In the case of Attrill & others v Dresdner Kleinwort Ltd and another company the claimants were employees of the first defendant bank (‘the bank’). Their contracts of employment incorporated the bank's employee handbook. Part of the handbook (section 1.4) conferred on the bank the power to unilaterally vary the contract. It also stated that when a change affected a group of employees, notification could be made by display on the notices boards or the bank's intranet.
In August 2008, it was announced that the bank's owner (Allianz) had agreed to sell the bank to the second defendant company (Commerzbank). As a result, the bank's senior management and the Financial Services Authority expressed concern that there was a risk of a mass exodus of staff. The bank announced the creation of a guaranteed retention bonus pool. The announcement was made at a 'Town Hall' meeting and simultaneously broadcast on the bank's intranet. In October 2008, the bank's human resources department emailed the bank's employees stating that bonuses would be paid in full in January 2009. In December 2008, there was a meeting of the bank's board, at which the board resolved to introduce a material adverse change clause into the bonus letters, stating that the bonus would be adjusted if material negative deviations in the bank's revenue were established. Therefore, the bank wrote again to its employees stating that the bank's financial position would be reviewed in January 2009 and that the bank reserved the right to review the payment of bonuses and, if necessary, to reduce it. In February 2009 the bank decided to reduce the bonus by 90% and, in some cases, to not pay a bonus at all.
The claimants issued proceedings claiming sums due as bonuses. The primary issues before the judge were whether the announcement of August 2008 had created a binding obligation on the bank to pay the claimants, and whether the introduction of the MAC clause had amounted to a breach of the implied duty of mutual trust and confidence. The judge found:
The bank appealed, and the issues for determination were,
The appeal would be dismissed.
Accordingly, the appeal would be dismissed as there had been an effective unilateral contractual amendment pursuant to section 1.4 of the handbook, and there had been, in any event, a binding contractual promise resulting from the terms of the promise and the circumstances in which it had been made.
Published on 29/11/2013