Employment Cases Update

Chunilal v Merrill Lynch [2010] EWHC 1467 (Comm)

Date published: 28/06/2010

Application by defendant to set aside an order for leave to serve proceedings upon the defendant outside the jurisdiction where the claimant was suing for breach of his employment contract because of non-payment of a discretionary bonus. The order was set aside.

The claimant was originally employed by an English company but that contract was terminated in December 2003 when the claimant transferred to Hong Kong, to work for another division of the business, under a contract negotiated in New York and accepted by fax when he was back in London. That contract stipulated that he would be eligible for a discretionary bonus for each year on assignment. His employment was terminated in February 2009 but was paid a bonus for 2008 of $2.345m compared with $11.675 in 2007 and $13.875 in 2006. The claimant contended that the defendant had breached an implied term in the contract that they would not act irrationally or perversely in making the bonus payment and issued proceedings.

In this judgment, Burton J has to consider I) where the contract was made; ii) whether it was governed by English law; iii) where the alleged breach was committed and iv) whether England was the appropriate forum. He concludes that i) the contract was made in New York partly as the fax acceptance was received there; ii) there was no express provision for choice of law in the contract so the onus was on the claimant to demonstrate the the choice of English law was reasonably certain and this he failed to do, partly because following Rutten in the European Court, the claimant habitually carried out his work in Hong Kong; iii) although there was an element of recommendation concerning payment of the bonus made by a member of staff in London, there was no credible evidence that the decision was made there; and iv) that, given the similarities of English and Hong Kong law and the fact that only one material witness was in London, the claimant had not satisfied the onus on him to demonstrate that England was the most appropriate forum. The order was therefore set aside.

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Neutral Citation Number: [2010] EWHC 1467 (Comm)

Case No: 2009 Folio 1354

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 18 June 2010

Before :

MR JUSTICE BURTON

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Between :

Damian Ratilal Chunilal (Claimant)

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Merrill Lynch International Incorporated (Defendant)

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Mr Robin Knowles QC and Mr Richard Leiper (instructed by Ferguson Solicitors) for the Claimant

Mr Christopher Harrison (instructed by Simmons and Simmons) for the Defendant

Hearing date: Friday 11 June 2010

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Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

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MR JUSTICE BURTON

Mr Justice Burton:
1. The claim by the Claimant, Mr Chunilal, a UK national resident in Hong Kong, against the Defendant, a Delaware corporation, with its principal place of business in New York, is for breach of the implied term of his contract of employment by the Defendant dated 5 November 2003 ("the 2003 contract") that in paying him a discretionary bonus (pursuant to a scheme called the Variable Incentive Compensation Plan ("VICP") the Defendant would not act irrationally or perversely.

2. This has been the hearing of an application by the Defendant to set aside the Order of Teare J of 10 December 2009 for leave to serve the proceedings upon it out of the jurisdiction, which was made, and is now supported by Robin Knowles QC and Richard Leiper on behalf of the Claimant, on three grounds:

i) that the 2003 contract was made in this jurisdiction.

ii) that the 2003 contract is governed by English law.

iii) that the breach of contract sued upon took place in the jurisdiction.

3. The Claimant was employed by another company in the Merrill Lynch Group, Merrill Lynch International Ltd, an English company, pursuant to particulars of terms of employment dated 4 September 1989 ("the 1989 contract"), in London until 2003, when he entered into the 2003 contract, and his employment with the English company under the 1989 contract was terminated as of 31 December 2003, as recorded in his P45. This took place because of his transfer to Hong Kong, where he has lived ever since. It is common ground that he went to New York to negotiate the terms of his proposed new employment in charge of the Head of the Pacific Rim Investment Banking group, based in Hong Kong, a position offered to him by Mr Fleming, the then Global Head of Investment Banking, based in New York, and that he negotiated his contract in New York with a Mr Don Schneider. The terms of his employment by the Defendant were recorded and signed as approved by Mr Schneider, and it seems that the Claimant signed the terms as accepted in London and faxed his acceptance back to New York. The letter dated 5 November 2003 ("the first letter") reads in material part:

"TRANSFER TO MERRILL LYNCH INTERNATIONAL INC.

