. Why all this mattered was that the evidence of Mr. O'Brien in cross-examination was to the effect that how the matter of "Transaction Bonuses" was dealt with, in particular with there being no documentary evidence to qualify what was said in the letters to recipients, including Mr. Elliston, dated 4 December 2012, or to record any condition that a recipient must forgo any entitlement to a "Prescribed Sum", was, amongst other things, to avoid having to consult Glencore International plc about the matter. What Mr. O'Brien said, at Transcript, Day 2, page 54 line 23 to page 55 line 10 was:-
"I discussed with Freshfields about the preparation of documents, around how we might want to try and effect these arrangements. Their advice to us was that if we prepared written documentation around these specific arrangements, then arguably that would have been a document that we should have been consulting Glencore about or potentially the [Takeover] panel. So we would have put control in the hands of Glencore, which we didn't want to do. We wanted to control our destiny of how we dealt with our employees. We had a history of paying transaction bonus. We relied upon that as a way of making payment, and then I agreed orally confirmed what the terms and conditions of the payment were."
- I accept that evidence. But it follows that what Mr. Marshall was told was likely to have been conveyed to him to fend off further enquiry from Glencore International plc, and not necessarily because it was true. In any event what Mr. Marshall was told did not deal with the payment of "Transaction Bonuses" to executives of Xstrata who were working under a contract of employment which made no provision for payment of a "Prescribed Sum". What Mr. Marshall was told implicitly indicated that no one who was not potentially entitled to a "Prescribed Sum" was going to get a "Transaction Bonus".
- Given that the position of Mr. O'Brien was that all of those who were intended recipients of a "Transaction Bonus" were spoken to by him, and had explained to them that it could only be received in return for giving up any right to a "Prescribed Sum", if otherwise potentially entitled to one, and any other entitlement to a payment in the nature of a redundancy payment, it was of some significance to consider the evidence, such as it was, of what Mr. O'Brien said about a "Transaction Bonus" and the linkage with a "Prescribed Sum" to other intended recipients.
- In an e-mail sent to Mr. Reid at 09.40 hours on 14 December 2012 Mr. Wilkins wrote, concerning his conversation with Mr. O'Brien:-
"I was a bit shocked when Dom told me the Transaction bonus was not a transaction bonus. That it was my prescribed sum and as such out of the goodness of our hearts we are not to pursue our contractual entitlement if the clause could be exercised."
- Mr. Choudhury relied heavily upon that passage. Mr. Craig submitted that the words, "out of the goodness of our hearts we are not to pursue our contractual entitlement" were intended as a flippant observation. By that I understood him to mean that those words were not intended as a correct statement of what Mr. Wilkins had been told, but rather was an ironic way of describing being required to give up entitlement to a "Prescribed Sum" in consideration of receiving a "Transaction Bonus". However, it was far from clear that Mr. Craig's submission was sound. If what Mr. Wilkins had been told was that, as it were, because he was to receive a "Transaction Bonus", he should "do the decent thing" and not also later claim a "Prescribed Sum", what he wrote was accurate. However, if what he wrote was accurate, what Mr. O'Brien said to him was not that, in consideration of the payment of a "Transaction Bonus", he was giving up a right to a "Prescribed Sum", but rather that, in the circumstances, the honourable thing was not to claim it.
- That interpretation of Mr. Wilkins's e-mail was not fanciful, for there were various other recipients of a "Transaction Bonus" who generated e-mails in which he asserted that he had not agreed to give up any right to a "Prescribed Sum". Mr. Wilkins himself elaborated upon his position in an e-mail sent to Mr. Mehra at 09.07 hours on 11 February 2013:-
"Ok thanks i heard Ivan knows who had transaction bonuses and when he finds out who has a prescribed sum clause when we merge or we share with them they knows we are not to be paid it.
Strange how i could gave [have] mis understood that."
- Mr. Wilkins later, in an e-mail sent to Mr. Reid at 09.16 hours on 25 February 2013, indicated that he had never intended to claim his "Prescribed Sum", but he did not, in that e-mail or otherwise, retract his comments in the e-mails from him which I have quoted. Indeed, in an e-mail sent to Mr. Reid at 17.58 hours on 25 February 2013 Mr. Wilkins explained his position in this way:-
"Today I was called by Cyril as he wanted to discuss myself and my team. I communicated to Cyril that when he looks to offer me a role/contract that I will not be expecting to be paid my Prescribed Sum.
