Vigeland v Ennismore Fund Management Ltd & Anor

A discretionary bonus arrangement may create a contractual duty to consider whether to award a bonus genuinely and rationally. Once a cash bonus is awarded, it may become contractually payable. Contributions placed in a discretionary employee benefit trust do not give the employee an absolute entitlement to the trust assets. The trustee must exercise its discretion in good faith, principally considering the employee’s contribution to the company, while remaining able to consider other relevant matters, including post-employment conduct. Terms will not be implied where they contradict the express discretionary trust structure or are unnecessary for business efficacy. A trustee may reasonably postpone its decision where related litigation may materially inform the exercise of its discretion.

The claimant, a former fund manager, claimed contractual bonuses and related relief against his former employer. He alleged an oral bonus agreement, implied contractual terms and misrepresentations concerning access to contributions made to an employee benefit trust. He also claimed that the trust’s corporate trustee had breached the settlement deed and its fiduciary duties by failing to distribute trust assets or properly consider his request.

The court considered whether the alleged bonus agreement existed, whether cash bonuses had already been paid, whether a later clawback agreement had been made, whether issue estoppel arose from Cayman proceedings, and whether the trustee had lawfully postponed consideration of a distribution pending an appeal in those proceedings.

1. The contractual claims. The alleged June 2002 oral bonus agreement was not proved. The contemporaneous documents and the claimant’s own evidence showed a discretionary bonus structure, with no guaranteed 50/50 division or absolute entitlement to trust contributions. EFM had a duty to exercise its bonus discretion genuinely and rationally, and an awarded cash element became contractually enforceable.
2. Implied terms. The proposed terms failed the requirements identified in AG of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 and BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. They contradicted the express provision that contributions would be held in a discretionary trust, were insufficiently clear and were unnecessary for business efficacy.
3. Misrepresentation and payment. The alleged representations that the trustee would do as EFM instructed were not proved. In any event, representations made after 2002 could not have induced entry into the alleged agreement. The 2003 and 2004 cash bonuses had been paid through Fenris. The court also found that a clawback agreement had been reached on 30 January 2008.
4. Issue estoppel. The court would have rejected the estoppel argument. The 2008 agreement was not sufficiently fundamental to the Cayman decision, and the claimant and Fenris were not privies.
5. The trustee’s discretion. A discretionary trust beneficiary has a right to due administration, not to any defined trust asset. Clause 4(2) required principal regard to the employee’s contribution to EFM, but did not exclude other relevant matters, including post-employment conduct. The trustee was entitled to await the Cayman appeal. The circumstances did not justify directing a distribution or prescribing an exhaustive list of relevant and irrelevant factors.

The claims therefore failed.