The bank had sought summary dismissal of a claim for non-payment of bonuses to the claimant a former employee, and now appealed refusal of its request for summary dismissal, saying that the claim had no prospect of success. The claimant said that though the payments were discretionary, it was an implied term that the bank would not exercise that discretion irrationally.
Held: The bank had not established the basis for its decisions to award less than the sums recommended. Before trial the court’s task was to see only whether there might exist a limit on law on the bank’s discretion.
Mummery LJ said: ‘The employment relationship contains implied duties which do not normally feature in commercial contracts sued on by business men in the Commercial Court or in the exercise of public law discretions challenged by citizens in the Administrative Court. Employment is a personal relationship. Its dynamics differ significantly from those of business deals and of State treatment of its citizens. In general there is an implied mutual duty of trust and confidence between employer and employee. Thus it is the duty on the part of an employer to preserve the trust and confidence which an employee should have in him. This affects, or should affect, the way in which an employer normally treats his employee ‘ and the employer should supply information as to how it had chosen to exercise its discretion. However the claims based upon irrationality faced insurmountable difficulties. The discretion was widely set, and the absence of evidence affected also the claimants assertions. As to a later bonus claimed after he left but in relation to an earlier year, the claimant said the clause allowing the bank not to make payment was unfair under the 1977 Act. The judge had been wrong to think that such issues were best raised at trial. They were ones of construction. The court did not accept that a term for payment of a bonus could fall within the 1977 Act, because the employee did not in this respect deal with his employer as a consumer, and nor were the terms of the employment contract the standard terms of business of the defendant in its banking operations: ‘ An employee does not deal with an employer as a consumer. A bank’s business is not entering into contracts of employment with its employees.’ (Moses LJ)
Judges:
Mummery, Jacobs, Moses LJJ
Citations:
[2006] EWCA Civ 1536, [2007] IRLR 132, [2006] 2 CLC 844, [2007] ICR 623
Links:
Statutes:
Unfair Contract Terms Act 1977
Jurisdiction:
England and Wales
Citing:
Cited – Clark v BET plc 1997
The court considered the assessment of damages in a wrongful dismissal case.
Held: A simple discretion whether to award a bonus must not be exercised capriciously by an employer. . .
Cited – Clark v Nomura International plc 2000
clark_nomura2000
Mr Clark was dismissed on three months’ notice and, although he was paid his basic salary for that period and was still in employment at the date for payment of the annual bonus, he was not paid a bonus. He had earned substantial profits for the . .
Cited – Cantor Fitzgerald International v Horkulak CA 14-Oct-2004
The employee claimed under a bonus clause which ‘contained in a contract of employment in a high earning and competitive activity in which the payment of discretionary bonuses is part of the remuneration structure of employers.’
Held: The . .
Cited – Timeload Ltd v British Telecommunications plc CA 1995
British Telecommunications Plc provided its own directory service. BT was licenced as a public telecommunications operator requiring it to provide telephone services on request to anyone who sought them without discrimination. The claimant wanted to . .
Cited – Chapman v Aberdeen Construction Group 1991
It having been conceded that contracts of service fell within section 15 of the 1977 Act, the court found that the question whether the contract was a consumer contract depended on the circumstances. Though the employee pursuer was to be regarded as . .
Cited – Brigden v American Express Bank Ltd 2000
A clause providing that the employer could dismiss an employee in the first two years of employment without implementing the disciplinary procedure was not void under the 1977 Act. Section 3 extended to contracts of employment and although the . .
Cited – Giovanni Mallone v BPB Industries Plc CA 19-Feb-2002
The claimant was a director of the respondent. On his dismissal, his share options were cancelled. He claimed this was in breach of his rights under the scheme. The company appealed a finding that they were so in breach. The scheme distinguished . .
Cited – Peninsula Business Services Limited v J Sweeney EAT 20-Feb-2003
A commission arrangement, which required the employee to be in the employment of the employer on the date when the commissions would normally have been paid, was not a contract term within section 3(2)(b) of the 1977 Act.
Keen v Commerzbank AG ComC 7-Apr-2006
. .
Cited by:
Cited – Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank Ba CA 23-Apr-2010
The claimant appealed against refusal of summary judgment on his claim for payment of a discretionary employment bonus by the defendant.
Held: The appeal succeeded and summary judgment was given. The contract properly construed did give rise . .
Cited – Dresdner Kleinwort Ltd and Another v Attrill and Others CA 26-Apr-2013
The bank appealed against judgment against it on claims by former senior employees for contractual discretionary bonuses.
Held: The appeal failed. The bank’s unilateral promise made within the context of an existing employment relationship to . .
Cited – Braganza v BP Shipping Ltd SC 18-Mar-2015
The claimant’s husband had been lost from the defendant’s ship at sea. The defendant had contracted to pay compensation unless the loss was by suicide. They so determined. The court was now asked whether that was a permissible conclusion in the . .
Lists of cited by and citing cases may be incomplete.
Contract, Employment
Updated: 08 July 2022; Ref: scu.246069