IN THE HIGH COURT OF JUSTICE BETWEEN WAYNE YIP CHOY AND ANGOSTURA HOLDINGS LIMITED

Transcription

1 THE REPUBLIC OF TRINIDAD AND TOBAGO IN THE HIGH COURT OF JUSTICE Claim No.CV BETWEEN WAYNE YIP CHOY CLAIMANT Claimant AND ANGOSTURA HOLDINGS LIMITED DEFENDA NT DEFENDANT Defendant Before the Honourable Mr. Justice James C. Aboud Dated: 8 July 2016 Representation: Mr. Alvin Fitzpatrick SC instructed by Ms. Joan Byrne of Byrne & Byrne for the claimant Mr. Reginald T.A. Armour SC leading Mr. Bronock Reid instructed by Ms. Francine Wilson of Lex Caribbean for the defendant JUDGMENT 1. The claimant sued the defendant for $44 million. He says that this sum represents his combined annual bonus under his contract of employment for two years of service as its CEO. On 20 September 2013 I made an order for an interim payment of $1 million in his favour. An order for an interim payment says something about the prospects of a liability defence. Several limbs of the Amended Defence were raised in defending the interim payment application. These included a pleading that the employment contract signed by Page 1 of 20

2 the parties was not ratified or approved by the board of the defendant company, and that the contract was void because it was not countersigned by the company secretary. These defences were not pursued at the trial. The many-sided defence was pared down to two essential points, which I will consider in detail below. Background facts 2. Due to the dismal financial performance of the defendant during the first to third quarters of 2009, a search for a new Chief Executive Officer ( CEO ) was undertaken. The defendant company was caught in the maelstrom of the collapse of its majority shareholder in the previous year. It recorded losses of almost $1.3 billion. On 1 October 2009 the defendant s then board of directors approved the selection of the claimant as CEO. Steve Bidishi, the acting CEO and Shafeek Sultan-Khan, the chairman, negotiated the terms of the contract with the claimant. Mr. Sultan-Khan was responsible for the fixed salary component of the claimant s compensation package and the other contract terms. Mr. Bidishi was responsible for the variable compensation component of the salary negotiation. Mr. Bidishi requested certain calculations or projections from Ms. Bernadette Sammy, the then Angostura Limited Manager of Financial Accounting. The calculations or projections related to earnings before income, taxation, depreciation and amortization (known in financial terms by the acronym EBITDA ) and Free Cash Flow ( FCF ) for the years This request followed a meeting held at the defendant s boardroom at the end of October 2009, attended by key personnel, including Ms. Sammy, the claimant and one Mr. Thornton. Ms. Sammy testified that the meeting concentrated on arriving at targets for the two local subsidiaries of the defendant, namely, Angostura Limited and Trinidad Distillers Limited, over the 3-year period. Basically, and according to the defendant, the all day meeting attempted to create a 3-year projected budget for the defendant s two local subsidiaries. These calculations were eventually set out in a document prepared by Ms. Sammy that was adduced by consent as exhibit WYC1. 3. Prior to the signing of the contract of employment, the claimant, with the permission of Mr. Sultan-Khan held meetings with the defendant s senior management to apprise Page 2 of 20