Pursuant to Merrill Lynch's relocation program and your agreement to the terms of your transfer previously discussed, this letter is to confirm that you will be transferred to Merrill Lynch International Inc. ("MLID") with effect from 1st January 2004.

You will hold the position of Managing Director for the Debt Markets Division. You may be seconded to other entities within the Merrill Lynch Group by MLID and should work in such place or places as MLID may reasonably require for the proper performance and exercise of your duties. You will be given a letter of understanding by MLID stating details of your compensation package.

Please indicate your acceptance of your transfer by signing and returning the duplicate copy of this letter."

4. The Letter of Understanding of the same date there referred to ("the second letter") was similarly signed by Mr Schneider and then signed and accepted and faxed by the Claimant. It reads in material terms as follows (I have added paragraph numbering for convenience):

"This letter of Understanding confirms your secondment to Merrill Lynch (Asia Pacific) Ltd ("the Company") as Managing Director in the Debt Markets Division subject to the following conditions:

- Possession of a valid Hong Kong work visa.

- Proper registration with the Securities and Futures Commission (SFC) in Hong Kong.

The terms of your secondment, including base salary, related assignment differentials and relocation entitlements are in accordance with the Company's Non-Equalized Temporary Assignment Policy.

1. PERIOD OF ASSIGNMENT

The effective date of your assignment will be 1st January 2004 and is expected to last for a period of up to 3 years. However this does not mean that there is any guaranteed period of employment and it should be understood that the length of the assignment is based upon present requirements and is therefore subject to change at the discretion of the Company.

The Company may terminate your assignment at any time for any reason upon giving you one month's prior written notice. Your employment may be terminated for cause (or gross misconduct) without any prior notice to you.

2. COMPENSATION/TAXES

At the start of this assignment, your base salary will be USD 200,000 per annum. You are responsible for any tax liabilities on your total compensation. Merrill Lynch will cover the cost of the preparation of your tax returns for the duration of your assignment.

As a method for the Company to ensure compliance with foreign tax laws, it is necessary that the Company's designated tax consultant provide Merrill Lynch with a copy of the foreign tax returns. By signing this letter, you agree to provide the consultant with all requisite information for the completion of accurate tax returns.

You will be eligible to participate in the Variable Incentive Compensation Plan (VICP) each year you are on assignment. The granting of an award under this Plan is at the discretion of Merrill Lynch.

On repatriation you will return to a salary in line with your peers in the home location.

3. EMPLOYEE BENEFITS

You will continue to participate, on the same basis as if you had remained in the UK, in the Merrill Lynch (UK) Defined Benefit Pension Plan, Life and Disability Assurance Programmes. This plan is non-contributory being fully paid for by the company.

As a British citizen on expatriate terms, you will be enrolled in the Company's International Medical Plan, which includes medical and risk benefits. If you have any questions on the International Medical Plan, you should contact Janneth LoMenzo of the International Benefits Department in New York at (212) 236-8151. For other employee-related benefits please contact your Hong Kong HR representative.

4. RELOCATION ENTITLEMENTS

Pre-Move Trip – The Company will pay/reimburse costs in connection with a pre-move trip to Hong Kong. ...

Shipping – The Company will pay the cost of shipping a reasonable amount of your personal and household effect form London to Hong Kong by a Company designated shipper. ...

En-route Travel – The Company will cover the cost of a one-way business class air ticket from London to Hong Kong for you and your partner.

Relocation Allowance – Upon your arrival in Hong Kong you will receive a relocation allowance equal to US$12,000 net of taxes, to be used for miscellaneous expenses not covered by the Non-Equalized Temporary Assignment Policy.

Auto Loss on Sale – The Company will reimburse costs in connection with the loss you incur as a result of selling two cars upon secondment to Hong Kong. ...

Temporary Living – If you are required to move into temporary accommodation prior to leaving London and/or prior to your occupying permanent accommodation in Hong Kong, the Company will reimburse the cost of temporary accommodation for a maximum of 6 weeks in London and/or Hong Kong.

...

To arrange temporary living, please contact Expatriate & Relocation Services team in the home and host locations.

Home Finding – Upon arrival in Hong Kong you will be provided home finding assistance by an outside consultant.

