18 November 2010
Two former Brewin Dolphin divisional directors are suing the national wealth management firm for breach of contract, claiming in excess of £300,000 in damages and asking to be paid trail commission in perpetuity for clients they brought to the firm.
Last week, the case by Andrew Ayers and Derek Baigent against Brewin Dolphin Limited was heard before Master Roberts over two days at the Royal Courts of Justice.
High Court writ
According to the High Court writ, Ayers and Baigent were made redundant on 30 April 2009 after four years in Brewin Dolphin's wealth management division. They joined as divisional directors in 2005, earning £88,000 and £72,000, respectively.
The writ also said that after a redundancy exercise in 2007, both Ayers and Baigent agreed to take up alternative positions as private client executives. In this role, it said, their task was to introduce new business from a number of sources, which were predominantly, but not exclusively, advertisements in the Daily Telegraph newspaper.
It said that after introducing new business to the company, Brewin Dolphin would invest the clients' assets and funds. However, the pair were entitled to an annual one-off payment of 0.1% on the first £15 million in funds they brought to the company, and 0.2% of any funds above £15 million.
Trail commission claim
Both Ayers and Baigent allege that as long as the funds they brought to Brewin remain with the firm, their contract entitled them to trail of 0.1% in perpetuity for the annual management fee charged on these assets - even if their employment was terminated. By the time they were made redundant, their respective salaries totalled £93,000 and £90,000. However, they are now suing the company and argue they should be paid 0.1% in commission - biannually - for the rest of their lives on all the business they brought to the wealth management company.
Ayers and Baigent claim to have been dismissed without notice, purportedly by way of redundancy, when they should have been given no less than six months' notice in writing. They are challenging the fairness of the dismissal in a separate employment tribunal.
Ayers and Baigent accuse Brewin Dolphin of breaching their contractual agreement by not paying them trail fees of £35,000 and £25,000, which it is alleged they would have earned during their notice period between 30 April 2009 and 30 September 2009. The duo also claim to be owed around £5,000 and £1,000 in new business fees on the £5 million and £1 million in funds they brought to the wealth management firm.
As well as their claim to an entitlement to biannual trail fees in perpetuity, Ayers and Baigent are seeking payment of notice and commission and damages.
Brewin Dolphin, meanwhile, is disputing the claims and refuses to accept that Ayers and Baigent are entitled to payment of fees in future.
The judgement on the case is expected in December. Brewin Dolphin declined to comment, while Ayers was unavailable for comment.
Alistair French, a solicitor in the employment team at Stewarts Law LLP, a firm which typically handles very high stakes bonus claims for investment bankers, said the Brewin Dolphin case is interesting because claiming for 'eternal loss' in the High Court is obviously desirable for the claimants although highly ambitious. He added he would have expected the contracts to expressly prevent employees claiming entitlement to bonus or commission for any period post-termination of employment.
He said: 'If I were drafting these contracts, I would want to make sure that the entitlement was tied directly to the individuals' loyalty and their continuing employment. What you would expect to see is something clearly stating that the 0.1% trail fee is only payable to individuals in employment and, even then, not to employees working their notice period.
'The absence of such wording could produce the result where executives have their cake and eat it: trail would still be payable once the individuals had left the company to work for a competitor - a crazy situation. A well drafted contract, would contemplate what happens where the people involved are no longer part of the organisation.'
French also pointed out that since the proceedings are taking place in the High Court, the case would not set a binding future precedent unless it reaches the appellate courts and a judgement is given in the Court of Appeal or, subsequently, the Supreme Court.