COURT OF APPEAL OVERTURNS FINDINGS OF FACT BY THE TRIAL JUDGE

In Elliston -v- Glencore Services (UK) Ltd [2016] EWCA Civ 407 the Court of Appeal took the unusual step of overturning findings of fact by the trial judge. (It is perhaps important that I emphasise how rare this is. There have been plenty of cases recently where the Court of Appeal has, robustly, upheld findings of fact by the trial judge).

THE CASE

The claimant claimed the sum of £417,774 (“the prescribed sum”)as money due under a contract.following the termination of his employment. The defendant’s case was that it was an express condition of a voluntary bonus award of £487,925 that the claimant would forego payment of the prescribed sum.

THE JUDGE’S FINDING

The judge found that there was no agreement that the bonus was paid on the basis that the prescribed sum be forgone.

ON APPEAL

The appeal was in relation to the judge’s findings of fact.

THE APPROACH OF THE APPELLATE COURT TO FINDINGS OF FACT

Lady Justice Gloster set out the principles in relation to an appellate court considering the findings of fact.

Approach by an appellate court to reversing findings of fact by the trial judge
  1. It is axiomatic that this court only very rarely reverses a trial judge’s findings of primary fact, and then only if it is satisfied that the trial judge was plainly wrong. The authorities cited by Mr Choudhury, if authority is needed for the proposition, make that manifestly clear. The question, however, is whether, in the light of the arguments presented to us on each side, we can be so satisfied in this case.
  2. I make the further point that it is all too easy for an appellate court to criticise individual sentences or infelicities of language or reasoning of a trial judge, notwithstanding that at the end of the day his judgment on the entirety of the evidence may well have been correct. A judgment should be looked at in the round, particularly where the outcome depends on the judge’s assessment of the credibility of the respective witnesses. It should not be picked over or construed as though it were a piece of legislation or a complex commercial contract. Nor should a judge be criticised for not mentioning every item of evidence.

OVERTURNING THE FINDINGS IN THE CURRENT CASE

What are the consequences of the judge’s errors in relation to the appellant’s pleaded case and the evidence?
  1. I turn now to consider the consequences of my conclusion that the judge made various errors in relation to his approach to the appellant’s pleaded case and in relation to his findings of fact in relation to the first issue.
  2. Mr Choudhury submitted that it was immaterial (if indeed it were the case) that the judge had failed specifically to address certain aspects of the evidence, or even that he had made an error in concluding that the respondent had been informed by Mr Wall of the condition in January 2013; the evidence taken as a whole (which was a matter for the judge to assess) was overwhelmingly in favour of the respondent’s account, and that it was simply not possible to say that the judge’s conclusion that he should prefer the respondent’s evidence over that of Mr O’Brien’s was “plainly wrong”. Mr Choudhury further submitted that the judge’s overall conclusion that the respondent had not been told prior to payment of the Transaction Bonus that it was subject to the condition could not be faulted for a number of reasons. These included the following:
i) the judge’s decision was firmly based on his assessment of the credibility of the respondent and Mr O’Brien as a result of their respective performances in the witness box;

ii) the judge was clearly impressed by the “measured and careful” way in which the respondent gave evidence; see paragraph 30 of the judgment;

iii) the judge’s assessment of Mr O’Brien’s credibility (or lack thereof) was not based only on the discrepancy between the pleaded case and his statement; as the judge made plain, it was also based, inter alia, upon the following:

a) the terms of the 29 April 2013 letter, which suggested that no waiver of the Prescribed Sum had previously been obtained; see paragraph 30 of the judgment;

b) Mr O’Brien’s evidence as to the state of play concerning a consultancy agreement for the respondent which was discredited in that the consultancy was not a vague thought or “possibility” as suggested by Mr O’Brien but something much more certain; see paragraphs 31-34 of the judgment;

c) the fact that arrangements had been made to pay the Transaction Bonus without any thought of obtaining a prior agreement that recipients would not claim the Prescribed Sum; see paragraphs 35 to 45 of the judgment;