Cyril asked me why and I said I was paid a Transaction Bonus in December and that was in lieu of this.
He asked lots of questions to understand what I was talking about and why I would walk away from what I am contractually entitled to.
He asked it [sic, "if" seems to have been meant] the Transaction Bonus was equal or more than my Prescribed sum. I advised it was equal to, as such he said "then you did not get a Transaction Bonus for one of the largest transactions to date".
He also asked me if I signed a letter or if the Transaction Bonus letter had a clause that cancelled out my Prescribed Sum clause in my contract, of which I said no.
As such he is very confused why out of the goodness of my heart I would not want to pursue my contract.
This is very difficult for me as I do not want to say the wrong thing for it to come back to you guys again and cause any upset or look like I am going back on what I said. "
- Another of the recipients of a "Transaction Bonus" was Mr. Mark Sawyer. In an e-mail sent to Mr. Ian Wall, Mr. James Kelly and Mr. Richard Laithwaite, who all also received a "Transaction Bonus", at 13.35 hours on 1 March 2013 Mr. Sawyer wrote:-
"Spoke to Anil [Mehra]. He gave me the distinct impression for us there is no redundancy payment if we don't accept a job with GIAG. He said the payment before Xmas was in lieu of a redundancy payment. He is coming over next week. He said all of us spoke to Dom [O'Brien] in December when this was explained. Am I alone in not having been spoken to? Suggested to Anil that we all is [sic] down next week and talk about this as a group. Do you agree?"
- On the face of that e-mail Mr. Sawyer was asserting that he had not spoken to Mr. O'Brien at all in December 2012 about his "Transaction Bonus". Mr. Craig submitted that, properly understood, what Mr. Sawyer was writing about was an entitlement to a redundancy payment. I am not persuaded that that is correct, but the important point so far as this e-mail is concerned was his contention that he had not spoken to Mr. O'Brien at all. On Mr. O'Brien's evidence he did speak to Mr. Sawyer, as to everyone else who was to receive a "Transaction Bonus", and explained to him that Mr. Sawyer could not receive a "Transaction Bonus" unless he agreed to forgo any entitlement to a "Prescribed Sum".
- Mr. Kelly replied to Mr. Sawyer's e-mail by an e-mail sent at 13.41 hours on 1 March 2013. He said:-
"Dom said the same to me last month. My response was the same as yours. More than happy to sit down as a group."
- The position of Mr. Kelly, according to that e-mail, was that Mr. O'Brien had not spoken to him either. Mr. Laithwaite replied in an e-mail sent at 13.44 hours on 1 March 2013 that, "I have had this conversation with Dom also". From the e-mail chain it seemed that that was a comment upon what Mr. Kelly had said.
- Mr. Wall's contribution came in an e-mail sent at 14.33 hours on 1 March 2013:-
"Totally agree, this is blatant butt covering because they fucked up. I have a contract plain and simply [sic] and my employer whoever that ends up being can honor [sic] it"*."
- That colourful e-mail was perhaps a little less easy to understand, but it seemed that Mr. Wall's position at that time was that he had a contractual right to a "Prescribed Sum" in addition to what had been paid to him as a "Transaction Bonus", and he intended to hold Xstrata to it.
- Mr. Sawyer amplified his position in an e-mail sent to Mr. Mehra at 15.47 hours on 1 March 2013. His e-mail included:-
"When we spoke you said that a general redundancy policy would not apply to me as I had a specific clause in my contract – the prescribed sum. You also said that it would be triggered if I went to work in the combination in Baar but was subsequently made redundant. I am confused because I can't understand the relevance of me moving to Baar and then being made redundant as being necessary prerequisites to being made redundant. I have a job and a contract in London; requiring me to move to switzerland [sic] is essentially making me redundant. You also said if I didn't move to Baar then I would simply 'leave' on the effective date. Again, I am confused as I have a contract which is still in existence and I would have thought the correct process would be to make me redundant. You mentioned that I received an amount before Christmas equivalent to my prescribed sum and implied this was in some way in lieu of any redundancy if I didn't move to Baar. As I explained to you, nobody has ever explained to me that I was effectively signing away my contractual rights by accepting what was explicitly stated to be an annual bonus and transaction bonus. If that had been the intention then why didn't you request people waive the prescribed sum as a condition for receiving the transaction bonus? I therefore refute any claim that I have waived my rights to redundancy. Morally it would not sit comfortably with me to claim the prescribed sum when i received such a large annual bonus and transaction bonus but let me make it clear the two are entirely separate. If they were linked then you should have made that clear and asked people to waive the prescribed sum clause as a condition of receiving the annual/transaction bonuses. No attempt was ever made to do that."
