England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
APPEAL TRIBUNAL

		Royal Courts of Justice Strand London WC2
		Friday, 15th September 2000

1. LORD JUSTICE MAY: This is an appeal by Chequepoint (UK) Limited from a decision of the Employment Appeal Tribunal on 4th March 1999. Peter Gibson LJ gave permission to appeal on paper on 28th June 1999.
2. The background facts may conveniently be taken from an earlier decision of the Employment Appeal Tribunal, which was presided over by His Honour Judge Hicks QC. He said this:

"Mr. Radwan, the respondent to this appeal and the applicant before the Tribunal below, was employed by the appellant, Chequepoint UK Ltd from 11 June 1984 to 27 June 1997 and by the time when his employment ceased he was the regional manager for the UK, Spain, Gibralter and Hong Kong and country manager for the UK. The business of the employers was that of currency exchange and Mr Radwan's salary was £40,000 per annum.

There was a reorganisation of the employer's business and the tribunal found that on 3 January 1997 Mr Radwan was informed that he would be given six months' notice for redundancy. That, on the face of it, is perhaps not entirely clear but it is clear from what follows that that was not itself a notice. It was advance warning that there would be such a notice.

On 11 March 1997 he was given the offer of alternative employment in Hungary at £10,920 per annum and, not surprisingly, turned it down. The tribunal found that that was not a suitable offer of alternative employment and there is no appeal against that finding.

On 17 March 1997 he was given notice of dismissal for redundancy expiring on 12 September 1997, but before that notice expired he was summarily dismissed for gross misconduct, the alleged misconduct being failure to monitor losses on credit card transactions and to act on chargebacks to the extent of some £81,000. There was a second category which does not seem to have featured so largely but the allegations were of that general nature. He was interviewed on 16 and 27 June 1997 by the European Operations Manager. Those were investigatory interviews, not disciplinary hearings, and he was then dismissed by the chairman without any disciplinary hearing.

On 6 August 1997 an appeal by him against that dismissal was heard by a Mr Turner and the dismissal was upheld. The tribunal rightly found that there was only one effective dismissal, not two as Mr Radwan had suggested, but they then went on to deal with the issue of redundancy which, as Mr Higgins agrees, did not in those circumstances really arise. Plainly the effective dismissal was summary dismissal and that was all that the tribunal needed to deal with. They did, however, also deal with that and found it to be unfair because, to summarise, there was no warning of the potential consequences during the investigatory interviews, he was not informed of his right to have a friend present at a disciplinary hearing and, in any event, there was no disciplinary hearing."

3. The matter came before an Employment Tribunal. There was a hearing on 9th and 10th March 1998. The tribunal held that the respondent had been unfairly dismissed for which he was entitled to a payment of £14,030. They also awarded him £11,500 of damages for breach of contract. That sum related to payment of bonuses and is the subject of the present appeal.
4. There were a number of grounds of appeal to the Employment Appeal Tribunal. There was an appeal against a refusal by the Employment Tribunal of an adjournment, an appeal against the finding on liability and appeals against the award of compensation, especially that in relation to bonuses. One of the appellant's problems was that they had not called witnesses to give evidence relevant to the issue which is the subject of this appeal before the Employment Appeal Tribunal. They had been refused an adjournment.
5. The Employment Appeal Tribunal on 18th September 1998 summarily dismissed the appeal on all grounds, except that which related to the bonus payments. That proceeded to a hearing which took place on 4th March 1999. A differently constituted Employment Appeal Tribunal upheld the decision of the Employment Tribunal. This is an appeal from that decision.
6. The terms of the respondent's contract of employment included at clause 18 the following:

"The employee's basic salary will be £. . . per year. In addition the company, may at its absolute discretion, pay to all or any of its employees an annual bonus. . . . The terms and conditions of any such bonus scheme to be notified to employees from time to time."

7. By a letter dated 2nd April 1992 the employer/appellant wrote to the respondent in terms which included the following:

"There will be a new bonus structure payable quarterly based on net operating profits achieved as compared with your regional budget as agreed in writing beforehand with Mr. Zackariya and payable as follows:-

April £1,750

July £1,750

October £1,750

December £1,750

Christmas £500

Audited £2,500

Annual Results

Total per annum bonus achievable £10,000."

8. The respondent's statement of evidence before the Employment Tribunal included the following. He said this at paragraphs 65 and 66:

"I am also owed the sum of £11,500 in relation to unpaid Christmas bonuses for 1994, 1995 and 1996 together with audited bonus for the years 1993, 1994, 1995 and 1996. None of the bonuses were discretionary. In the case of the three Christmas bonuses, they each amount to £500, making a total of £1,500. In relation to the audited bonuses for the four years of 1993-1996, there is a total due in the sum of £10,000 (£2,500 x 4).

A new bonus structure was introduced in the spring of 1992. The new system was confirmed in Chequepoint's letter to me of 2 April 1992."

9. That is of course the letter to which I have just referred.
10. The Employment Tribunal in its reasons quoted from the contract of employment and the letter of 2nd April 1992, and then said:

"We note that this letter is vague in that it does not state what the net profit should be. However, it is quite clear as to the payments to be made to Mr Radwan.