3 himself of the state of affairs of the company. Further to these meetings, the claimant held discussions with Mr. Bidishi on the EBITDA and FCF components of the salary package. The claimant has pleaded that EBITDA would be calculated on the basis of the net earnings of the defendant and its foreign and local subsidiaries for the relevant year ( the group s EBITDA ). The claimant says that the FCF would be calculated on the basis of the group s EBITDA plus or minus as the case may be, any increase or decrease in the inventory, accounts receivables and accounts payable for the defendant and its subsidiaries for the relevant year ( the group s FCF ). This contention was denied by the defendant, which asserted that the calculation of the group s EBITDA and FCF was limited to the performance of the two local subsidiaries, and did not include the foreign subsidiaries. In monetary terms the difference between both assertions is substantial. 4. The claimant was hired as CEO of the defendant by letter of 4 November, 2009 contracting him for the period 1 November 2009 to 31 December 2012 ( the contract of employment ). The contract was printed on the letterhead of Angostura Limited, a subsidiary, but I have no doubt that he was employed by the defendant. The contract says so. Mr. Sultan-Khan signed for and on behalf of the defendant. The contract made provision for a base salary of $75, per month, a monthly housing allowance of some US$6,000, and prerequisites such as a car, access to the defendant s vacation homes, and various elite club memberships. It also made provision for a minimum annual bonus of $600,000 and the variable bonus, the subject of this trial. A schedule was annexed to the contract. It set out the formula to be used in calculating the claimant s bonus. Basically, it provided that upon achieving certain EBITDA and FCF targets the defendant would pay certain incremental bonuses to the claimant. No cap or ceiling was written into the entitlement. 5. Clauses 5.2 and 5.3 of the employment letter and its schedule dealt with the EBITDA and FCF targets. The schedule provided that if EBITDA for the defendant and its subsidiaries for the year 2010 exceeded $145 million the defendant would pay to the claimant in addition to his basic salary and emoluments the following compensation: (a) with respect to the first $10 million excess, 5% thereof; (b) with respect to the second $10 Page 3 of 20

4 million excess, 10% thereof; and (c) with respect to any excess thereafter, 15% thereof. With respect to FCF it provided that if FCF for the year 2010 exceeded $75 million the defendant would pay to the claimant, in addition to his basic salary and the EBITDA compensation: (a) with respect to the first $10 million excess, 5% thereof; (b) with respect to the second $10 million excess, 10% thereof; and (c) with respect to any excess thereafter, 15% thereof. The compensation based on EBITDA and FCF performance are together hereafter called the variable compensation. Targets were also set for EBITDA and FCF performance for 2011 and At a board meeting on 21 January 2010 the claimant s six-month probation was waived and he was confirmed as CEO. He set about his work as CEO and, according to the evidence, the company s fortunes were dramatically reversed. The defendant s board of directors approved its consolidated financial statements for the year 2010 on 24 March 2011, and they were passed at the annual general meeting on 29 March Mr. Romesh Singh, the defendant s Chief Financial Officer, thereafter prepared calculations showing the claimant s variable compensation, based on the combined results of the defendant s local and foreign subsidiaries. Mr. Singh has testified that he prepared this document on the direct instructions of the claimant as his CEO. He suggests that there is no other reason for including the foreign subsidiaries other than his following instructions. I have no reason to doubt his sincerity. The variable compensation based on the 2010 EBITDA and FCF of the local and foreign subsidiaries was $18,905,000 for On 14 June 2011 the claimant wrote to request payment of his bonus but it was rejected by the defendant on 25 July By letter of 21 September 2011 the defendant terminated his employment as the defendant s CEO. He was dismissed with immediate effect, and not, as provided for in the contract, with six months notice. Instead, he was given a cheque for his salary for the period in advance, but, as will be discussed below, substantial deductions were made, thus grounding the damages element of a claim for wrongful dismissal. Page 4 of 20

5 8. The crux of the claim is whether the variable compensation ought to be calculated on the results of the whole group, meaning, local and foreign subsidiaries. The claimant contends that by virtue of the oral discussions, the contract documents, and his confirmation in the post as CEO for the group, his compensation ought to be calculated upon the performance of all the group s subsidiaries. The defendant says that insofar as both parties were operating on different assumptions as to which subsidiaries were included there was a fundamental mistake that vitiated the variable compensation component of the contract. The defendant says that the mistake is common mistake, or alternatively, mutual mistake. The defendant also denies that the claimant is entitled to any damages for wrongful dismissal. As indicated earlier, several of the defences set out in the Amended Defence were not pursued at the trial. Law of Mistake 9. Common and mutual mistake have come to be known as two separate categories. Briefly stated, a common mistake arises where both contracting parties make the same fundamental mistake when entering into a contract. For example, they both believe that they are buying and selling a Cazabon painting, when, in fact, Cazabon is not the painter. A mutual mistake occurs when the parties misunderstood each other and are, in effect, at cross purposes when entering into the contract, so that there is no genuine offer and acceptance and by extension no agreement is reached: Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679. An example of this type of mistake would be this: due to a misunderstanding, the seller believes he is selling a Cazabon painting and the buyer believes he is buying a Rambissoon painting. This second type of mistake is occasionally called mistake in communication or mutual misunderstanding. 10. Lord Phillips MR in the English Court of Appeal carefully dissected the cases which had formed the conflicting authorities of Bell v Lever Bros [1932] AC 161 and Solle v Butcher [1950] 1KB 671, and doubted the Denning theory of fairness. The court of appeal in Great Peace held that the following elements must be present if common mistake is to avoid a contract: Page 5 of 20