d) the absence of any contemporaneous document whatsoever supporting Mr O’Brien’s contention that there was any condition imposed in respect of the bonus; see paragraphs 45 of the judgment;

e) the fact that, contrary to Mr O’Brien’s case that he had spoken to other employees in the same terms as he had spoken to the respondent, there was evidence that others had either not been spoken to at all by him or had been spoken to in terms which supported the respondent’s account; see paragraphs 49 – 67 of the judgment;

f) Mr O’Brien’s email of 1 March 2013 to Mr Reid contained phraseology which resonated with the evidence of the respondent as to what he was told at the December 2012 meeting; see paragraphs 66-67 of the judgment;

g) the fact that the phrase “double-dip” was in fact more consistent with the right to the Prescribed Sum remaining extant (with the expectation that the respondent would do the honourable thing and not claim it), rather than the respondent forgoing that right altogether; see paragraph 68 of the judgment; and

h) Mr O’Brien’s attempt to “create the impression, incorrectly, that the terms of the offer of a Transaction Bonus were fixed by him with all relevant persons in conversation before any letter of notification arrived”; see paragraph 69 of the judgment.

  1. Despite Mr Choudhury’s careful and forceful submissions, I have concluded that this is one of those very rare cases where an appeal court is able to say with confidence that the judge was plainly wrong in the conclusion which he reached in relation to the first issue, namely as to what the respondent was told at the meeting with Mr O’Brien on 10 December. In my judgment, whatever precise words were used by Mr O’Brien, the evidence before the judge overwhelmingly supported a finding that, viewed on any objective basis, Mr O’Brien had said enough to make it clear to the respondent that any acceptance of the Transaction Bonus was subject to the condition that the recipient would not also claim the Prescribed Sum in the event that his employment came to an end and the other applicable conditions were satisfied.
  2. Contrary to Mr Choudhury’s submissions, my reading of the full transcripts of both the evidence and the argument, and the judgment itself, does not suggest that:
“the judge’s decision was firmly based on his assessment of the credibility of the respondent and Mr O’Brien as a result of their respective performances in the witness box”.
I am well aware that a trial judge has the indubitable advantage of seeing the witnesses in real-time and judging their demeanour. But where a trial judge has clearly gone wrong in his approach to, and evaluation of, the evidence and an appellate court has the benefit of a full transcript, this so-called advantage can be overstated. In my judgment, the judge’s decision was wrongly based, not on legitimate assessments of the credibility of witnesses, but rather on:
i) his initial hostility to, and misunderstanding of, the appellant’s pleaded case, which, as I have already held, affected his approach to the appellant’s case even before he came to consider the evidence[5];

ii) his failure to appreciate the significance of the admission by the respondent in cross-examination of what he understood by his conversation with Mr O’Brien in relation to the condition[6];

iii) his failure, in the context of the critical issue as to when the respondent first learnt of the imposition, or purported imposition of the condition, to take into account, let alone mention, the significant evidence of Mr Burton that the respondent had told him that Mr O’Brien had informed him of the condition but only after the respondent had received payment[7];

iv) his speculative finding, unsupported by any evidence, that the respondent had learned of the imposition of the condition in his conversation with Mr Wall in January 2013[8];

v) his failure to take into account the background, or context, leading up to Xstrata’s offer of the Transaction Bonus in the letter dated 4 December 2012;

vi) his naive reliance on the respondent’s attendance notes – or absence of an attendance note – in assessing what was said at the meetings with Mr O’Brien and Mr Burton – to support the respondent’s credibility;

vii) his failure to have adequate regard to the impact on the respondent’s credibility of the fact that he had frequently changed his evidence as to when the meeting with Mr O’Brien took place.