Mr Radwan claimed that he had not been paid Christmas bonus in respect of three years from 1994 to 1996 and he is claiming, thereby, the sum of £1,500. He also claimed that he was not paid an annual bonus for the four years inclusive from 1993 to 1996 at £2,500 per year amounting to £10,000. He is in total claiming the sum of £11,500 and we find, as a fact, that he is entitled to this sum pursuant to paragraph 25 of his contract of employment."

11. It appears that the reference to paragraph 25 must be an error.
12. The Employment Appeal Tribunal's decision included the following:

"On behalf of the company, Mr. Higgins has submitted that such a finding was not open to the tribunal because on the true construction of the contract of employment and the 1992 letter, the tribunal could not have reached such a conclusion. He pointed to the discretionary elements in the second sentence of clause 14 and submitted that by reference to clause 14 that it was really a matter of the company alone to decide whether to pay any bonus or not. His submission invited us to consider the contract of employment and the 1992 letter in isolation.

It is common ground between the parties that a contract has to be construed in accordance with its terms against the background to which it was made. The Employment Tribunal heard evidence from Mr Radwan as to the circumstances in which it was made and reached the conclusion from hearing that evidence. There has been no request for the notes of the evidence before the tribunal to support a submission that findings of fact went against the weight of the evidence. Although as Miss Harrison accepts, the extended reasons are in abbreviated form, in our judgment, the Employment Tribunal was well entitled to consider the two documents together, and having heard evidence of the surrounding circumstances to conclude that the unpaid monies claimed were payable as a matter of contract and not as a matter of bonus. It is a little unhappy that the decision does not set this out more extensively, but in our judgment, the decision arises from mixed findings of fact and law;the decision was one which the tribunal was entitled to reach. In those circumstances, we are not entitled to interfere with it."

13. The grounds of appeal to this court and Mr Higgins' submissions are that the Employment Appeal Tribunal was wrong to say that the issue was a question of fact. It turned on the construction of the contract of employment. Clause 18 gave the employers an absolute discretion both as to whether to pay a bonus and, if so, as to its amount. The word "discretion" qualifies the word "pay" so that the discretion is retained until any payment is made. The respondent had no right to a payment. The letter of 2nd April 1992 did not vary or replace that absolute discretion. At most, it notified a method of assessing bonuses. It did not abrogate the absolute discretion that was retained. Insofar as the Employment Appeal Tribunal may have considered the facts to support the finding of the Employment Tribunal that was an error, since the issue was one of law as to the construction and effect of the contract and the letter.
14. The respondent's case is that clause 18 provided for the employer to notify the employee of the terms and conditions of any bonus scheme. Once that was done the employee became contractually entitled to the resultant bonus, at least until the scheme was by notice abrogated, which it was not in the case of the respondent. The mere non-payment of bonuses which were due cannot amount to abrogation of the scheme. The letter of 2nd April 1992 constituted notification under the contract. Accordingly, the respondent became entitled to payment under it. Insofar as the payment of bonuses depended on relevant profitability, the respondent's evidence was sufficient to show that the conditions were achieved. The appellant did not call any evidence to the contrary.
15. In my judgment, the respondent's submission correctly construes clause 18 of the contract and correctly applies the facts established by the evidence to it. The appellants had a discretion as to the payment of bonus and had agreed that from time to time they would notify the terms of any bonus scheme. The letter constituted notification within clause 18. Once such a scheme was notified, be it individual or referable to a group, the respondent was entitled to the bonus until, in their discretion, the employer notified a change in the scheme or its withdrawal. It is unnecessary in this appeal to determine what would have constituted appropriate notice since no notice of any kind was established by the evidence. That construction, in my view, accords with the terms of the clause, but it also accords with common sense. If you tell an employee that he is going to get bonus payments on certain terms, you are or ought to be obliged to pay bonus in accordance with those terms until the terms are altered and notice of the alteration is given. For these reasons I would dismiss the appeal.
16. LORD JUSTICE TUCKEY: I agree.
17. LORD JUSTICE POTTER: I agree. In this particular case it does not seem to me, as suggested in the skeleton argument of the respondent, that the Employment Appeal Tribunal was, or this court is, precluded from investigating and, if appropriate, overturning the decision of the Industrial Tribunal simply by reason of the Industrial Tribunal having expressed its conclusion that the respondent was entitled to the sum of £11,000 by way of unpaid bonus as a finding of fact. As rightly stated in paragraph 13 of the notice of appeal, the Employment Appeal Tribunal did not identify the evidence or factual basis by which it purported to justify the Industrial Tribunal's construction of the contract and, in fact, the Industrial Tribunal expressed itself to be relying solely on two documents, namely the contract and the letter, in reaching its conclusion that the respondent was entitled to notice. I read the finding of fact as relating, and intended to relate, to the quantum of the bonus payable; that is to say, a finding by the Industrial Tribunal that the figures claimed by the respondent were accurate and recoverable on the assumption that he was entitled to a bonus.
18. As to the question of the respondent's entitlement in principle, there was a tacit acceptance amounting to a finding of law that the respondent was so entitled. In that respect their decision was plainly a conclusion of law based on the relevant documents before them.
19. So far as clause 18 of the contract and the letter of 2nd April 1992 are concerned, the Tribunal stated at paragraph 27 that the letter was quite clear as to the payments to be made to Mr. Radwan. That was plainly based upon their reading and construction of the two documents together. So far as that question is concerned, I agree with the reasoning of May L.J. I, too, would dismiss the appeal.

Order: Appeal dismissed with costs.