5. HOUSING BENEFITS

6. RETURN TRIPS TO THE UK

You are entitled to four return business class air tickets form Hong Kong to London for yourself per annum for the duration of your assignment. This is in lieu of any air tickets for your children to visit you in Hong Kong.

7. COMPLETION OF SECONDMENT

Upon completion of your secondment, the Company will pay/reimburse the following costs: return business class airfare, shipping of household goods, temporary living expenses and relocation allowance.

Under the transition provisions of the Non-Equalized Temporary Assignment Policy, if your assignment in Asia Pacific Region extends beyond three years, your expatriate benefits will begin to scale down and gradually approach more localised standards. You will begin to receive these benefits in cash allowance in accordance with the following schedule:

Year 4 – You receive 75% of the expatriate benefits in cash allowance.

Year 5 – You receive 50% of the expatriate benefits in cash allowance.

Year 6 – You receive 0% of the expatriate benefits in cash allowance – transition to local terms is complete.

8. TERMINATION

... Should you be terminated for any reason other than for cause, you will be terminated under the Company's UK termination terms and conditions prevailing at the date of termination. ..."

5. From January 2004 until the termination of his employment by the Defendant in February 2009 the Claimant was employed by the Defendant in Hong Kong. He held the position of Head of Investment Banking for the Asia Pacific region: on 1 January 2006 he was appointed as a managing partner, with the title of Senior Vice President. His secondment to Merrill Lynch (Asia Pacific) Ltd ("ML Asia Pacific") was extended by letter dated 31 January 2007 ("the extension letter"). His role in Hong Kong required him to oversee the investment banking business of Merrill Lynch in the Asia Pacific region, which led to his travelling extensively throughout the Asia Pacific region to countries including Australia, Japan and Indonesia. He also travelled occasionally to the United States and to the United Kingdom, primarily to meet with his line managers. He spent between two and four weeks in the United Kingdom each year, taking the opportunity to spend weekends and holidays there with the children of his first marriage, who live with their mother in London. His reporting line was, from January 2004 until mid-2007, to Mr Fleming in New York, from mid-2007 until autumn 2008 to a Mr Orcel in London (who in turn reported to Mr Fleming in New York), and it reverted to Mr Fleming in autumn 2008.

6. He was given notice of termination on 11 November 2008, such that his employment ended on 9 February 2009. He makes no claim in these proceedings as to such termination. His claim, as set out above, relates to his discretionary bonus. He was paid a discretionary bonus for the year 2008 in the sum of US$ 2,345,000 (paid into his Hong Kong bank account). This compares with the discretionary bonus he received in the two previous years of US$ 11.675 million in 2007 and US $13.875 million in 2006. He claims that this payment was in breach of the implied term set out in paragraph 1 above, which has been the subject of conclusion by the English courts in Clark v Nomura International plc [2000] IRLR 766, Horkulak v Cantor Fitzgerald International [2004] EWCA Civ 1287 CA and Keen v Commerzbank AG [2007] ICR 623 CA, and that is his cause of action in these proceedings.

7. For the purpose of today's hearing, although the Defendant, for whom Mr Christopher Harrison appears, submits (as will be seen) that Hong Kong law applies to the 2003 contract and that the Hong Kong courts will not be bound by any of those decisions, nevertheless Mr Harrison accepts that there is a serious issue to be tried, and that the jurisdictional gateway in that regard is satisfied. It is common ground that in respect of one or more of the grounds set out in paragraph 2 above, the Claimant must establish that he has a good arguable case, namely (see e.g. Canada Trust v Stolzenburg (No 2) [1998] 1 WLR 547 per Waller LJ at 555) that the Claimant has a much better argument than the Defendant on the material available. The Claimant must also establish, because he seeks the exercise by the English court of its exorbitant jurisdiction against a non-domiciled defendant, the burden being upon him, that England is clearly the most appropriate forum (see Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460 per Lord Goff at 478-482 and Dicey and Morris Rule 31(3) at 12R-001 (2006 Ed).

