CONTRACT OF EMPLOYMENT – Damages for breach of contract
UNFAIR DISMISSAL – Constructive dismissal
The claimant brought a claim for breach of contract relying on non-payment of a bonus he said was due to him; and for unfair (constructive) dismissal, relying on his resignation in response to a repudiatory breach of his contract of employment. The respondent denied any breach and asserted that the claimant had affirmed his contract and had resigned, but not in response to any breach.
The employment judge had not erred in construing the bonus clause conferring a discretion to pay up to 20 per cent of salary each year. The clause did not, on its true construction, exclude the financial position and performance of the employer from the scope of permissible considerations relevant to the exercise of the employer’s discretion. The judge correctly so decided.
The judge (as the respondent accepted) erred when assessing how close the claimant came to achieving the level of profit he had forecast for the year 2017, in respect of the part of the respondent’s business for which he was responsible. She mistook the turnover figure the claimant had forecast (Euros 3.25 million) for the profit figure (Euros 1.79 million).
The actual profit in 2017 was Euro 1.68 million. The claimant had therefore fallen Euros 110,000 short of his profit target, i.e. he had achieved about 94.5 per cent of his target, not 51.6 per cent as the judge found. Although the respondent did not make the same error when considering whether to pay bonus, the judge’s error was material to her conclusion that the respondent’s exercise of its discretion not to pay any bonus in 2018 was rational and lawful, not perverse.
The judge found that if, contrary to her primary decision, the decision not to pay bonus was a breach of contract, the claimant was entitled to a maximum of pounds 19,500 (20 per cent of salary) but would have resigned unless paid a sum close to pounds 55,000, which he was demanding and believed he was entitled to. She reasoned that his unfair dismissal claim must therefore fail anyway because he would not have resigned in response to a breach of contract.
That finding was not justified on the pleadings and the evidence and (applying the principles in Chen v. Ng  UKPC 27) was procedurally unfair. The respondent had not relied on the judge’s proposition; it was contrary to the claimant’s case and was not properly put to the claimant during his evidence, either by the respondent or the judge. Nor was it an obvious and permissible inference from the documents and evidence as a whole.
The claims for breach of contract and unfair dismissal would therefore be remitted for redetermination in the light of the EAT’s judgment. It was appropriate to remit the issues to a different employment judge in view of the finding of procedural unfairness, but it was not necessary for all the evidence to be heard again.
 UKEAT 0017 – 20 – 1505
England and Wales
Updated: 12 May 2021; Ref: scu.650921