High Court judgment in Richard Pease v Henderson Administration Ltd

Cases

The High Court has given judgment in Richard Pease v Henderson Administration Ltd, a high profile dispute between a successful investment fund manager and his former employer concerning the parties’ respective rights to manage, and receive fees for the management of, a billion pound investment fund.

Mr Pease managed that fund (“the ESSF”) whilst employed by Henderson. His contract of employment entitled him to payment of a share of the fees generated by Henderson in respect of the ESSF. It also entitled him to replace the manager of the ESSF upon termination of his employment with Henderson, following which he would be required to procure payment to Henderson of half of the management fees earned on the fund in the following year.

Mr Pease sought to exercise his right to replace the manager of the ESSF in 2009, and the parties fell into dispute. Their dispute centred on three, related issues.

  1. Following the termination of his employment, Henderson refused to pay Mr Pease a large chunk of his share of the management fees earned in the final three years of his employment. The amount Henderson withheld from Mr Pease amounted to some £4 million. Henderson claimed a contractual right to forfeit that pay.
  2. The parties disagreed as to the meaning of Mr Pease’s right to replace the manager of the ESSF. Eventually, the majority of the assets under management within the ESSF were transferred to a new fund nominated by Mr Pease. Mr Pease contended that this was not what his contract provided for, and claimed that Henderson’s insistence on that mode of transfer caused him significant loss.
  3. Relatedly, as Henderson contended the transfer of assets was in accordance with Mr Pease’s contractual right, it claimed an entitlement to a half-share of the fees generated by the newly established fund in the following year. Mr Pease disagreed, and refused to pay Henderson.

Richard Spearman QC (sitting as Deputy Judge of the Chancery Division) determined all three of those issues. He accepted Mr Pease’s submissions on each of them in respect of contractual liability. He held that:

  1. Henderson was not entitled under the terms of Mr Pease’s contract of employment to defer and forfeit Mr Pease’s share of the management fees for the ESSF.
  2. Henderson was required by that contract to allow Mr Pease to replace the manager of the ESSF, which was its authorised corporate director. It failed to do this when it transferred the assets under the management of the ESSF out of that fund and into a new one.
  3. Having failed to allow Mr Pease to replace the manager of the ESSF, Henderson was not entitled to a share of the fees generated by Mr Pease’s new company for its management of the fund to which the ESSF’s assets had been transferred.

The Judge awarded Mr Pease his unpaid management fees in damages, but only nominal damages for Henderson’s failure to allow him to replace the ESSF’s manager.

Richard Leiper QC and Zac Sammour appeared for Mr Pease.

The Judgment can be found here. Media coverage of the dispute and judgment can be found here and here.