Elliston v Glencore Services (UK) Ltd

A contractual change-of-control payment is construed in light of the commercial rationale stated in the clause. Where that rationale links the payment to the consequences of the change of control, termination must result from that event, but need not involve a breach of contract or dismissal without notice. A clause is not uncertain merely because it does not specify a fixed period after the change of control.

A variation requires an offer and acceptance. Silence, failure to object, or conduct equally referable to the original agreement does not amount to acceptance. Conduct relied upon as acceptance must be unequivocally referable to the alleged offer.

The claimant was employed by the defendant under a written service agreement containing a change-of-control payment provision. Following the merger of Xstrata plc and Glencore International plc, his employment was terminated by reason of redundancy on notice.

The defendant resisted the claim on two bases. It argued that the payment clause was void for uncertainty or, alternatively, operated only where employment was terminated in breach of contract. It also argued that a transaction bonus paid to the claimant had varied the agreement, or was paid subject to his waiving the change-of-control payment. The central issues were the proper construction of the payment provisions and whether any binding variation or waiver had occurred.

1. Construction of the payment clause. Applying the approach stated in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 and Investors Compensation Scheme Ltd. v West Bromwich Building Society [1998] 1 WLR 896, the court construed the clause by reference to the meaning which a reasonable person would attribute to it in its commercial context.
2. The clause stated that the payment was intended to reduce the distraction and uncertainty created by a pending or potential change of control and to encourage continued dedication. Accordingly, entitlement arose where termination after the change of control was a consequence of that event. The claimant’s redundancy was such a consequence. The clause was therefore sufficiently certain.
3. The payment provision did not need to be read together with the separate termination provision so as to require dismissal without notice or a repudiatory breach. Such a construction would permit the employer to avoid the payment simply by giving proper notice and would contradict the stated rationale of the clause.
4. Variation and acceptance. The pleaded facts did not disclose an offer by the defendant to pay the transaction bonus in return for deletion of the relevant contractual clauses. The claimant’s silence could not amount to acceptance. Applying Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA [2010] IRLR 715, conduct relied upon as acceptance must be unequivocally referable to the alleged offer.
5. The transaction bonus was never withdrawn or threatened with withdrawal. Its retention and expenditure were equally referable to the original, unconditional bonus award and therefore did not establish acceptance of a variation. On the evidence, no waiver, collateral contract or variation was proved.
6. Judgment was entered for the claimant for the agreed sum of £418,774. The parties were directed to agree an order dealing with the appropriate tax and possible National Insurance deductions.