  1. I should supplement the last three points which I have not previously addressed.
  2. First, the relevant context was the evidence relating to what the respondent and others had repeatedly been told when Xstrata was considering paying the Management Incentive Arrangements (MIA) earlier in 2012 (which arrangements were later voted down by Xstrata shareholders) as set out in the correspondence and his own evidence. This evidence showed:
a) the respondent knew that the amount of the Transaction Bonus in the sum of £487,925 was exactly the same as the amount of the Prescribed Sum for 2012 of £487,925;
b) the respondent knew, because he had been told repeatedly, that the amount of £487,925 was the calculation of the Prescribed Sum;
c) the respondent knew, because he had been told repeatedly in the context of the proposed MIA, that the payment of the first tranche of that proposed bonus of £487,925 was in substitution for the Prescribed Sum of £487,925;
d) that he could not “double recover” (i.e. double dip) by being paid both the first tranche of the MIA proposed bonus of £487,925 and the Prescribed Sum of £487,925; the words “double recover” and “double dip” were essentially the same.
That context was critical. But the judge did not refer to, or consider, any of the previous correspondence sent to the respondent during 2012 at the time when the MIA proposals were being offered to employees. In relation to each proposal, the respondent had been told and had accepted, that the payment of the first tranche of the proposed incentive payments, namely the Initial Retention Bonus of £487,925 was in substitution for the Prescribed Sum of £487,925, and that he could not “double recover” (i.e. double dip) by being paid both. He also knew that the amount of the Transaction Bonus was precisely the same as the previously canvassed Initial Retention Bonus and the Prescribed Sum for 2012 namely amount of £487,925. It was against that background that, necessarily, what Mr O’Brien had said, and what the import of it was, had to be assessed.
  1. Second, in my judgment, the judge was naive to place so much reliance on the existence, or accuracy, of an attendance note compiled by the respondent. It was clear that the respondent did not start to make attendance notes until after he had consulted solicitors in early 2013 – the first such attendance note being of the meeting which he had with Mr Burton on 5 February 2013. In such circumstances it was not at all surprising that he had not made an attendance note of his meeting with Mr O’Brien on 10 December 2012. Likewise if the judge was going to attach importance to the absence of any attendance note of that meeting[9], it was inconsistent of him not to do so in relation to what the judge found was the critical meeting with Mr Wall on 8 January 2013 when, according to the judge, the respondent first discovered that the Transaction Bonus was said to be subject to the condition. Furthermore, the logic in the last half of paragraph 85 of the judgment that reliance could be placed on the statement in the respondent’s attendance note of the meeting with Mr Burton on 5 February 2013 that he learned of the condition “at a much later date” because:
“Consequently, it seems to me to be realistic to proceed on the basis that what Mr. Elliston recorded himself as having said to Mr. Burton was not merely what he did in fact say, but also was believed by him to be true at the time he made the relevant statements to Mr. Burton. If he had lied to Mr. Burton he would scarcely have recorded such lie in his own attendance note.”
is incomprehensible. Not only had the respondent engaged solicitors by this time but also any attendance note was inevitably likely to be self-serving.
  1. Third, although, in paragraph 85 of the judgment, the judge said that he recognised that
“…… over time, Mr. Elliston has given different dates as the date upon which he became aware of the contention that the December Bonus was supposed to be in lieu of a “Prescribed Sum”. I also recognise that Mr. Elliston has advanced different dates at different times as to when exactly his meeting with Mr. O’Brien took place. Actually the date of the meeting with Mr. O’Brien was not important unless it was after the payment of the December Bonus, and only one version of Mr. Elliston’s account, that in the Reply, contended for that”
the reality was that whether the date of the meeting with Mr O’Brien occurred before or after payment of the Transaction Bonus was a highly important issue in the case, as was the issue as to the date on which the respondent first learnt that the Transaction Bonus was said to be subject to the condition. The respondent’s vacillating evidence about when these dates occurred was clearly a critical matter to be taken into account when assessing his credibility. The judge appears – wrongly in my view – to have placed no importance on these matters which were, on any basis, important factors in assessing his credibility,
  1. None of the additional matters relied upon by Mr Choudhury, as set out in paragraphs 74(iii)(a) above – (h) persuaded me that the judge’s findings of fact could be supported. Indeed some of the findings were the subject of the appellant’s third ground of appeal and detailed submission by Mr Craig. I do not address all the points but, in particular, it can be observed that, contrary to the judge’s view:
i) There was very little, if any evidential value in the email correspondence with other employees, none of whom were called as witnesses. Such correspondence did not in fact support the respondent’s account as the judge suggested in paragraphs 49 – 67 of the judgment. The judge appears to have held that these emails evidenced that Mr O’Brien had not spoken to those individuals about the Transaction Bonus being paid in lieu of the Prescribed Sum. A proper analysis of the emails showed that most of them were about whether Mr O’Brien had told individuals that the Transaction Bonus was being paid in lieu of redundancy payments (notice periods) and not about whether Mr O’Brien had told them that the Transaction Bonus was being paid in lieu of the Prescribed Sum. In particular one of the emails upon which the judge replied was an email from a Mr Kelly whose complaint was wholly irrelevant because he was not entitled to a Prescribed Sum in any event. Moreover, what may have been said to other employees, to the extent that it could be gleaned from the sometimes disgruntled email correspondence, had very little probative value as to what was actually said to the respondent.