- It could not be plainer that the position of Mr. Sawyer at that time was that no one had spoken to him to explain, or to seek his agreement, that his "Transaction Bonus" would only be paid on terms that he gave up any entitlement to a "Prescribed Sum".
- In an e-mail sent at 15.19 hours on 1 March 2013 Mr. Kelly elaborated his position:-
"I completely agree and like you have never been asked to sign any form of waiver over might [sic] rights and nor was it explained/communicated (orally or in writing) to me at the time that my transaction bonus was in lieu of any redundancy package. Regardless of qualifying for a redundancy package, surely they have to honour our notice period meaning a minimum of three months more salary?"
- Again, the terms in which Mr. Kelly expressed himself were perhaps a little obscure, but it was plain that he was asserting that no one had spoken to him to explain that his "Transaction Bonus" was in lieu of something.
- Andrew Latham, who was also a recipient of a "Transaction Bonus", explained his view in an e-mail sent at 16.00 hours on 1 March 2013 as follows:-
"I have had no conversations of any kind, although there seems to be a general belief that we all have enough to live on for 6-9 months at least and everything is fine …"
- Once more the important point was that Mr. Latham was contending that he had not had any conversations in relation to his "Transaction Bonus".
- Mr. Mehra forwarded to Mr. O'Brien the e-mail which Mr. Sawyer sent to him at 15.47 hours on 1 March 2013. Mr. O'Brien commented upon Mr. Sawyer's allegations in an e-mail to Mr. Reid, copied to Mr. Mehra, sent on the same day. What he said was very interesting in the light of his evidence at the trial. He wrote:-
"Trev – Mark Sawyer is now raising the issue of entitlement to P[rescribed]S[um] notwithstanding the T[ransaction]B[onuse]s. The same day that I was in London (10 Dec) last year to discuss with Jason, I specifically remember speaking with Mark (the conversation took place during the afternoon in the room by reception where I always sit) about our decision to pay TBs in the same amount of people's PS to give them the free option to choose what they would like to do with their futures. I said we were not requiring written waivers to be entered into and we expected people to respect the no double-dip principle given that we were doing everyone a favour by paying the PSs as TBs early to give everyone the free option to decide what they wanted to do with their futures – either walk or join G and stay on permanently and in no case have to fight G for their PS. He said to me that he wouldn't double dip because it is a small world and he would rather move into a new job without leaving X or G/X under some sort of cloud of dispute. Anil discussed with him this afternoon after Mark raised it with him (Anil reminded him of my 10 December discussion and he denies it). Anil said that he and I would be in town next week and we could discuss then so we will do so on Tuesday afternoon when we arrive. I just wanted to let you know promptly that this has arisen in case he brings it up with you. We can discuss when I am there next week."
- It is to be noted that Mr. O'Brien said in terms to Mr. Sawyer, according to that account, that a written waiver was not required. At paragraph 17 of his witness statement Mr. O'Brien said, in relation to his conversation with Mr. Elliston, that, "I did not ask the Claimant for a specific acknowledgement or consent", but with Mr. Sawyer, it appeared, he had gone further and told him specifically that no waiver was required. However, the critical phrase in Mr. O'Brien's e-mail of 1 March 2013 was, "we expected people to respect the no double-dip principle". That is, essentially, exactly what Mr. Elliston contended Mr. O'Brien had said to him, and seems to have been what Mr. Wilkins contended Mr. O'Brien had said to him. In other words, it was not a condition of payment of a "Transaction Bonus" that the recipient agree to forgo any entitlement to a "Prescribed Sum". Rather Xstrata expected recipients to do the decent thing and not claim. Another part of Mr. O'Brien's e-mail of 1 March 2013 which resonated with the evidence of Mr. Elliston as to what he was told by Mr. O'Brien was the reference to "in no case have to fight G for their PS". That appeared to be the same point as not having to "waste money on legal fees".