The place where the contract was made
8. It is common ground that the 1989 contract came to an end and that the new contract of employment as from 1 January 2004 was between the Claimant and the Defendant company. There was thus a novation (see Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 esp at 1018-9), a contract between the Claimant and a different employer, and on different terms, because, subject to the governing law, which is addressed below, and to whether there were separate provisions in respect of grievance and disciplinary procedures, all other contractual provisions were specifically, indeed lengthily, set out in the new documents, as appears in paragraph 4 above. Although the application to Teare J was put by the Claimant on the basis that the 2003 contract was made in England, there is no doubt on the evidence, as provided by the Claimant himself in his subsequent witness statement, that it was negotiated – i.e. orally agreed – between him and Mr Schneider in New York, and if there were some doubt as to whether it were subject to the terms being formally accepted in writing, they were so when the Claimant's faxed acceptance was communicated to the Defendant in New York. Mr Harrison produced, in his skeleton and bundle of authorities, a good deal of learning, English (Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34 and J S Zestafoni Nikoladze Ferroalloy Plant v Ronly Holdings Ltd [2004] 2 Lloyd's Rep 335), Canadian and Australian, all to the effect that (unlike the postal exception) "the simple case of instantaneous communication between principals … involves that the contract … was made when and where the acceptance was received" (per Lord Wilberforce in Brinkibon at 42E). In any event, since it is English law which the Claimant contends governs the contract, it is to English law which the Claimant must look for assistance, and it gives him none. In the event, Mr Knowles did not challenge the point. I am satisfied that the 2003 contract, breach of which is relied upon in these proceedings, was made in New York, and, at any rate, that there is no good arguable case that it was made within this jurisdiction.

Governed by English law
9. There was no express choice of law in the 2003 contract. Article 3 of the Rome Convention, applicable to this contract as a result of the Contracts (Applicable Law) Act 1990, provides (under the heading "Freedom of choice"):

"1. A contract shall be governed by the law chosen by the parties. The choice must be express or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case."

10. Mr Knowles relies upon Article 3 as his primary case, namely that he could demonstrate that English law was chosen with reasonable certainty by reference to the terms of the contract and/or the circumstances of the case.

11. His fallback case was by reference to Article 6(2) relating to "Individual employment contracts", namely:

"... a contract of employment shall, in the absence of choice in accordance with Article 3, be governed

(a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; or

(b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated;

unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country."

12. As to Article 3, the following facts were relied upon by each side:

i) Mr Knowles' bedrock was that the governing law of the preceding 1989 contract, which regulated the Claimant's employment from 1989 to 2003, was English law. There was no express choice of law in that contract, but all the circumstances and terms so suggested, in respect of an English resident employed by an English company, and Mr Harrison did not challenge that.

ii) Mr Harrison, on the Defendant's behalf, relied upon the factors in the 2003 contract, which in his submission contra-indicated English law, as conveniently set out in his thoroughly prepared skeleton argument:

"74. … the contract of employment was made in New York.

75. The contract was with a corporation (incorporated in Delaware) which has its principal place of business in New York.

76. The Claimant was leaving England to move to Hong Kong, to work there on secondment to Merrill Lynch (Asia Pacific) Ltd, a Hong Kong company.

77. … the contract of employment required him to have a Hong Kong work visa and to be registered with the Hong Kong Securities and Futures Commission.

78. He moved to Hong Kong and has lived there ever since [a post-contractual fact, but no doubt the Defendant would say that it was in accordance with the contractual intention].

79. He moved from the UK payroll to the Hong Kong payroll. He ceased to be paid in sterling and instead was paid in US dollars.

80. He paid Hong Kong taxes. The returns filed with the Hong Kong tax authorities each year included the bonuses which had been paid to him [as per my comment above].

81. He was in the "Pac Rim Officers" bonus pool [within the VICP] and … received his annual compensation statements from the human resources office in Hong Kong [in the event received by him in Tokyo in 2004 and 2005, in Hong Kong in 2006 and in Sydney in 2007: as set out in paragraph 6 above his 2008 bonus was paid in to his Hong Kong bank account].