6 a) There must be a common assumption as to the existence of a state of affairs; b) There must be no warranty by either party that that state of affairs exists; c) The non-existence of the state of affairs must not be attributable to the fault of either party; d) The non-existence of the state of affairs must render performance of the contract impossible; e) The state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible. Construing a contract 11. Terms in a contract may seem clear to parties when the contract is agreed, but, as in this case, after later scrutiny, it is capable of being construed in ways that are not so clear. It is the business of the court, to construe such contracts. If the language is capable of more than one meaning it does not mean that the contract is void. It does not amount to a mistake if two constructions are sought by the two contracting parties. If the contract term is capable of producing more than one meaning the court s duty is to select one. (See Upper Hunter District Council v Australian Chilling and Freezing Co. Ltd [1968] 118 CLR 429 at p.436). I do not think that the instant case is one where the contract term is so vague that no meaning could be attributed to it. That was the situation in G. Scammel and Nephew v H.C and Ouston [1941] AC 251. A court would obviously be wary to adopt a strike-out solution in cases where the contract has already been fully performed. The contract term in the instant case is, in any event, not so vague as to be meaningless. If so, the court s overarching aim would be to determine the meaning the contract would convey to a reasonable person with all the background knowledge available to the parties at the time that the contract was made. This is a mechanism to help discover the intentions of the parties. Page 6 of 20

7 12. The discovery of the parties intentions will depend upon on the natural meaning of the language, and, if there is still ambiguity, by applying tests that evaluate the commercial common sense of the contract term and the background knowledge of the parties. These tests have not always been consistent. A number of pronouncements from the English House of Lords and Supreme Court over the years, illustrate the evolution of that court s approach. 13. Chartbrook Ltd V Persimmon Homes Ltd [2009] UKHL 38 is an authority for the proposition that the interpretation of a written contract is to be conducted by an enquiry into the intention of the parties. The intention is to be discovered by reference to what a reasonable person having all that background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean (per Lord Hoffman, para 14). A court will carry out this exercise by studying the meaning of the words. 14. In the recent case of Arnold v Britton and Others [2015] UKSC 36 the English Supreme Court, in interpreting an onerous service charge provision in a number of long leases, concluded that arguments based on commercial common sense should not be used to undervalue the importance of the actual words used, and that the correct interpretation was one which applied the natural meaning of the words. In that case the court was called upon to interpret a service charge contribution provision in the 99-year leases of a number of chalets in a caravan park in South Wales granted between 1977 and The terms of the clause varied slightly between the relevant leases, but in essence there were two parts. The first part provided for the lessee to pay a proportionate part of the maintenance and service costs, whilst the second part provided for the payment of a yearly sum of 90 for the first year, and for each ensuing year a fixed sum representing a 10% increase on the previous year. 15. The landlord argued that the correct construction of the clause was to provide for a fixed annual charge of 90 for the first year of the term, increasing each subsequent year by 10% on a compound basis. The practical effect was that for a lease granted in 1980 the annual service charge in 2015 would be 2,500, increasing to over 550,000 by Page 7 of 20

