Attrill & Ors v Dresdner Kleinwort Ltd & Anor

An employer’s clear announcement of a guaranteed minimum bonus pool may create contractual obligations, even though individual awards remain discretionary. A collective announcement may vary employment contracts where the contractual variation procedure is satisfied. Alternatively, continued employment may amount to acceptance of a beneficial variation where it is only referable to the promise, and the employer’s practical benefit may constitute consideration.

An employer cannot introduce a qualification to defeat such a promise in breach of trust and confidence. A material adverse change clause is construed objectively and commercially. It permits reduction only within its proper terms, including any specified forecast, reviewer, timing and threshold of necessity.

Employees of Dresdner Kleinwort Ltd claimed unpaid 2008 discretionary bonuses after a guaranteed minimum bonus pool of €400 million was announced and later reduced. They also claimed damages from Commerzbank for inducing breaches of contract.

Simon J had summarily dismissed claims based on the August announcement, while allowing claims based on the December bonus letters to proceed. The Court of Appeal allowed the employees’ appeal and dismissed the defendants’ appeal, restoring the claims for trial.

At trial, the principal issues were whether the announcement created contractual obligations, whether the December material adverse change clause was valid and effective, and whether the defendants had lawfully reduced the provisional awards.

1. Contractual effect of the announcement. The announcement communicated a guaranteed minimum €400 million pool for DKIB’s front and middle office staff. Individual allocations remained discretionary and were to be made by reference to performance in the usual way. The promise was sufficiently certain: it fixed the minimum pool without needing to fix each employee’s precise award or every payment detail.
2. Variation under the employment handbook. The announcement itself did not satisfy paragraph 1.4 of the Employment Handbook because it was not made by a member of the Human Resources Department. However, Mr Hindle’s email of 20 October, sent in his capacity as Global Head of Human Resources, confirmed the variation and explained its implementation. That communication satisfied paragraph 1.4.
3. Intention, acceptance and consideration. Objectively, the announcement was intended to create legal relations. It was made as a staff-retention measure, following board approval and regulatory concern. Acceptance was impliedly waived. Alternatively, acceptance could be inferred from continued employment only if that conduct was solely referable to the promise. That test was not satisfied because employees remained for several reasons. Nevertheless, the employer obtained a substantial practical benefit by retaining and incentivising staff, and the employees’ continued service also constituted consideration.
4. Subsequent statements. The later FAQs and management statements merely repeated the August promise. Mr Hindle’s email did not create a contractual obligation standing alone, but operated with the announcement to satisfy the contractual variation mechanism.
5. Material adverse change clause. The defendants conceded that a binding August obligation prevented introduction of the clause. In any event, its introduction breached the implied term of trust and confidence because it was introduced to enable the employer to retreat from the promise. Had reliance on the clause been available, it was not complied with: the wrong forecast was used, Dr Jentzsch did not conduct the review in January, the employer reduced the pool rather than reviewing individual awards, and it failed to establish that reductions were necessary.
6. The claimants were entitled to damages representing the difference between their provisional bonus awards and the sums actually paid.

1. High Court (Queen’s Bench Division): The claims were tried following the Court of Appeal’s decision to set aside Simon J’s summary dismissal of claims based on the August announcement and to dismiss the defendants’ applications for summary judgment.
2. Court of Appeal: The claimants’ appeal was allowed and the defendants’ appeal was dismissed. The citation of that judgment is not stated in the judgment under review.
3. High Court (Queen’s Bench Division): The claimants succeeded at trial on the contractual effect of the guaranteed bonus pool and, alternatively, on the material adverse change clause.