82. He continued to participate in the Merrill Lynch (UK) Defined Benefit Pension Plan, Life and Disability Assurance Programmes, but this was just because contributions had already been made to the plans while he had been working in the UK as an employee of Merrill London and so benefits had already built up. In relocation to medical and risk benefits he changed from being a member of BUPA in the UK to become enrolled in Merrill Lynch (Asia Pacific) Ltd International Medical Plan."

iii) Mr Knowles points to the following factors in the Claimant's terms and conditions:

a) The provision in paragraph 8 that in the event of termination for any reason other than for cause, UK termination conditions would apply.

b) The reference at the outset of the second letter to the terms of his secondment being in accordance with the "Company's Non-Equalized Temporary Assignment Policy".

c) The reference in paragraph 2 to foreign tax laws and tax returns.

d) The reference in the same paragraph to what would occur in the event of repatriation, namely "return to a salary in line with your peers in the home location".

e) The reference in paragraph 3 to his continuation in the pension etc scheme "on the same basis as if you had remained in the UK".

f) The reference in paragraph 4 to his opportunity to contact the "Expatriate and Relocation Services team in the home and host locations".

iv) In addition Mr Knowles referred to the extension letter of 31 January 2007 which provided that:

"This position will be reviewed on a regular basis including the terms and conditions of your secondment. The review will include, but will not be limited to, repatriation to the UK or transfer to local terms and conditions."

Further Mr Knowles pointed out that the Claimant remained registered with the FSA (but of course additionally with the Hong Kong SFC, as set out in (ii) above) and that, although his salary ceased to be paid in sterling and was now paid in US dollars, it was still paid into the same UK bank account.

13. As to Article 3, Mr Knowles submits as follows:

i) There is no express governing law clause in either the 1989 or 2003 contracts. There is no reason to conclude that the governing law of the 2003 contract was different from that which is conceded to have been the (unexpressed) governing law of the 1989 contract. There were two subsequent agreements, one dated 1 January 2006 relating to participation in a Managing Partner Incentive Program and an Employee Stock Compensation Plan, whose prospectus is dated 1 February 2008, both of which were expressly governed by New York law, and a special bonus arrangement dated 9 February 2007 expressly subject to Hong Kong law, and so could the 2003 contract have been, had it been so desired or intended. The indications set out above within the detailed terms – references to foreign, home etc – and the provision for UK termination terms and conditions to apply, all support the case for the continuation of the UK governing law from the 1989 contract to the 2003 contract.

ii) The 2003 contract constituted a secondment to Hong Kong. It could be followed by other secondments to other locations, and if this secondment were to be governed by Hong Kong law, then any future secondment would presumably be said to be governed by the law of the fresh secondment, and it made far more commercial sense for the continuing employment status of the Claimant to be governed by UK law.

14. As to Article 6, if, contrary to Mr Knowles' contentions, he could not demonstrate the choice of English law with reasonable certainty, by reference to Article 3, then his case by reference to Article 6 is that, by virtue of the November 2003 contract the Claimant was to be temporarily employed in Hong Kong, but he was not, by virtue of its being a secondment, habitually to carry out his work in Hong Kong; alternatively he did not habitually carry out his work in any one country, in which case the contract would be governed by the law of the country in which the place of business through which he was engaged is situated, which Mr Knowles submits to be London. Although he did not expressly so submit, he would presumably if necessary contend that, by reference to the Claimant's previous employment history, and the matters set out in paragraph 12(iii) above, the 2003 contract was more closely connected with the UK than with Hong Kong.

15. As to Article 3, Mr Harrison submitted that, by virtue of the indicators to which he referred, that Article pointed not to English law but to Hong Kong law or New York law, but in any event he submitted that a choice of English law could not be "demonstrated with reasonable certainty" by the Claimant. He contended:

i) There was a fundamental change by virtue of the 2003 contract in the identity of the employer and in the terms and conditions of employment. Instead of working full-time in London, the Claimant was to be seconded internationally. He refers to paragraph 9.4 of the first witness statement of Ms Lynch on the Defendant's behalf:

"The Claimant's employment was transferred to the Defendant in accordance with Merrill Lynch's normal practice at that time of transferring the employment of employees who had worked in the UK but were moving to Hong Kong on to employment contracts with the Defendant."

