Attrill & Ors v Dresdner Kleinwort Ltd & Anor

On an application for summary judgment, the court must distinguish a realistic claim from a fanciful one without conducting a mini-trial. It must consider both the available evidence and evidence reasonably expected at trial.

An employer’s announcement of a guaranteed minimum bonus pool may be contractually binding although individual awards remain discretionary and unallocated. Informality, uncertainty affecting some beneficiaries, existing discretionary bonus terms, disputed acceptance and continued employment as consideration do not necessarily eliminate a real prospect of establishing contractual liability.

Where the meaning and operation of a condition permitting bonus reductions depend upon disputed facts and undisclosed documents, those issues should ordinarily be resolved at trial.

Employees working in Dresdner Kleinwort’s investment-banking business claimed unpaid portions of bonuses specified in December 2008 letters. They alleged that an announcement in August 2008 had contractually established a guaranteed minimum bonus pool of €400 million. They also challenged the subsequent reliance on a material adverse change clause to reduce most awards by 90%.

Simon J, in [2010] EWHC 1249 (QB), summarily dismissed the claims based upon the August announcement but held that the claims arising from the bonus letters required a trial. The employees appealed the former ruling, while the banks appealed the latter.

The central questions were whether the announced pool gave rise to an arguable contractual obligation and whether the banks had shown that the bonus-letter claims had no real prospect of success.

1. The employees’ appeal was allowed and the banks’ appeal was dismissed. Both applications under rule 24.2 of the Civil Procedure Rules 1998 were dismissed. The Chancellor gave the judgment, with which Smith and Black LJJ agreed.

2. The August announcement was capable of establishing a contractually binding minimum bonus pool. It quantified one previously uncertain part of the bonus process and conferred a substantial benefit intended to encourage employees to remain. The absence of individual allocations did not prevent contractual effect. At least nominal damages could follow from breach of the promise concerning the pool.

3. The manner of announcement was not casual. A Town Hall meeting was an approved and conventional means of communicating with employees, while the employment handbook expressly contemplated notifying group changes through the company intranet. Difficulties identifying some members of the relevant class did not justify summarily dismissing claims brought by identifiable employees. Nor was the alleged promise necessarily inconsistent with the handbook’s provisions governing discretionary individual awards.

4. The questions of acceptance and consideration could not properly be determined summarily. It was arguable that a wholly advantageous change, the handbook’s communication provisions or the employer’s conduct affected the need for communicated acceptance. The internal documents showed that staff retention was the purpose of the pool, so the employees’ continued work was at least arguably sufficient consideration. The employees therefore had a realistic prospect of succeeding on the claim based upon the announcement.

5. The banks’ cross-appeal also failed. If the guaranteed-pool contract were established, inserting the material adverse change clause would prima facie breach it and could not justify withholding bonuses. Independently, factual questions remained about the clause’s meaning, whether the required deterioration occurred and whether the prescribed review was performed. Those matters required disclosure and determination at trial.

• Court of Appeal (Civil Division): By [2011] EWCA Civ 229 , allowed the employees’ appeal, dismissed the banks’ appeal, set aside the order below and dismissed both applications for summary judgment.
• Queen’s Bench Division: Simon J, in [2010] EWHC 1249 (QB) , summarily dismissed the claims based on the August announcement but directed that the claims based on the December bonus letters should proceed to trial.