8 The current tenants argued that the landlord s construction would result in such an absurdly high annual service charge in the later years of the lease that it could not be right or intentional. Instead, they argued, the words up to should be read into the clause such that the tenants were required to pay a fair proportion of the landlord s costs subject to a cap, which was 90 in the first year and increased by 10% each year on a compound basis. The surrounding evidence making up the factual matrix by reference to which the contract was to be interpreted was limited to the documents themselves and the published Retail Price Index (RPI) for each of the years The Supreme Court favoured the landlord s construction of the lease by a four to one majority, upholding the decision of the Court of Appeal and High Court. Lord Neuberger delivered the judgment of the majority. Summarising the leading authorities, including Chartbrook Ltd v Persimmon Homes Ltd (supra) and Rainy Sky SA v Kookmin Bank [2011] UKSC 50, two cases to which both parties made reference, he said the court was concerned to identify the intention of the parties, by using the language of the contract. The meaning of the words must be assessed in light of (i) the natural and ordinary meaning of the words used in the clause, (ii) any other relevant provisions in the contract, (iii) the overall purpose of the clause and the contract, (iv) the facts and circumstances known or assumed by the parties at the time that the contract was signed and (v) the commercial common sense of the clause, but (vi) disregarding subjective evidence of any party s intentions. He concluded that the natural meaning of the words used in the clause was clear. The interpretation contended for by the tenants would, he said, involve the court inventing a lack of clarity in the clause as an excuse for departing from its natural meaning. 17. Lord Neuberger set out seven factors which he said it was important to emphasise, including four that concern the interaction between the natural meaning of the language and commercial common sense. These four factors are set out in paras of his judgment, and I now paraphrase from those paras: (a) The parties have deliberately selected the language of the contract. The reliance placed in some cases on commercial common sense and Page 8 of 20

9 surrounding circumstances (for example, in Chartbrook) should not be invoked to undervalue the importance of the language they have selected. Save in a very unusual case, the meaning that would be conveyed to a reasonable reader is most obviously to be gleaned from the language of the provision. (b) The less clear the words are, or the worse the drafting skill of the authors, the more ready the court can properly be to depart from their natural meaning. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. (c) The retrospective invocation of commercial common sense is not permissible. The mere fact that a contractual arrangement, if understood by the ordinary meaning of its language, leads in time to some disastrous consequence for one of the parties, is no reason to depart from the plain meaning of the words. It is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date the contract was made. What happened afterwards is irrelevant. (d) Notwithstanding the usefulness of commercial common sense as an interpretative tool, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom or hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. It is not the duty of the court to relieve any party from the consequences of his own imprudence Page 9 of 20

10 Issues 18. The issues to be decided are these: a) Whether the claimant s variable compensation ought to be calculated based on the EBITDA and FCF performance of the defendant s local subsidiaries alone, or whether it should be based on its local and foreign subsidiaries; b) What are the sums due and owing to the claimant with respect to his variable compensation for 2010 and 2011; c) Whether the claimant s contract of employment was wrongfully terminated, thereby entitling him to damages for wrongful dismissal. Disposition Common and mutual mistake 19. The defendant submitted that the variable compensation component of the contract is void for uncertainty by virtue of either common or mutual mistake. This argument is not supported by the authorities. The defendant contended that it intended to contract for a variable compensation calculated on local subsidiaries only, while the claimant s supposed intention and/or understanding was that he was contracting for a variable compensation calculated on local and foreign subsidiaries, thereby creating an operative mistake as to the terms. 20. Mr. Steve Bideshi, was the one who negotiated the variable compensation component of the contract with the claimant. In his witness statement he said that the financial statements of the foreign subsidiaries were never at any time taken into account during those negotiations. However, during cross examination counsel asked Mr. Bideshi whether he had informed the claimant that the compensation would be based solely on EBITDA and FCF of two companies in the group. He said he could not recall telling him that, but it was always the understanding that the results were to be based on the Trinidad companies. The claimant and Mr. Bideshi clearly did not have a shared assumption as to Page 10 of 20