All the reasons compelling the conclusion that the previous London employment of the Claimant by the English company was governed by UK law no longer applied.

ii) The factors relied upon by the Defendant as counter-indicating London, set out in paragraph 12(ii) above, were neither outweighed nor even balanced by the factors relied upon by the Claimant. The fact that the Claimant's existing position as to "UK termination terms and conditions" was preserved, as was his continued participation in the pension etc programmes "on the same basis as if you had remained in the UK", was at best equivocal, but rather was supportive of there being otherwise a change away from terms and benefits expressed or implied by reference to English law. Mr Harrison makes the same or similar submission in relation to the terms of the extension letter, whereby there might be a review leading to repatriation to the UK or transfer to local terms and conditions. Mr Harrison submitted that the reference to repatriation highlights that the Claimant was not UK-based, and that the possibility of transfer to local terms and conditions repeated the possibility of a future loss of expatriate benefits already heralded in paragraph 7 of the second letter: it does not, Mr Harrison submits, suggest that the Claimant's contract was governed by English law but might later be changed to Hong Kong law.

iii) As to the express choice of New York law in the Incentive Program, and (as is to be expected) in the prospectus for stock options in Merrill Lynch & Co Inc issued in New York, the express choice of New York law in those documents, and indeed of Hong Kong law in the special bonus arrangement, was not inconsistent with the Defendant's case, and was not supportive of English law governing the 2003 contract.

16. Mr Harrison places most reliance upon Article 6. He submits that it is plain that, as from November 2003, the Claimant habitually carried out his work in performance of the contract in or from Hong Kong, even if from time to time he was employed in other countries of the Pacific Rim or making occasional visits to England. He refers to paragraph 33-085 of Dicey and Morris, in which reference is made, for the purpose of construction of Article 6(2)(a), to the approach of the European Court to the interpretation of the similar words in Article 5(1) of the 1968 Convention as amended, whereby the "place of performance of the obligation in question" for the purpose of matters relating to individual contracts of employment was the "place … where the employee habitually carries out his work". Mr Harrison refers to the following passage in the European Court's judgment in Rutten v Cross Medical Ltd [1997] ICR 715 at 728G ff:

"23. … where a contract of employment is performed in several contracting states, article 5(1) of the [Brussels] Convention, as amended by the San Sebastian Convention, must be understood to refer to the place where the employee has established the effective centre of his working activities and where, or from which, he in fact performs the essential part of his duties vis à vis his employer.

25. When identifying that place in the particular case, which is a matter for the national court in the light of the facts before it, the fact that the employee carried out almost two-thirds of his work in one contracting state – the remainder of his work being performed in several other states – and that he has an office in that contracting state where he organised his work for his employer and to which he returned after each business trip abroad, as was the case in the main proceedings, is relevant."

17. Mr Harrison submits that it is clear on the facts of this case that from 1 January 2004 Hong Kong was such place. In the alternative, if Article 6(2)(b) were relevant, then the law of the country in which the place of business through which he was engaged is situated would, Mr Harrison submits, plainly on the facts of this case be New York, and finally, if indeed Mr Knowles were placing reliance on the proviso to Article 6(2), Mr Harrison submits (in paragraph 116 of his skeleton) that "if there is any connection with England, it is a tenuous one; it is certainly not the case that the contract is "more closely" connected with England than with Hong Kong or New York."

18. I am persuaded by Mr Harrison that it is indeed central on the facts of this case that there was a change from the London-centric employment of the Claimant under the 1989 contract by the English company. There could have been a secondment by the English company to Hong Kong on a temporary basis. But that is not what occurred. A novation by which the Claimant's employment became international and was transferred to the Delaware corporation for the purpose of international secondment was negotiated and agreed in New York, and from that time the Claimant was full-time employed by the Delaware corporation (seconded to ML Asia Pacific) in the Pacific Rim, based in Hong Kong. Given that there was in fact to be a secondment to Hong Kong, it is not surprising that there are so many Hong Kong factors, as relied upon by Mr Harrison, set out in paragraph 12(ii) above. I can see the force of Mr Knowles' case as to the possible question that might arise in the event of a further secondment to a different jurisdiction. But the Claimant has to persuade me that there is a choice of English law demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case, and I am not so satisfied. With the exception of those employee benefits which are expressly preserved, and with the one remaining fact that the Hong Kong salary, in dollars, is to continue to be paid into the English bank account, there are, in my judgment, no continuing factors indicating, or certainly demonstrating with reasonable certainty, any connection with the UK, or with UK law, from January 2004 onwards. As to benefits, the Claimant's contact was now to be the International Benefits Department in New York (paragraph 3 of the second letter). The onus is on the Claimant to establish an arguable case that English law can be demonstrated with reasonable certainty to govern the 2003 contract. I do not so find. I prefer Mr Harrison's fallback argument that Article 3 cannot be shown to apply, and that there is no choice of law in the November 2003 contract, such that the provisions of Article 6, intended to govern contracts of employment in the absence of such express choice, apply.

