England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Rolls Building, Fetter Lane, London, EC4A 1NL
		7 October 2014

CONSEQUENTIAL RULING

Mr Justice Hamblen :

Introduction

1. This is the hearing of matters consequential upon my judgment handed down on 8^th July 2014. The relevant background is set out in the judgment. The Claimant, Mr Macleod, made a claim against his former employer, Mears Ltd, for some £2 million which he contended to be due to him under a profit sharing bonus agreement.
2. A split trial had been ordered and the trial in June concerned liability only. The principal issues which arose were (1) whether a binding agreement was made; (2) the terms of any such agreement, and (3) whether it was varied or superseded.
3. As set out in my conclusions at paragraph 96 of the judgment I found that:

(1) "The T/A and accompanying documents involve a contractually binding bonus agreement.

(2) The bonus agreed was for Mr Webb's and Mr Macleod's teams rather than for them individually.

(3) The allocation of 75p in the pound only applied until April 2008.

(4) The agreed terms were only applicable until December 2008.

(5) The agreement did not include a bonus cap.

(6) The agreement was not subsequently varied or superseded."

4. During the course of the judgment I found that, contrary to the defendant's case, there was a contractual agreement made but that, contrary to the claimant's case, the agreement was that a bonus would be provided to the claimant's team rather than to him personally.
5. In paragraphs 52-54 of judgment I said as follows:

"52. For all these reasons, and those given by Mears, I conclude and find that the bonus agreed in the T/A was a pooled bonus for the benefit of Mr Webb and Mr Macleod's teams, and not an individual bonus.

53. Mears submitted that this shows that T/A was not meant to be contractual. It did not confer a personal entitlement; it simply set out the arrangements for the calculation of pool bonuses. However, in my judgment the approval of the T/A was intended to have and did have contractual effect. That is clearly the case in relation to Mr Webb and Mr Macleod being Grade 8 employees, the benefits conferred thereby and their salary. An entitlement to claim a share of a specified bonus pool is a recognised right, even if distribution is discretionary. Further, Mr Miles accepted in evidence that Mears was bound by the agreement he had made and would keep its promises.

54. Mears further submitted that this is not how the claim has been advanced and that the sole claim made is for a specified sum due personally. There is some force in this but that does not mean that, subject to permission being granted, a claim to a share in a bonus pool could not be made. For the avoidance of doubt, I have not made any final findings as to the basis upon which any discretionary distribution was to be made - this was not a matter in issue."

The Issues

6. In the light of the judgment, and in particular the unresolved issues referred to in paragraph 54, the following consequential issues arise for determination:

1. Does the claim as currently pleaded include a claim for a share in a bonus pool?

2. If not should the claimant be granted permission to amend his claim to include such a claim?

3. If a claim for a share in a bonus pool is permitted to proceed what directions should be given the outstanding issues to be resolved?

4. What order should be made in relation to costs?

(1) Does the claim as currently pleaded include a claim for a share in a bonus pool?

7. The relevant passages from the pleadings are as follows:

Particulars of Claim

"7. The principle effect of the Agreement was that a percentage of net profit generated by the managed projects would form the Claimant's (and Mr Webb's) bonus payments. …

8. By clause 10, it was a further express term of the Agreement that from April 2008, the first £100,000 of profit would form the Claimant's (and Mr Webb's) bonus payment and the remainder would be split on a 50/50 basis between the Claimant and Mr Webb and the Defendant.

….

13. Accordingly, the Claimant is entitled under the Agreement to:

13.1 75% of the net profit generated by St Georges Estate between 01 November 2007 and 31 March 2008 …;

13.2 The first £100,000 of the net profit generated by St Georges Estate from 01 April 2008 to completion plus 75% of the remainder …;

13.3 75% of the net profit generated by Phipps House between 01 April and 31 December 2008 …;

13.4 50% of the net profit generated by Welwyn & Hatfield between 01 April 2008 and 31 December 2008 …."

….