- It was common ground between Mr. O'Brien and Mr. Elliston that, in the conversation between them on 10 or 11 December 2012, Mr. O'Brien had used the expression "double dip". That, apparently colloquial, expression seemed to have no very definite meaning, but the concept underlying it appeared to be that something was being claimed twice. If the conversation between Mr. O'Brien and Mr. Elliston had been to the effect asserted by Mr. Elliston, what he was told was that he was getting the December Bonus, something he already knew, and, in the circumstances, the honourable thing was not also to claim a "Prescribed Sum" – that would be double dipping. If the conversation had been to the effect which Mr. O'Brien claimed at the trial the concept of double dipping was irrelevant. In consideration of receiving the December Bonus Mr. Elliston had agreed to forgo any right to a "Prescribed Sum". Consequently double dipping was no longer possible. This consideration also supported the account of Mr. Elliston and did not support the account given at the trial by Mr. O'Brien.
- Another aspect of the evidence of Mr. O'Brien in his witness statement that appeared odd was his contention in paragraph 19 that, "Following my discussion with the Claimant on 10 December 2012, I understood that a letter would be delivered to the Claimant and other recipients of the Transaction Bonus confirming payment". It was unclear from that sentence exactly what Mr. O'Brien meant. He was asked about it in cross-examination, and then said that actually it was a letter in the terms of the letter dated 4 December 2012 from Mr. Davis to Mr. Elliston to which he intended to refer. It followed that Mr. O'Brien was unaware, when he spoke to Mr. Elliston, or any of the other people he says he spoke to in London on or about 10 December 2012, that his interlocutor had already received the letter. That seems unlikely, not least because one would have expected that it would have become clear to Mr. O'Brien as soon as he raised the possibility of a "Transaction Bonus" with someone to whom he spoke, that that person already knew about it. I am afraid that I had a concern that, by the sentence which I have quoted, Mr. O'Brien was trying to create the impression, incorrectly, that the terms of offer of a "Transaction Bonus" were fixed by him with all relevant persons in conversation before any letter of notification arrived.
- A further matter which, in my judgment, supported Mr. Elliston's account, albeit a rather secondary consideration, was that Mr. Elliston made no attendance note of his meeting with Mr. O'Brien on 10 or 11 December 2012. As matters developed subsequently concerning whether or not Mr. Elliston had agreed not to claim a "Prescribed Sum", Mr. Elliston did make quite detailed attendance notes. That was not surprising, given that he is a qualified solicitor. If he had a conversation with someone which was relevant to his entitlement, or not, to a "Prescribed Sum", he made a note of it, starting with a note he made of conversations with Mr. John Burton, at that time company secretary of Glencore International plc, on 5 February 2013. The absence of an attendance note of the conversation with Mr. O'Brien on 10 or 11 December 2012 is at least suggestive of nothing which Mr. Elliston considered to be of significance having been said by Mr. O'Brien on that occasion.
- The considerations which I have identified led me to my conclusion that I should accept the evidence of Mr. Elliston as to the substance of his conversation with Mr. O'Brien on 10 or 11 December 2012 in preference to the evidence of Mr. O'Brien given at the trial.
- The evidential burden of proving that the conversation had been as Mr. O'Brien asserted at the trial was upon Xstrata. There was no evidential burden on Mr. Elliston to disprove it. However, Mr. Craig, in his cross-examination of Mr. Elliston and in his closing submissions launched a sustained attack upon the credibility of Mr. Elliston. It is appropriate that I deal with some of the points upon which Mr. Craig relied.
- Heavy reliance was placed by Mr. Craig upon Mr. Elliston's evidence as to how he learned that it was being contended on behalf of Xstrata that because he had received the December Bonus, he was not entitled to a "Prescribed Sum". Mr. Elliston knew that by the time of his meeting with Mr. Burton on 5 February 2013. As I have said, Mr. Elliston himself made an attendance note of that meeting. A copy of the attendance note was adduced in evidence at the trial. It included:-
"Burton raised the subject of the prescribed sum and offered the information that Glencore had recently learned that Mick Davis had paid a transaction bonus to senior staff which was for an equal amount of the first payment under the MIA retention bonus. Glencore were infuriated by this which they considered to be in direct contravention of shareholders expressed wishes not to pay the MIA. I told him that I was also surprised but understood that transaction bonuses were paid by Xstrata on numerous acquisitions, that I had not received any such bonus in the past, probably because my role was limited, but that I had also been given a transaction bonus for the merger as I had played an important role in seeing it through e.g. and not least, a substantial amount of extra work and three extraordinary general meetings in six months.