11 how the compensation was to be calculated. This shared assumption is necessary to prove a common mistake. 21. For a mutual mistake, it is vital to establish that the parties were at cross purposes during the negotiations. If that is successfully proven it would have the effect of destroying the offer and the acceptance, and thus the whole contract. That, however, is not the only consideration. 22. I have already mentioned the Scammell case in connection with the vagueness of contractual terms. The difference between that case and this one is that in the instant case there is no doubt that a binding contract existed between the parties. The claimant and the defendant fully performed every obligation of the contract save for the defendant s payment of the claimant s variable compensation. This is an important difference. It cannot be correct to say that there is no contract after each party has, save for the payment of the bonus, already enjoyed the benefit of the other s performance. An issue of fairness also raises its head. The defendant would be able to enjoy the rewards of the claimant s labour without the obligation of paying, despite its clear written intention to do so, any variable compensation whatsoever. 23. It seems to me that, insofar as the parties might be said to be at cross-purposes, their divergence of understanding (if any) does not run deep enough to submerge the entire contract. It does not even run deep enough to submerge the variable compensation component of the contract, in my respectful view. The alleged difference of opinion refers to the identity of the subsidiaries whose EBITDA and FCF performance would be measured. The contract and the variable compensation component can survive such a difference of opinion. I am not, in any event, satisfied that a proper reading of the contract documents, namely the contract of employment and WYC1, will support a finding of mutual mistake such as would obviate the offer and the acceptance. 24. In my view there is no mistake such as would vitiate either the variable compensation component or the entire contract. The contract is therefore enforceable in its entirety, but it will need to be construed. Page 11 of 20

12 Construing the contract 25. To determine the calculation of the claimant s variable compensation it is essential to examine the contractual terms that the parties agreed to. The defendant has argued that the variable compensation payable to the claimant is limited to the calculation of EBITDA and FCF of the local subsidiaries. 26. When the claimant was contracted to work in the position of CEO, he was responsible for the defendant, namely Angostura Holdings Limited and all its subsidiaries. This is a fact that both parties accepted at the trial. After negotiations with the defendant s representatives, the claimant signed the employment letter and its attached schedule. Clause 5.3 of the employment letter makes provision for variable compensation. It says: Variable compensation will be paid in accordance with a criteria agreed upon between the parties to this agreement and illustrated in the attached schedule which forms part of this agreement. 27. The schedule which forms part of the employment contract was created using the targets set out by Ms. Sammy in her working document WYC1. The claimant received this document, studied it and then, to borrow the language he used during cross-examination, he made proposals to the defendant based on WYC1 that were accepted and encapsulated in the schedule to the contract. This working document is titled Angostura Group-Trinidad Companies, Consolidated Operating Results, Plan 2010 and Comparative Values. Ms. Sammy was tasked with the responsibility of preparing projections for Angostura Limited and Trinidad Distillers Limited for a 3-year period, spanning From this process she was able to derive the EBITDA for the two local companies. She testified that that information formed the core of WYC1, noting further that she was not instructed, nor did she prepare a projected balance sheet for the defendant s group of companies which comprised local and foreign subsidiaries. She said she had no information on the overseas companies within the AHL group, and accordingly did not take them into consideration. Ms. Sammy testified that she later, at the request of Mr. Bideshi, generated FCF calculations using the information in WYC1. To arrive at the FCF calculations Ms. Sammy was required to stretch the numbers using different Page 12 of 20