23. In breach of the Agreement the Defendant has failed and refused to pay the sums due to the Claimant and has thereby caused the Claimant to suffer loss and damage as aforesaid.

….

And the Claimant claims:

(1) £2,318,723.06 in respect of his contractual entitlement to an incentive payment bonus….

Reply

"The specific nature of the claim

3. … For the avoidance of doubt, the Claimant's claim arises solely from his entitlement to bonuses based on a percentage share of net profit in respect of the 3 specific projects identified and referred to in the Particulars of Claim.

….

9.1.1 Clause (5) sets out the general percentage principle of the profit sharing and expressly provides for a greater profit share for the Claimant and Mr Webb in respect of the Keller liability projects …"

8. In addition, there is the following exchange from the Defence and the Reply:

Defence 7(b)

"By clause (5) of the Terms of Agreement, the incentive payments produced (if any) were to be identified by team and to be distributed amongst the team working on the applicable projects. The Claimant specifically acknowledged this in an email dated 18 August 2008, writing 'Distribution of the bonus within the business units is at the discretion of the Project Directors as agreed with the MD.'"

Reply 8.1 & 8.2

"… There was never any intention, which is why there is no express term to that effect, that the bonuses which were the subject of the Agreement should be pooled or further distributed;"

"The allegation that the Claimant 'acknowledged this is an email dated 18 August 2008 …' is wholly misconceived and does not bear scrutiny."

9. The defendant's position is that these pleadings show that the claim was one for an individual bonus of a specified sum due personally to the claimant but not one for a pooled bonus.
10. The claimant relies on the general terms in which the claim was put in the claim form. However, that was superseded by the Particulars of Claim in the terms in which to which I have already referred.
11. In essence the claimant's position is that the greater includes the lesser, that he made a claim for personal entitlement to the full sum, and that that claim includes a claim for the same or a lesser sum on the basis of being entitled to all or part of a pool bonus due to his team.
12. I consider that a claim made for part of a pool bonus is different to a claim for personal entitlement to a bonus. For the purpose of making a pool claim it is necessary to identify the basis upon which it is said that you are entitled to a share of that pool bonus, to identify what share you claim to be entitled to and to explain why. Further any claim for breach will be different. The breach is not a failure to pay a sum personally due but a failure to set up or pay from a pooled bonus.
13. In my judgment it is therefore necessary for the claimant to amend if he wishes to pursue a claim on the basis of an entitlement to, or damages for failing to pay from, a pooled bonus.
14. This is supported by the way the case was put at trial. The claimant's written evidence was clear that the agreement was that he should be paid the bonus personally rather than it should be paid to his team. Moreover, when asked by the court during submissions about the possibility of it being a group bonus the claimant's counsel's response was that that "cannot be right".
15. In my judgment therefore, this is a case in which an amendment needs to be made and permission given if this claim is to be pursued.

(2) Should the claimant be granted permission to amend his claim to include such a claim?

16. The first issue which arises is whether the proposed amendments put forward by the claimant in July following my judgment cover a claim for a share in a pool bonus. The defendant contends that they do not and that therefore the proposed amendment should be refused on that ground alone. Again in my judgment the defendant is correct about this.
17. The proposed amendment adds to paragraph 13.5 of the Particulars of Claim the wording: "or in the alternative such a share and such sums under the agreement as the court determines". That, however, does not explain or aver how it is alleged the agreement gives rise to any entitlement other than that already alleged in paragraphs 7 and 8 of the Particulars of Claim.
18. The draft re-amended Reply adds a new 8.6:

"Accordingly to the extent to which it is found the claimant's pleaded entitlement to "a percentage of net profit generated by the managed projects" is not to the percentages contended for and/or subject to any implied further distribution, the nature and the extent of that distribution was and is it is at the claimant's sole discretion".