He said that this had caused a lot of problems for Glencore in how to deal with it. Only one person had actually made a claim (the CEO of Xstrata Coal) and an arrangement had been made resolving this in the context of his new contract of employment with Glencore to continue in his current role. He said that the head of HR (Dom O'Brien) had told everyone on receipt of the bonus that this was instead of the prescribed sum. He asked me what my view of it was. I told him that in my case I had not been told immediately but learned of this at a much later date. …"
- Mr. Burton was called to give evidence on behalf of Xstrata. He agreed with that account of that part of his meeting with Mr. Elliston on 5 February 2013, save that his recollection was that Mr. Elliston had identified the source of his information that the December Bonus was in lieu of a "Prescribed Sum", and had said that that source was Mr. O'Brien.
- In his witness statement Mr. Elliston said, at paragraph 31:-
"I met Mr. Ian Wall, the Group Treasurer on two occasions at my initiative to understand more about the Transaction Bonus. The first occasion was on or about 8th January 2013 when I asked him if he knew anything about the circumstances surrounding the Transaction Bonus and the second occasion was on 26th April 2013 when Ian Wall told me that he had suggested the payment of the Transaction Bonus to Mr. Reid, as a means of ensuring that the amount of the Prescribed Sum was paid. …"
- Mr. Elliston was cross-examined about discussions which he had with anyone concerning the relationship between the December Bonus and the "Prescribed Sum". That cross-examination included, at Transcript, Day 1, page 117 lines 2 – 16:-
"Q. As I understand it, after your discussion with Mr. O'Brien in the week of 10 December, the next discussion you had about the relationship between the bonus and the prescribed sum, the transaction bonus and the prescribed sum, was with Mr. Burton; is that right?
A. Yes, after – first of all, 8 January and then 5 February.
Q. You do not tell us anything about the discussion you had on – Mr. Wall said anything of significance to you on 8 January; is that right?
Q. The next substantive discussion you had about the prescribed sum and the transaction bonus was about eight weeks later on 5 February 2013, correct?
- Mr. Craig interpreted that exchange as amounting to an admission on the part of Mr. Elliston that nothing substantive had been said by Mr. Wall to Mr. Elliston on 8 January 2013. On that hypothesis the following exchanges took place, Transcript, Day 1, page 119 line 12 – page 121 line 22:-
"Q. You have told us that you had no substantive discussion with anybody about the prescribed sum being in lieu or – sorry, the transaction bonus being in lieu of the prescribed sum with anybody after your discussion with Mr. O'Brien until you spoke to Mr. Burton on 5th.
A. Sorry, where does it say that I had not had a substantive discussion?
Q. I put to you just before – when I started this section of my questions, I asked you about the conversations you had had. I put to you that you had had a further discussion with Mr. O'Brien on 20 February?
Q. I put to you you had had discussions with Mr. Wall?
Q. These are the discussions you refer to in your witness statement?
Q. I assume they are a complete account?
Q. You have told us you had no substantive discussion with Mr. Wall on 8 January and it was in April that he told you that the transaction bonus had been paid in lieu of the prescribed sum, and you accepted, when I put it to you – just so you have the context that – that this, therefore, was the next substantive conversation you had had about the transaction bonus and the prescribed sum. That is what I put to you and that is what you accepted but it is clear, is it not, from this that you accepted in your discussion with Mr. Burton on 5 February –
A. I am sorry, but paragraph 31 we have had Mr. Wall telling me.
Q. And I put both of those comments?
A. You said I have put that in 31.
Q. I put it to you, Mr. Elliston, and you accepted that you referred to two conversations there but he said nothing substantive on 8 January. The substantive part was 26 April and you have accepted that?
A. I do state on 8 January that:
"Ian Wall told me that he had suggested the payment of transaction bonus … (Reading to the words) … prescribed sum was paid."
Whether you call it a substantive discussion or not he has conveyed that information to me there, so I do not understand what your problem is with this later paragraph.
Q. I suggest to you, Mr. Elliston, that you have – the penny has dropped, has it not, that the difficulty that this chronology creates for you. Let us have a look at paragraph 11 of Mr. Burton's witness statement, please, behind tab 2 of Bundle B, and have a look, please, at paragraphs 9 to 11, just to remind yourself. I am going to come to the detail of it?
Have you read those?
Q. On that account of your discussion with Mr. Burton on 5 February you said to Mr. Burton that you had been told that the transaction bonus had been paid in lieu of the prescribed sum, yes?
A. Yes, which is what Ian Wall told me."
- There were then further exchanges, until Mr. Elliston was asked who had given him the information which he recorded conveying to Mr. Burton and which he noted in his attendance note, Transcript, Day 1, page 124 line 2 to page 125 line 24:-
"A. I am not talking about O'Brien there.