13 formulae, thereby challenging the CEO to achieve what might be considered as very ambitious goals. That was her evidence. 28. In cross-examination Ms. Sammy explained why she could not have taken the results of the foreign subsidiaries into account. She said that though she had historical data for the foreign subsidiaries, she did not have other relevant information, such as strategic plans, that would have allowed her to create projections for those companies. She denied having any conversation with the claimant concerning the defendant s foreign subsidiaries during the preparation of WYC1. Ms. Sammy refuted the claimant s assertion that the reference to foreign subsidiaries in WYC1 was meant to show that the results of those foreign subsidiaries were either zero and/or were estimated at zero and/or were negligible. She said that those references related to adjustments that were taken into account by the local subsidiaries in respect of investments which they held in three overseas subsidiaries. They did not relate to the results of those overseas subsidiaries per se. I accept that evidence. 29. What is clear is that Ms. Sammy got directives to prepare projections for the two local companies, Angostura Limited and Trinidad Distillers Limited. Those projections were prepared in anticipation of negotiations with the claimant. According to the claimant s own pleadings, WYC1 is a contractual document. Ms. Sammy s projections therefore require interpretation like any other clause or contract document. WYC1 specifically deals with the two local companies. It is aptly titled Angostura Group- Trinidad Companies. The claimant in cross examination said that WYC1 was a projection for the entire group, but that the contribution of the foreign subsidiaries was zero. The claimant further alluded to his attendance at a managers meeting in October 2009 with Ms. Sammy, and he admitted that the discussion pertained to target projections for Trinidad Distillers Limited and Angostura Limited. 30. He said that the reason why the discussion only revolved around the local companies was due to the fact that he had a prior conversation with Ms. Sammy about the projections for the foreign subsidiaries and it became clear to him then that she had no such figures, hence no such discussion could have occurred at the managers meeting. The claimant Page 13 of 20

14 during cross-examination contended that he had more than one conversation with Ms. Sammy on the subject of projections for the foreign subsidiaries, though he never said this in his witness statement. The claimant s failure to do so causes concern. I say this for the sole reason that his contention has been that his compensation was to be calculated using EBITDA and FCF for the local and foreign subsidiaries. Evidence of such discussions would have been something critical to the case he was presenting. The omission of such evidence is telling. WYC1 does not make any projections for the foreign subsidiaries. I think that it is plain to me, even without the affirmation of both experts, that WYC1 is confined to the two local subsidiaries. 31. The court must examine the contractual documents, including WYC1, and enquire whether there is any ambiguity. Both parties referred to the case of Rainy Sky to make the point that if there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. I think that the law has been more properly explained by Lord Neuberger in Arnold v Britton. Commercial common sense and the surrounding circumstances should not be invoked to undervalue the importance of the language of the provision that is being construed. If there is no ambiguity in the language of the clause, then none should be read into it so as to try to remedy any deficiency of commercial common sense. In BMA Special Opportunity Hub Fund Ltd and others v African Minerals Finance Ltd [2013] EWCA Civ 416 the English Court of Appeal concluded that commercial common sense is not to be elevated to an overriding criterion of construction. 32. Clause 5.3 of the contract makes provision for the payment of variable compensation. The schedule referred to in clause 5.3 was prepared on the basis of WYC1, a contract document. The claimant has asserted, and the defendant has said nothing to contradict the assertion, that WYC1 is a document that evidences those parts of the contract that were oral. It would therefore be a document that can be used to construe the schedule to the contract. It would also provide to a reasonable person the necessary background knowledge available to the parties at the time that the employment contract was executed. In the schedule to the contract the word group is not used in the headings setting out Page 14 of 20

15 the performance targets. The word group is however inserted into the headings in the claimant s statement of case and his witness statement. If the schedule was proposed by the claimant then the absence of the word group is a more telling indication of the parties intention, or of his intention at any rate. The claimant s evidence in crossexamination on the meaning of WYC1 was unsteady and unconvincing. At first he agreed that the heading referred only to Angostura Limited and Trinidad Distillers Limited. Later on he tried to say that the use of the word group in the heading Angostura Group-Trinidad Companies indicated that it included all the subsidiaries. The claimant s request to Mr. Romesh Singh to calculate his variable compensation entitlement for the year 2010 based on the publication of the 2010 financials would of course produce results that were not in keeping with the terms of the contract. That calculation included the performance of the foreign subsidiaries. I accept that Mr. Singh prepared his calculations because he was instructed to do so. 33. Generally speaking, parties have freedom to contract in any way that suits them. Although the claimant was employed as CEO of the group it does not necessarily follow that his variable compensation is based upon the performance of the foreign and local subsidiaries. The claimant said that his bonus must be based on the performance of all the companies in the group, because if not, a CEO might be tempted to ignore some of the companies under his charge. I do not agree. If the parties want to peg the variable compensation on the sales performance of all the companies in the group or of one company only, they are free to do so. They could also peg it to the performance of a race horse at Santa Rosa Park It is a matter for them entirely. It is not for the court to substitute its own commercial common sense for that of the parties, as outrageous as their agreement might seem to sensible observers after the fact. In my view the claimant s entitlement to a variable compensation must be restricted to the EBITDA and FCF of the two local subsidiaries alone. It seems to me that this was their intention, having construed the employment contract, WYC1 and analysing the surrounding circumstances. Page 15 of 20