19. However, that is contained in the Reply; it is not an amendment to the claim and the way in which the amendment is put as part of the Particulars of Claim is simply as an alternative way of putting the existing claim.
20. In my judgment that is insufficient. The nature of a claim for a share in a bonus pool is different to one based on personal entitlement to the entire bonus, and that difference needs to be recognised in the way in which the claim is put forward. I made it clear to the claimant's counsel at the outset of the hearing that that was my view and gave him a brief opportunity to put forward an amended case to meet these concerns. I adjourned the hearing for an hour to enable claimant's counsel to do that and a further amendment was then produced. Objection was still taken that the further amendments were inadequately particularised in that they did not identify the contractual basis upon which it was alleged that the claimant had a discretion as to the distribution of the bonus. Nevertheless, in my judgment the further amendments do identify a different way of putting the case which is premised on being entitled to a share in the pool bonus or to damages for failing to set up the pool bonus and being paid out appropriately.
21. I turn then to consider whether these further amendments should be allowed. There was some dispute between the parties as to the applicable principles when considering amendments at this late stage of the proceedings. The claimant's position was that the usual principles governing applications to amend, and in particular late amendments, applied and that lateness was simply a factor, albeit an important factor, to be taken into account in the exercise of the court's discretion. The defendant's position was that where an amendment is sought post judgment then different principles apply and that amendments should not be allowed unless there is a satisfactory reason for it being put forward at that late stage. In this connection they relied on the majority judgment of the Court of Appeal in Stewart v Engel [2000] 1 WLR 2268.
22. As to the usual principles governing late applications for permission to amend the White Book cites at paragraph 17.3.7 my judgment in Brown v Innovatorone Plc [2011] EWHC 3221 in which I stated as follows at [64]:

"As the authorities make clear, it is a question of striking a fair balance. The factors relevant to doing so cannot be exhaustively listed since much will depend on the facts of each case. However, they are likely to include:

(1) the history as regards the amendment and the explanation as to why it is being made late;

(2) the prejudice which will be caused to the applicant if the amendment is refused;

(3) the prejudice which will be caused to the resisting party if the amendment is allowed;

(4) whether the text of the amendment is satisfactory in terms of clarity and particularity."

23. I shall address each of these factors.

(1) The history as regards to the amendment and the explanations to why it is being made late.

24. The amendment arises out of the fact that I have rejected the claimant's case at trial based on a personal entitlement to the bonus. It was always the defendant's position that any agreement as to a bonus was on the basis of it being a pool bonus rather than a personal entitlement. It was also its case that any such agreement was non-contractual. I accepted the former contention but not the latter. It would appear that the reason that no amendment putting forward an alternative case on behalf of the claimant has been made until this late stage is the claimant's view that the existing pleading already embraces the alternative way of putting the case. For reasons already given I do not accept that.
25. The position therefore is that the claimant did not regard it as being necessary to make the proposed amendment and it is only now that I have ruled otherwise that it is recognised that it is necessary to amend and to make the application for permission.
26. In my judgment that is an understandable reason for putting forward the amendment late, but it is not a good reason. The claimant should in my view, have appreciated the difference between the two ways of putting the claim.

(2) Prejudice to the applicant if the amendment is refused.

27. In my judgment there is potentially significant prejudice to the claimant if permission to amend is refused. On the basis of the findings made in my judgment the claimant would appear to have a reasonably strong case for the payment of some bonus, albeit for a significantly lesser sum than that claimed in his Particulars of Claim. He was the team leader; there were sums which should have been allocated to a pool bonus according to the relevant profit figures, and, as team leader, he would reasonably expect to have an entitlement to at least a share of that bonus.
28. On the face of it therefore if the amendment is refused the claimant would be shut out from pursuing any claim, even though on my findings he has reasonable grounds for making such a claim. Not only would he be shut out from his claim but the consequence would be that his entire claim would be dismissed and he would be likely to be liable for most, if not all, of the costs of the action.

(3) The prejudice to the defendant if the amendment is allowed.