19. So far as Article 6 is concerned, I do not find Mr Knowles' submissions persuasive: indeed they seem counter-intuitive. As for Article 6(2)(a), Mr Knowles submits that, under the 2003 contract, the Claimant is temporarily employed in Hong Kong, with the implication that, insofar as subparagraph (a) applies, the Claimant must (continue to) habitually carry out his work in the UK. That is plainly not so, and, so far as concerns his presence in the UK on his two to four-week visits (much of it on holiday) after 2003, it is that which is temporary. Particularly in the light of consideration of the dicta of the European Court in Rutten, I am entirely persuaded that, from 2003, the Claimant habitually carried out his work under the contract in and from Hong Kong.

20. If it were necessary to consider the provisions of Article 6(2)(b), which in my judgment it is not, I would be satisfied that, on the facts of this case, as described in paragraph 3 above, New York was the country in which the place of business through which he was engaged is situated. Mr Knowles was in my judgment right not to place reliance upon the proviso to Article 6(2), which, in my judgment, does not arise.

21. In those circumstances, I am not satisfied that there is a good arguable case that English law governs the 2003 contract, breach of which is asserted in these proceedings.

Breach committed within the jurisdiction
22. The breach relied upon by the Claimant which is said to found his claim in damages is that set out in paragraph 1 above, pleaded in paragraph 2(3)(a) of the Particulars of Claim. An implied term is also pleaded in paragraph 2.3(b) that:

"The Defendant would give an explanation of its reasons for its exercise of the said discretion and, unless there was good reason to the contrary, that explanation would identify the decision-maker."

23. However, if there is a breach of that pleaded obligation to explain, it is not that breach which would sound in damages, and a breach of that term would not support a claim for service out of the jurisdiction in relation to the breach of the term upon which the Claimant primarily wishes to rely. It is derived, Mr Knowles accepts, from the words of Moses LJ in Keen at paragraphs 110 to 112, but Moses LJ himself there makes clear that a failure to identify the decision-maker or to give reasons is only a starting point where the claim is for damages for breach of the implied term not to make an irrational award, and "a failure to give reasons or to identify the decision-maker will not necessarily establish irrationality".

24. The discretionary bonus payment that was made was paid in Hong Kong into the Claimant's Hong Kong bank account. The question is where the allegedly defective decision to pay such bonus was made. The evidence before me is, unfortunately for the Claimant, wholly unhelpful to him. As the Claimant himself explains in his evidence, at paragraph 6.2 of his witness statement in opposition to the Defendant's application:

"My own bonus was not determined in the Pacific Rim. The recommendation for the level of my bonus would have been made by Greg Fleming (initially) and, thereafter, Andrea Orcel, to whom I reported [I interpose and then after autumn 2008 once again by Mr Fleming]. At my level within the bank, managers were required to fill in a form prior to bonus determination, which was sent to the Management Development and Compensation Committee based in New York. It is inconceivable that my compensation could have been signed off without its being approved or at least reviewed by other non-HK-based senior leadership of the firm and/or the Compensation Committee and/or Stan O'Neal [also based in New York]."

25. In explaining why he concludes that the bonus decision must have been irrational, he describes, in paragraph 6.8 of the same witness statement, how, in September, he was given a bonus pool number for the Pacific Rim by New York", whereafter he did his own workings on what he thought the bonus would be, by reference to the "relatively good performance of Pacific Rim Investment Banking within the overall investment banking group".

26. Mr Harrison points out that the Management Development and Compensation Committee based in New York is the same Committee as is referred to in the New York Employee Stock Compensation Plan (referred to in paragraph 13(i) above) relating to the decisions as to employees' stock options.

