Veitch Penny LLP - Exeter | Crediton, Devon

Case

Price-Jones v Commerzbank AG
Court of Appeal - (21 November 2003)

Issues

The Issues

(1) Construction of Contract
(2) Provisions of payment of guaranteed bonus
(3) Deductions

Facts

Mr Price-Jones began working for Commerzbank AG as an Investment Banker on 10th April 2000. His written Contract of Employment was contained in a letter of 18th February 2000. This Contract provided that he would be paid a guaranteed minimum bonus of £250,000.00 for each of the years 2000 and 2001. A further letter dated 29th June 2000 stated that Mr Price-Jones would be paid a minimum bonus of £265,000.00 in respect of the year 2000.

He was actually paid £250,000.00 on 15th December 2000 and an additional £265,000.00 in March 2001. The Bank asked Mr Price-Jones to repay the first payment of £250,000.00 on the basis that he had been paid by mistake. It said it had intended to award him only £15,000.00 extra bonus and that the payment of £265,000.00 was to supersede the guaranteed bonus of £250,000.00 for the year 2000. Mr Price-Jones refused to repay the money claiming he was contractually entitled to both payments. Mr Price-Jones was then made redundant on 16th November 2001. In order to recoup the overpayment the Bank sought to set against the bonus due to Mr Price-Jones for the year 2001.

Mr Price-Jones initiated proceedings against the Bank seeking to recover the recouped bonus, alleging that the proper construction of the Contracts meant he was entitled to both payments. In addition, as a defence to the claim he relied on the defence of change of position namely, that his position had so changed that it was inequitable in the circumstances to require him to repay the overpaid sum.





The High Court found in Mr Price-Jones’ favour. It found that the intention of the letter of 29th June meant that the Bank were obliged to pay him the sum of £265,000.00 in addition to the sum of £250,000.00. In addition, the Bank could not recover the mistaken payment by reason of Mr Price-Jones’ change of position. If it had not been for the letter of 29th June and Mr Price-Jones’ understanding of it he would have decided to leave the Bank later that month and seek alternative employment.

The Bank appealed the decision.

Decision

The Court of Appeal allowed the appeal on the following basis:-

(i) The Court of Appeal found that the previous Judge had been incorrect in his interpretation of the Contract of Employment. It was found that too much reliance had been placed on the surrounding circumstances in order to construct a sensible commercial agreement between the parties. Insufficient attention had been given to the actual wording of the documents. When the various documents were read together and in context, their meaning was clear to the effect that it had been intended that the original guaranteed bonus clause of £250,000.00 would be changed by inserting in its place a similarly worded clause containing a new minimum guaranteed bonus of £265,000.00.

(ii) Furthermore, it was found that the Judge had been incorrect in finding that the change of position was available to Mr Price-Jones in respect of the overpayment. Mr Price-Jones had argued that his change of position had been to stay at the Bank rather than move on and look for alternative employment elsewhere. If he realised that the additional bonus would have been only £15,000.00 he would not have remained. In reality his position had not so changed as to make it inequitable for him to repay the full amount of the overpayment.

It was found that Mr Price-Jones’ decision not to seek alternative employment fell outside the scope of the defence available to him. The fact that he would have decided to seek similar employment elsewhere save for the expectation of a very large additional bonus, was not a sufficiently significant matter to be treated as a change of position. His decision to stay was based on his misinterpretation of the June letter and not the overpayment. Further there had been no relevant connection in between the Claimant’s decision to stay at the bank, payment of the bonus actually promised in the letter of 29th June for the year 2000.

Comments

With respect to overpayments this Judgment assists practitioners by outlining a number of useful principles:-

1. Whilst in most change of position cases a relevant change of position is more likely to have occurred after receiving the overpayment. However the reversal of this order does not affect the availability of the defence to an employee.

2. With respect to causation, the change of position argued by an employee must be “referable in some way to the payment of the money”.

3. It is not essential for an employee to prove financial or pecuniary detriment, as non-pecuniary detriment alone may suffice.

4. Previous case law which has suggested that a change of position defence only protects employees when that has been an actual reduction in their wealth is an inaccurate statement of the law.

Clearly each case will depend upon its facts but in this case the Court of Appeal has acknowledged that the defence of change of position may be available in many more employment situations than previously envisaged. For example:-

a) Where the recipient of an overpayment has given up a job at a time when it would be hard for him to secure alternative employment;

b) Where the recipient has turned down a firm offer of employment that was better remunerated;

c) Where the recipient has stayed in his existing job.