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 damages award wa sreduced. Although the contract did not contain any particular formula or point of reference for the calculation of the bonus, the obligation was to consider the question of bonus as a rational and bona fide exercise when taking into account the criteria adopted for the purpose of arriving at a decision. To do otherwise would be to ‘fly in the face of the principles of trust and confidence which have been held to underpin the employment relationship.’
Potter LJ said: ‘While, in any such situation, the parties are likely to have conflicting interests and the provisions of the contract effectively place the resolution of that conflict in the hands of the party exercising discretion, it is presumed to be the reasonable expectation and therefore the common intention of the parties that there should be a genuine and rational, as opposed to an empty or irrational, exercise of discretion. Thus the courts impose an implied term of the nature and to the extent described.’
Judges:
Potter, Carnwath LJ, Bodey J
Citations:
[2004] EWCA Civ 1287, [2005] ICR 402, [2004] IRLR 942
Links:
Jurisdiction:
England and Wales
Citing:
Appeal from – Horkulak v Cantor Fitzgerald International QBD 31-Jul-2003
The claimant sought damages for constructive dismissal. He said that verbal abuse he had suffered from the manager damaged his health and destroyed the relationship of trust and confidence.
Held: The manager was dictatorial and saw it as his . .
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 by:
Cited – Commerzbank Ag v Keen CA 17-Nov-2006
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 . .
Cited – Lymington Marina Ltd v MacNamara and others CA 2-Mar-2007
A share in a marina had been inherited by one brother whose application to grant successive sub-lcences of it to the other two was rejected by the marina, who said that this was not permitted. The marina appealed a finding that it had to make its . .
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 – Parties Named In Schedule A v Dresdner Kleinwort Ltd and Another QBD 28-May-2010
The defendant merchant banks resisted two group claims for annual bonuses for 2008 made by the employee claimants. They now sought summary judgment against the claims. The employer had declared a guaranteed minimum bonus pool available to make the . .
Cited – Small and others v The Boots Co Plc and Another EAT 23-Jan-2009
EAT CONTRACT OF EMPLOYMENT: Written particulars
UNLAWFUL DEDUCTION FROM WAGES
In determining claims under a discretionary bonus scheme the Employment Judge erred in failing to decide whether the scheme . .
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.
Employment, Contract
Updated: 21 June 2022; Ref: scu.216444