27. The Claimant's solicitors pressed the Defendant for further information about the bonus, no doubt with Keen in mind, and some explanation was given, eventually as expanded on in paragraph 4 of Ms Lynch's second witness statement. She said as follows:

"4. The Claimant states in his witness statement … that he was not aware that it was the Defendant's practice not to award bonuses in redundancy situations. I have spoken with Siobhan McDonagh who was Global Head of Human Resources for Investment Banking for approximately 18 months up to and beyond the termination of the Claimant's employment. She had significant dealings with the Claimant and a number of other senior leaders within the Investment Banking Division. She confirmed that the Defendant's policy in redundancy situations at the time when the Claimant was terminated was that individuals, subject to them signing a compromise agreement or similar document, were offered two elements of a package which were 1) a severance payment calculated based on service and 2) a percentage of the previous year's bonus, usually up to a maximum of 20%. Ms McDonagh told me that she believed all senior managers were aware broadly of how the policy worked. She said Human Resources were careful not to send emails on the subject but she said it is inconceivable that the Claimant will not have been aware of this. She told me that she cannot remember details of specific discussions she had with the Claimant but she is sure, given the number of redundancies going on in the organisation, that she will have had a number of discussions with him where redundancy calculations will have been discussed."

28. Mr Knowles submits that two conclusions arise out of this:

i) Ms McDonagh, who is based in London, played a (significant) part in the decision making.

ii) As explained by Ms Lynch, the calculation of the bonus was by reference to a policy in redundancy situations, and hence by reference to "UK termination terms and conditions".

29. Given the difficulty for any claimant at this stage, Mr Knowles submits that this is sufficient for an inference to be drawn that there is a good arguable case that the impugned decision as to the bonus was made in London.

30. I accept Mr Harrison's submissions to the contrary. Even if a policy applicable in redundancy situations was applied to this bonus, this is not a claim relating to termination but to an allegedly flawed bonus payment. In any event, on the Claimant's own case, the recommendations as to bonus were made in New York by the relevant line manager (although for a period – not relevant to this case – that line manager was in London), but it now seems that there may also have been a recommendation by, or at any rate a consultation of, Ms McDonagh, the Global Head of Human Resources, in London. However, it seems to me plain that there is no evidence which begins to establish that the impugned decision was made in London: indeed all the evidence leads to the conclusion that it was made in New York. It may well be difficult for a claimant to get at evidence at an early stage. In proceedings in which there is no issue as to jurisdiction there are now methods whereby pre-action disclosure can be obtained. But this is a claim against a non-resident defendant, where the Claimant has at the outset to establish the arguability of his jurisdictional gateway to the relevant standard, and I am satisfied he has not.

31. Given that I am satisfied that, on the evidence, there is no good arguable case that the breach relied on in fact occurred within the jurisdiction, I do not need to address Mr Harrison's carefully argued fallback case by reference to Sharab v Al-Saud [2009] 2 Lloyd's Law Rep 160, whereby, in reliance upon the words of Richards LJ at paragraphs 37-39, he submitted that, in any event, the Claimant would need to show for the purposes of this gateway that "this jurisdiction must be the only place where performance is required by the contract".

England the most appropriate forum.
32. Even if the Claimant had established a sufficiency of case as to the existence of one or more of the gateways, he would still need to address and establish the appropriateness of the forum (see paragraph 7 above). Even if I had concluded that there was a good arguable case that English law governed, that would not necessarily have been enough, or indeed even a starting point: see Dicey and Morris at paragraph 11-192, and further at 12-029:

"If the legal issues are straightforward, or if the competing fora have domestic laws which are substantially similar, the identity of the governing law will be a factor of rather little significance."

Given the close similarity of, and relationship between, the United Kingdom and Hong Kong courts and their laws, any differences could easily be understood and assimilated by either court, English or Hong Kong.

33. As for witnesses, the Claimant himself is in Hong Kong, and it is not suggested that there will not be the availability of disclosure and witness orders sufficient for a satisfactory trial of the issues. In any event, as set out above, the onus is upon the Claimant to show that London is the most appropriate forum, and, apart from Mr Orcel, whose relevance does not seem great, the only material witness who is in London is Ms McDonagh.

34. Had the matter arisen, which I am satisfied it does not, I would not have concluded that the Claimant satisfies the necessary onus to establish that the English court should exercise jurisdiction in this case.

35. The Defendant's application to set aside is accordingly granted.