ii) The terms of the 29 April 2013 letter, which was a formal letter setting out the terms of respondent’s redundancy, was equally consistent with Mr O’Brien’s account as with that of the respondent.

iii) The judge did not explain how the difference of emphasis between Mr O’Brien’s evidence as to the state of play concerning a consultancy agreement and that of the respondent, discredited Mr O’Brien’s evidence in relation to the entirely separate issue of as to what was said at the meeting on 10 December. Indeed it was difficult to see how it did discredit Mr O’Brien. There was no dispute between the respondent and Mr O’Brien about the fact that the respondent wanted a consultancy agreement with Glencore; nor was there any dispute that Mr O’Brien told the respondent that ultimately this was a matter that he would have to address with Glencore.

iv) It was not surprising that there was no contemporaneous document supporting Mr O’Brien’s evidence that he had imposed a condition in respect of the bonus. As the judge accepted at paragraphs 47 – 48 of the judgment, Mr O’Brien’s evidence was that, on the advice of Freshfields, nothing was put in writing in order to avoid the risk of triggering a requirement to consult with Glencore or the Takeover Panel in relation to the Transaction bonus.

v) The judge was wrong to state in paragraphs 67 of his judgment that Mr O’Brien’s email of 1 March 2013 to Mr Reid showed that in his conversation with Mr Sawyer (another employee) “he had gone further and told him specifically that no waiver was required.” The thrust of what was stated in Mr O’Brien’s email, and indeed in his evidence, was that no written waivers had been required from those individuals had been told that the Transaction Bonus was being paid in substitution for the Prescribed Sum. In such circumstances I cannot agree with the judge’s evaluation that this correspondence “resonated with the evidence of the respondent as to what he was told at the December 2012 meeting”.

vi) Nor was the judge’s view, apparently based on one line in paragraph 19 of Mr O’Brien’s witness statement, that Mr O’Brien’s had attempted to “create the impression, incorrectly, that the terms of offer of a Transaction Bonus were fixed by him with all relevant persons in conversation before any letter of notification arrived”, a fair criticism of the entirety of his evidence, which undermined his credibility. His oral evidence and other paragraphs of his witness statement made it clear that he had indeed started speaking to some employees in November 2012, before the Transaction Bonus letters were sent out. Mr O’Brien was not challenged in cross-examination on this aspect.

  1. Many, if not all, of these points were not primary findings of fact by the judge, but rather evaluations by him of the effect of what was said in documents, and, in my judgment, they did little to support his view as to the credibility of Mr O’Brien on the principal issue.
  2. For the above reasons I conclude that the totality of the evidence before the judge clearly established that, whatever precise words he used, Mr O’Brien made it clear to the respondent at the meeting on 10 December that, if the respondent was going to accept the payment of the Transaction Bonus he would not be entitled to claim the Prescribed Sum. In my judgment the judge was plainly wrong for the reasons which I have given not to reach this conclusion. The findings which he did make were not open to him on a proper analysis of the evidence. For these reasons I would allow the appeal and give judgment for the appellant.

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