16 Calculating EBITDA and FCF 34. The expert testimony of Ms. Daniel and Mr. Seeterram was very helpful and I thank them both. Ms. Daniel was particularly impressive as a Part 33 expert. I think that she had no reluctance to put the interests of justice above those of her client. Every court could do with experts of this calibre. 35. It would be useful to understand the meaning of the term EBITDA as used in clauses 5.2 and 5.3 of the contract. It is accepted that it means Earnings Before Interest, Taxation, Depreciation and Amortization. Ms. Daniel however felt that the acronym was fluid in its meaning and not subject to any conventional construction. She gave her own professional interpretation of the acronym. According to her, EBITDA ought to and very often excluded all non-recurring income transactions and fair value and exchange rate gains. This would have greatly restricted the calculations. 36. However, Mr. Steve Bideshi admitted during cross-examination that he felt that these items were elements of EBITDA at the time that the contract was negotiated. Each of these items was separately put to him by the claimant s counsel and in each case he freely conceded that non-recurring income transactions, and fair value and exchange rate gains were included in his understanding of EBITDA at that time. Now, it is not permissible to use oral testimony given after the formation of a contract as a tool to construe its meaning. But such testimony does shed light on the intention of the parties in cases where more than one meaning is apparent. It seems to me that the defendant, if it wished, could have restrictively defined EBITDA in the contract so as to exclude these items. The defendant must be taken to have a better knowledge of its exchange rate gains for example, and would presumably know the importance of specifically excluding it from the definition. In the absence of such exclusions the court is left to determine what formulation would constitute the classic definition. It seems to me that these items ought to be included as part of EBITDA. They are not alien to the formulation. They sufficiently formed part of the understanding of both negotiators at the time that the contract was executed. Page 16 of 20

17 37. Ms. Daniel s final report of 15 December 2014, exhibit MDZ, sets out her latest opinion on the calculations. She calculated the defendant s liability for 2010 as $8,250,000, a figure that was accepted by the defendant. There are, however, three scenarios that emerge in relation to the items mentioned in the previous paragraph, namely, nonrecurring income transactions, and fair value and exchange rate gains. a) In her report marked MDY Ms. Daniel noted: In 2009, Moet and Hennessy Asia Pacific (MHAP) refused to pay for rum stock blended by Angostura Limited which was intended to be sold by MHAP under the Ten Cane Brand. As a result, the stock value and receivables from MHAP at the end of 2009 were written off. However, in 2010, through efforts led by [the claimant], MHAP agreed to pay $9m for this stock. Although [the defendant s] management has excluded this from one of its calculations of EBITDA, as this benefit can be attributed to [the claimant] it is debatable whether this should be excluded from reported EBITDA. During her cross examination she again testified that her treatment of this item was debatable. In response to specific questions from the court, she recognized that had MHAP paid its debt when due, such payment would have been received in the course of normal business operations and would have amounted to a performance target achievement under the contract. She accordingly adjusted her calculation for the inclusion of $9,000,000 as part of EBITDA. The result is an increase by $1,350,000. This addition conforms with Mr. Bideshi s definition of EBITDA that he provided to the court during his cross-examination. b) Foreign exchange gains of $8,026,000 were originally excluded from the calculation. However, in light of Mr. Bideshi s testimony the court would be hard pressed to deny it. The inclusion will add a further sum of $1,204,000 to the claimant s compensation. Page 17 of 20