Q. Who were you talking about?
A. Whoever it was that conveyed that information to me.
Q. Who do you say that was?
A. Well, I do not know. I do not think I – I am almost certain I did not rush around the office asking everybody, you know, straight after this, but probably in the weeks that followed I did have conversations with various people. I mean, I have not put down conversations which I have had with every single person, you know, during this time.
Q. It could be an extremely important conversation in the context of the litigation, if somebody had told you in terms that the transaction bonus had been paid in lieu of the prescribed sum, would it not? This could be a very important conversation?
A. This could be referring to the conversation with Ian Wall.
Q. This could be referring to the conversation with Ian Wall?
Q. You told us just before that on 8 January nothing really substantial was said. It was on 26 April?
A. Sorry, you have to read the last three lines of that paragraph.
A. I misread that.
Q. I think you accept then, Mr. Elliston, that Mr. Wall does not come to your aid in this context?
A. He does, actually, because when I am talking about the circumstances surrounding the transaction bonus, as I mentioned, the issue that was playing on my mind actually at that time was the circumstances surrounding it: how has this arisen that we have a letter which is clearly specific, being produced to everybody, which then, at a later stage, apparently has conditions attached to it, and really, what was – and it was handled in a very, very strange way, as I have mentioned. All sorts of things were not done that ought to have been done, particularly compared with changes and revisions to the MIA, and I think that here I am talking about if I knew anything about the circumstances surrounding the transaction bonus."
- From the totality of the cross-examination of Mr. Elliston, and in particular those passages which I have quoted, Mr. Craig submitted at paragraph 46 of his written closing submissions:-
"If there was no substantive discussion about the Prescribed Sum and the Transaction Bonus between 10 December 2012 and 5 February 2013, it is clear beyond a peradventure that when C told Mr. Burton on 5 February 2013 that he had been told that that Transaction Bonus was being paid instead of the Prescribed Sum, he can only have been told that by Mr. O'Brien on 10 December 2012."
- Mr. Craig went on, in his written closing submissions:-
"47. Note also C's telling comments about conditions being imposed by Mr. O'Brien at that meeting (when giving a lengthy answer not addressing the question that he had in fact been asked. Transcript Day 1, p.113 line 21 to p.114 line 16. …
48. See also Transcript Day 1, p.125"
- If I had been persuaded on the evidence that Mr. Elliston could only have known by the time of his meeting with Mr. Burton on 5 February 2013 of the notion that the December Bonus was supposed to be in lieu of a "Prescribed Sum" because Mr. O'Brien had so informed him at their meeting on 10 or 11 December 2012, then obviously that would have affected my conclusion as to whose evidence as to that meeting to accept. However, the position was far less clear. Although Mr. Elliston wavered somewhat in the course of his cross-examination, he seemed to me really to be saying that his information as to the December Bonus being in lieu of a "Prescribed Sum" came from Mr. Wall at their conversation on 8 January 2013. I have to say that, on the basis that Mr. Elliston did speak to Mr. Wall about the December Bonus on 8 January 2013, it seemed improbable that Mr. Elliston did not seek some information from Mr. Wall, and that Mr. Wall did not impart some information. The idea that there was a conversation about the December Bonus, but that nothing of substance was said, is challenging. What was the point of the conversation?
- Mr. Wall was himself called to give evidence at the trial on behalf of Xstrata. He made a witness statement dated 6 August 2014. He did not deal in that witness statement with a conversation with Mr. Elliston on 8 January 2013. When cross-examined about it he said he did not recall it. However, he did not contend that there had not been such a conversation. What Mr. Wall did say, at paragraph 6 of his witness statement, was:-
"I believe it was understood by all involved that those individuals who had the benefit of Prescribed Sum provisions in their contracts of employment would not be entitled to receive the Prescribed Sum in addition to the Transaction Bonus. Indeed I could not say in good conscience that the payment of the Transaction Bonus was anything other than a direct early payment in lieu of the Prescribed Sum and regardless of whether employment was terminated. In my view there was no ambiguity about this whatsoever. I had several informal discussions with the Claimant and others, including Andrew Latham, Mark Sawyer, Martin Fewings and James Kelly, where we discussed our Prescribed Sum entitlements and the Transaction Bonus. Both the Claimant and I sat in offices adjacent to Trevor Reid and Mick Davis and therefore I believe that the Claimant would have been aware of the various discussions taking place."