29. The defendant submits that it is far too late to make an amendment of this kind. The proper time to be making such an amendment was at the trial itself. Moreover, the claimant has had all the time since judgment to put forward a proper amendment. He failed to do so and had to be afforded yet further time today to put forward a sustainable amendment. The defendant submits that this is too late, that it would be unfair for such a late amendment be allowed and that it would be inconsistent with the overriding objective for the court to allow it.
30. I accept that the defendant has a reasonable expectation of finality and that in the ordinary course it would have expected that the trial on liability would finally determine all issues of liability. However, this was a case in which there was an order for trial split between liability and quantum. There was therefore always the prospect of there being a further hearing and, whilst the further claim raises issues of liability, it also involves quantum and closely overlaps with the anticipated quantum issues.
31. I also accept that the amendment will require some further evidence beyond that which will be required purely for a quantum hearing, although I do not consider that such evidence will be substantial. Furthermore, in so far as additional costs are incurred that is a matter which can be dealt with by an appropriate court order.
32. The defendant further submits that had this claim be made at an earlier stage the course of litigation might have been different. That is possible although it is necessarily speculative and is right to bear in mind the defendant's position throughout has been that no contractual agreement was made at all. In those circumstances, had an alternative pooled bonus claim been put forward, it by no means follows that the defendant would have adopted an entirely different approach.
33. In summary, I accept that there is prejudice to the defendant if the amendment is allowed but in my judgment it is far less than the very considerable prejudice to the claimant if it is shut out from making this further claim.

(4) The text of the amendment and whether it is satisfactory in terms of clarity and particularity.

34. The initial proposed amendments were not satisfactory but that has now been addressed. Notwithstanding the criticisms made of the further proposed amendments, in my judgment they do advance a sustainable claim and there is no real difficulty about understanding the nature of that claim.
35. In the light of those conclusions, if it was simply a question of applying usual principles governing amendments, and in particular late amendments, in my judgment the outcome of the discretionary balancing exercise comes down firmly in favour of granting the amendment.
36. The defendant contends, however, that different principles are in play because this amendment is being sought post judgment and relies on the majority judgment in Stewart v Engel.
37. The facts of that case are summarised in the head note as follows:

"The plaintiff issued proceedings in negligence and breach of contract against the liquidator of a management consultancy company and the liquidator's firm. The claim related to copies of documents belonging to the plaintiff which had been taken from the company's premises by a competitor to whom the liquidator had sold other materials. On the defendant's application for summary judgment under C.P.R., Part 24 , the judge asked whether the plaintiff's legal advisers had considered a claim in conversion. Counsel expressed the view that such a claim would face difficulties. The judge's draft judgment, which was circulated to the parties, concluded that the plaintiff's claims based on breach of contract and negligence could not succeed, but left open whether she might succeed in avoiding summary judgment by applying to amend her claim to include a claim in conversion. On the day judgment was handed down the plaintiff's counsel informed the judge that she was not pursuing a claim in conversion. The judge thereupon directed that the action be dismissed as against both defendants and subsequently added a sentence to the final version of the judgment stating that he had been told after delivery of the judgment that the plaintiff did not wish to pursue a claim in conversion. On the advice of leading counsel obtained after she had received the final version of the judgment, the plaintiff applied for permission to amend her statement of claim to plead a claim for conversion in substitution for the claims in negligence and breach of contract. The judge granted the application but ordered the plaintiff to pay the costs and gave the defendants permission to appeal."

38. That was a case on striking facts. The judge had given judgment and made an order dismissing the claim. Moreover, during the hearing, in the draft judgment and at the time of delivering judgment he had invited the claimant to consider amending the claim to put forward a claim in conversion, but the claimant's counsel had declined to do so.
39. The decision of the majority (Sir Christopher Slade and Roch LJ) is summarised in the case head note as follows:

"(2) Allowing the appeal (Clarke L.J. dissenting), that, although a judge hearing an application for summary judgment or to strike out a pleading had a wide discretion to permit amendments in the interests of justice, once judgment had been given on such an application the jurisdiction to reopen it was to be sparingly exercised and only where there were exceptional circumstances or strong reasons for doing so, since finality and the doing of justice required justice to all parties in the litigation; that in exercising his discretion the judge had failed to take into account the plaintiff's refusal to avail herself of his invitation to amend her statement of claim by including a claim in conversion, and had misdirected himself in not considering whether there was a satisfactory reason for the plaintiff's failure to apply for the amendment at the proper time which would make it appropriate to reopen the order for dismissal he had made; that the fact that the plaintiff had changed her mind on the basis of fresh legal advice was not an exceptional circumstance or a strong reason sufficient to justify the judge in reopening his order; and that, accordingly, the court would exercise the discretion so as to refuse the amendment (post, pp. 2276H–2277G , 2294C–D )." (emphasis added)

40. The application in that case was made under CPR 3.1 and the claimant accepted that the application involved the variation and revocation of the order of dismissal already made. That brought into play particular considerations which the majority of the court regarded as being highly significant. In particular the majority referred to the principles set out in the case of In re Barrell Enterprises [1973] 1WLR 19, which were referred to in the judgment by way of shorthand as "the Barrell jurisdiction". That jurisdiction, as Sir Christopher Slade explained at page 2273H, is a jurisdiction which enables "a judge who has given judgment the power to reconsider his conclusion and reverse his decision, provided that the order has not been formally completed". As Sir Christopher Slade observed at 2275G: "If the application is made after judgment however the situation is quite different because then the applicant is then obliged to invoke the Barrell jurisdiction".
41. It is against that background that the majority decision falls to be considered. They considered that to invoke the Barrell jurisdiction required exceptional circumstances or strong reasons to be established and that there needed to be a satisfactory reason for the failure to apply for the amendment at the proper time. Clarke LJ dissented. As he stated at 2284C:

"…. I respectfully differ from the suggestion that this court is bound by In re Barrell Enterprises [1973] 1 W.L.R. 19 to hold that permission to amend should only be granted in exceptional circumstances where the application is made after the order is announced orally but has not been drawn up and sealed. In deciding how to apply the overriding objective that factor is simply one consideration to be taken into account, albeit an important one. I am therefore unable to agree that we have to look to see whether in November 1999 there existed exceptional circumstances sufficient to justify the judge in exercising "the Barrell jurisdiction"".

42. The present case is not one in which there is any need to invoke the Barrell jurisdiction. I have not made an order dismissing the claim. Indeed I have as yet made no judgment order. At the time of handing down judgment I adjourned all consideration of consequential matters. These included the issues referred to in paragraph 54 of the judgment, which I had expressly not sought in any way to resolve or pre-judge.
43. The defendant's case, founded on Stewart v Engel, was that the court should not grant an amendment in a case such as the present unless there was a satisfactory reason for the claimant's failure to apply before this late stage and in this case there is no such reason.
44. In my judgment, for the reasons already given, the present case is distinguishable from Stewart v Engel and the court's discretion to grant permission to amend is not as circumscribed as it was in that case, where the Barrell jurisdiction was being invoked. I would also add that in my judgment the powerful dissenting judgment of Clarke LJ provides good reason for not extending the ambit of the majority decision in Stewart v Engel further than is necessary.
45. Nevertheless, the lateness of the application and the fact that it has had to be refined further today are undoubtedly important factors to take into account in the exercise of my discretion. However, as already indicated balancing all the various factors, including lateness and consequential prejudice to the defendant, I have reached the clear conclusion that, in the exercise of my discretion, this is an appropriate case for permission to amend to be granted.

(3) Consequential directions

46. The parties have indicated that this is a matter which should be able to agree in the light of my ruling on the question of amendment.

(4) What order should be made in relation to costs?

47. I have indicated that I consider that costs should be reserved and the issue re-visited at the end of the litigation. The defendant's position is that it has succeeded in relation to the claim made against it to date and that it should recover all the costs of the action. The claimant's position is that it has or will be substantially successful in the action and should recover all or most of his costs. All these arguments will remain open to the parties but should be reserved until a later occasion.