18 c) Fair value gains of $41,773,000 were originally excluded from the calculation. However, once more, the court cannot ignore Mr. Bideshi s evidence during cross-examination. He openly accepted that fair value gains were included in the definition. He is the chief negotiator for the defendant. I feel constrained to include it. Ms. Daniel has provided a further sum of $6,266,000 under this head. 38. In the circumstances, and according to the contract, the claimant s variable compensation for 2010 is $17,070, With respect to the 2011 calculation the situation is not clear. At first Ms. Daniel calculated this at $9,534,000. However the FCF component was calculated using targets different from those found in the contract. For example, the contract target for EBITDA of $150 million was increased to $183 million, and the contract target for FCF of $139 million was increased to $172 million. Of course, the plain language of the contract is the only proper compass. The defendant is bound to make the calculations using the contractual targets. Raising the target levels will obviously diminish the entitlement. The court is not allowed to re-write the contract to make commercial sense of it. (See South East Windscreens Ltd v Hamid Jamshidi [2005] EWHC 3078). 40. Ms. Daniel s first report marked MD2, does not correctly state the total variable compensation for 2011, but it nonetheless recognizes that the figure of $9,534,000 excluded foreign exchange gains $16,552,000 and fair value losses of $104,000. These are items, in my view, that ought to be included. Accordingly the figure of $9,534,000 was understated by the sum of $2,468,000, being the difference between the increase of $2,483,000 attributable to the inclusion of foreign exchange gains and the loss of $15,000 attributable to the inclusion of fair value losses. The upshot of this is that the claimant is entitled to $12,002,000 for variable compensation for Wrongful Dismissal 41. In relation to the wrongful dismissal claim I am surprised that this dispute is before me for resolution. The termination of the claimant s contract with immediate effect was in Page 18 of 20

19 breach of clause The payment of six months salary in lieu of notice would naturally have abated the damages alleged to have been suffered as a result of the breach. But the full amount due to the claimant was not paid. The pay statement issued to the claimant after his dismissal set out the claimant s full six-month entitlement as $757,470 but it wrongly deducted the sum of $723, from that total. Part of the deduction, the major part, was the sum of $711,000. This sum of $711,000 was the amount that the defendant had prepaid to the claimant before his dismissal as an advance on his variable compensation. There were some other deductions amounting to $12,538 that must also be added back to make up the six-month entitlement. In my view the defendant ought not to have made the deduction of $723, The claimant is therefore entitled to damages of $723, under the wrongful dismissal claim. Of course, the $711,000 component of this figure will need to be subtracted from the 2010 variable compensation; if not, it would amount to a double benefit. Conclusion 42. In making the final calculations of liability for variable compensation I will have to discount from the 2010 calculation the $1 million paid by way of interim payment. I also subtract the sum of $711,000 paid by way of advance for These therefore are the final figures: For 2010: $17,070,000 less 1,000,000 less 711,000 $15,359,000 For 2011: $12,002, 000 Total $27,361,000 Awards will therefore be made in relation to these calculations, to which I will add damages for wrongful dismissal in the sum of $723, The issues of costs and Page 19 of 20

20 interest are adjourned to 12 July at 2.00 pm, when both senior counsel will be available to assist me. 43. In closing I express my concern that officers of a publicly traded company, one that was teetering near the abyss of the CLICO collapse, would negotiate a bonus package that did not include any cap or a ceiling. Mr. Bideshi said that during the negotiations he felt that the compensation would probably amount to $2 to 3 million. But the contract never provided for a ceiling, so how could he, or any member of the board of directors, have imagined that the bonus would be restricted to any dollar value? No one sat down and asked themselves the sensible question, What if this company enjoys a dramatic turnaround? No one thought it prudent to restrictively define the components of EBITDA. Notwithstanding these failings, the claimant is entitled in law to every benefit contained in the contract. The business acumen of contract negotiators is of no concern to a court when they have full legal capacity to devise and negotiate its terms. As Lord Neuberger aptly stated in Arnold v Britton, People enter into all sorts of contracts on the basis of hopes, expectations and assessments which no professional expert would consider prudent, let alone feel able to predict with accuracy. I have little doubt that many fortunes have been both made and lost (and sometimes both) by someone entering into such a contract (para 37). James Christopher Aboud Judge Page 20 of 20