- I have to say that I was not impressed by Mr. Wall as a witness. He remained employed by Glencore plc, and so had not been entitled to a "Prescribed Sum" on any view. It seemed to me that the criticism of him by Mr. Choudhury in his closing submissions, Transcript, Day 3, page 87 line 24 to page 88 line 1, that he "was willing to say pretty much anything, however far away from the truth, in order to support his employer", was fair. For example, Mr. Wall volunteered nothing in his witness statement by way of explanation of his e-mail of 1 March 2013 which I have quoted, and was evasive, as it seemed to me, when cross-examined about it. However, the fact of the matter is that Mr. Wall asserted that there had been informal discussions between the executives in the London office about the "Transaction Bonuses", to which he contended Mr. Elliston was a party. At one point in his cross-examination Mr. Elliston appeared also to be asserting that. The fact of such discussions was relied upon by Mr. Craig in his closing submissions.
- I am inclined to find that Mr. Elliston actually found out about the December Bonus being supposed to be in lieu of a "Prescribed Sum" from Mr. Wall in the conversation of which Mr. Elliston spoke on 8 January 2013. However, it was plain from the various e-mails of Mr. Wilkins, Mr. Sawyer, and others which I have quoted, that the various recipients of a "Transaction Bonus" were in contact, at least by 1 March 2013, about the question of any linkage between the "Transaction Bonus" and a "Prescribed Sum", and so it seems entirely credible that, in a small office, such discussions took place. Nonetheless, all I need actually be concerned with is whether I am satisfied that, as submitted by Mr. Craig, the only possible source of Mr. Elliston's information could have been Mr. O'Brien at their meeting on 10 or 11 December 2012. I am not satisfied of that.
- I recognise that, over time, Mr. Elliston has given different dates as the date upon which he became aware of the contention that the December Bonus was supposed to be in lieu of a "Prescribed Sum". I also recognise that Mr. Elliston has advanced different dates at different times as to when exactly his meeting with Mr. O'Brien took place. Actually the date of the meeting with Mr. O'Brien was not important unless it was after the payment of the December Bonus, and only one version of Mr. Elliston's account, that in the Reply, contended for that. As to the date upon which Mr. Elliston became aware of the contention that the December Bonus was intended to be in lieu of a "Prescribed Sum", for the reasons which I have explained, I am inclined to find that it was on 8 January 2013. It seems to me that that finding is supported by Mr. Elliston's attendance note of his meeting on 5 February 2013, with the reference to "learned of this at a much later date". It should be remembered that the attendance note was prepared by Mr. Elliston for his own use, albeit he may have contemplated that he might seek to rely on it to support a claim at a later date. Mr. Elliston must have contemplated that it was open to him, in preparing the attendance note, to omit anything which he may have said to Mr. Burton which he, Mr. Elliston, knew to be untrue. Consequently, it seems to me to be realistic to proceed on the basis that what Mr. Elliston recorded himself as having said to Mr. Burton was not merely what he did in fact say, but also was believed by him to be true at the time he made the relevant statements to Mr. Burton. If he had lied to Mr. Burton he would scarcely have recorded such lie in his own attendance note.
- Realistically Mr. Craig did contemplate, in preparing his written closing submissions, that I might reach the conclusions as to the conversation between Mr. Elliston and Mr. O'Brien on 10 or 11 December 2012 which I have reached. On that hypothesis Mr. Craig submitted that, taken in the context in which it was said, Mr. O'Brien's comments, which I find he made, that "we prefer people don't double-dip or waste money on legal fees" modified the terms upon which the December Bonus had been offered, to the effect that Mr. Elliston could only take the December Bonus if he gave up any entitlement to a "Prescribed Sum", and Mr. Elliston accepted that offer.
- I have already explained why I do not accept that the use of the words which I have found proved amounted to any modification to the award of the December Bonus.
- If I had been persuaded that there was an attempt at a modification of the terms of the award, a number of questions would have arisen. One is whether, the award having been notified by the letter dated 4 December 2012, the terms of the award could later be modified. As the December Bonus was not a contractual bonus, at common law, at any rate, Xstrata could have changed its mind and not paid it. If it wanted to modify the basis upon which the award was made, the appropriate mechanism would seem to have been to withdraw it and re-award it on the new terms. If Xstrata wished to alter the character of the award from a non-contractual bonus to a contract requiring consideration in the form of a promise not to seek to enforce the provisions of clauses 9.4, 9.5 and 9.6 of the Service Agreement, what was required was at least a threat not to make the award unless agreement was forthcoming, but on my findings there was no such threat.
