Parties Named In Schedule A v Dresdner Kleinwort Ltd & Anor

On an application for summary judgment, a claim has a realistic prospect of success where reasonably arguable factual or legal issues may affect the outcome. The court must avoid a mini-trial, while considering evidence reasonably expected to be available at trial.

An employer’s announcement of a discretionary bonus pool will not ordinarily create an enforceable contractual entitlement where the announcement leaves uncertain the individual beneficiaries, the basis of allocation and the interaction with existing discretionary criteria. A later bonus letter may nevertheless create an arguable claim if its provisional award and review conditions are unclear. Whether the stated review condition has been satisfied is a matter for trial where the evidence permits more than one reasonable interpretation.

The claimants were employees or secondees working in Dresdner Kleinwort’s investment banking division. Their contracts provided for discretionary annual bonuses.

In August 2008, senior management announced a guaranteed minimum bonus pool of €400 million. In December 2008, the claimants received letters provisionally awarding individual bonuses, subject to review if additional material deviations appeared in revenue and earnings for November and December 2008.

Following severe financial deterioration, the provisional awards were reduced by 90 per cent. The claimants alleged contractual entitlement, estoppel, misrepresentation and breach of the implied duty of trust and confidence. The defendants sought summary judgment under Part 24. The central issues were whether the announcements or letters created enforceable rights and whether the review condition had been properly triggered.

1. Summary judgment principles. The court applied the principles stated in The Federal Republic of Nigeria v Santolina Investment Corporation [2007] EWHC 437 (Ch), approved in Khatri v Cooperatieve Centrale Raiffeisen [2010] EWCA Civ 397. The question was whether the claims had a realistic, rather than fanciful, prospect of success. The court was not to conduct a mini-trial, but could reject assertions lacking real substance and had to consider evidence reasonably expected at trial.
2. August announcement. The announcement and subsequent assurances did not give the claimants an enforceable right to payment. The announcement did not specify how the €400 million would be allocated between individuals, who would qualify, or how the existing discretionary criteria would operate. It was also made informally and lacked the certainty and formality expected of an irrevocable contractual commitment. The claims based solely on those statements therefore had no realistic prospect of success.
3. December letters. The provisional individual awards raised a different and arguable case. Although the court considered that there were real difficulties in arguing that DKL could not impose conditions falling within the contractual bonus criteria, it declined to determine that issue finally on a summary application.
4. Review condition. The first-stage review required comparison of the forecast revenue and earnings for November and December with the actual figures, and the letter referred to an “additional” material deviation. The evidence did not establish conclusively which forecast was intended, whether the deviation identified by KPMG was additional, or whether the contractual review had been performed by the proper decision-maker. These issues could be affected by fuller evidence at trial.
5. The court considered that a percentage reduction applied consistently to all provisional award recipients would not, by itself, be irrational or objectionable if the second-stage review had been triggered. The defendants failed to show that the claims had no real prospect of success. The applications for summary judgment were dismissed.

This was a first-instance decision on applications for summary judgment. No appellate decision is stated in the judgment.