- A further problem, if one was to find a contract to vary the Service Agreement in consideration of the payment of the December Bonus, having found an offer, would have been to find an acceptance. Mr. Craig contended for an acceptance by conduct.
- In Khatri v. Cooperatieve Centrale Raiffeisen-Boerenleenbank BA  IRLR 715 the leading judgment was that of Jacob LJ, with whose judgment Longmore LJ and Rix LJ agreed. In the course of his judgment Jacob LJ said, at page 720:-
"We asked Mr. Craig when it could be said that the offer was accepted. Was it on the day after the offer when the claimant came into and was allowed to work? Was it when he accepted his first pay after the offer? Or when? Mr. Craig could not really say, other than that the acceptance must have happened by October. That overlooks why he could not really say. It is because there is no unequivocal act implying acceptance.
The law in such a case is reasonably clear. Perhaps the leading authority is Rigby v. Ferodo  IRLR 516. An employer unilaterally announced a reduction in pay. The employees rejected that but continued to work under protest. It was held that the unilaterally imposed variation of the contract did not take effect. Lord Oliver said at pp. 518 – 519:
'I can … see no other basis [ie estoppel waiver or acquiescence] upon which it can be argued that the continued working by Mr. Rigby and his acceptance for the time being and under protest of the wage that the appellant, with full knowledge of his lack of agreement, chose to pay him is to be construed as an acceptance by him either of the repudiation by the appellant of the original continuing contract or of the new terms which the appellant was seeking to impose.'
Mr. Craig submitted that this case was different because there was no protest. However there was a failure to accept the terms as specifically asked for by the employer. Why should anyone construe the fact of continued working as an acceptance of those terms."
- What emerges from that passage, in my judgment, is that, to be effective as an acceptance arising from conduct, the conduct relied upon must be unequivocally referable to the relevant offer.
- In the present case the award of the December Bonus was never withdrawn, or, on my findings, threatened with being withdrawn. Those features are important because what was relied upon as amounting to acceptance by conduct of an offer to make payment of the December Bonus in consideration of Mr. Elliston giving up his right to enforce clauses 9.4, 9.5 and 9.6 of the Service Agreement was what happened after the amount of the December Bonus was paid into Mr. Elliston's bank account on 14 December 2012. By the time of his closing submissions, although it has to be said that there was less clarity about it earlier in the trial, Mr. Craig did not contend that mere acceptance of the money into Mr. Elliston's bank account amounted to conduct of such a nature as to accept the offer for which he contended. That was plainly sensible. The holder of a bank account is in no position to refuse to accept an electronic payment into that account, at least unless he knows when it is coming. What Mr. Craig did rely upon was, first, not returning the money and, second, spending it. Mr. Choudhury submitted that those matters were equivocal, as they were equally capable of being referable to the original award of the December Bonus. Mr. Craig appeared to counter that that could not be so, because by the date of payment into the account only the offer to make payment of the December Bonus on terms that Mr. Elliston forgo the benefit of clauses 9.4, 9.5 and 9.6 of the Service Agreement, and not also an alternative, untrammelled award of the December Bonus, was available. However, that was not so. As I have said, the December Bonus was never withdrawn and no threat to withdraw it was ever made. Taking the promised money and spending it was capable of being referable entirely to the award in the letter dated 4 December 2012, even if there had later been an attempt to vary the Service Agreement.
- For the reasons which I have given, I find that Mr. Elliston is entitled to the "Prescribed Sum" for which the Service Agreement provided in clause 9.4. As I have recorded, it was common ground that the appropriate sum was £418,774. It was also common ground that Mr. Elliston is liable to pay income tax upon that amount, and, possibly, also to pay National Insurance contributions. Mr. Craig submitted that Xstrata was bound, by the provisions of Income Tax (Earnings and Pensions) Act 2003, to make the appropriate deductions, which should therefore be subtracted from the otherwise agreed sum of £418,774 in determining the amount for which judgment should be entered. I think that Mr. Choudhury was not too concerned about who accounted to HM Revenue and Customs, as long as someone did, and as long as Mr. Elliston did not find himself in effect having to pay income tax twice. In the circumstances I leave it to Counsel to devise a form of order with which both sides are content.
Published: 24/11/2014 16:46