England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Employment Appeal Tribunal
HHJ Peter Clark
UKEAT/0570/07/RN

		Royal Courts of Justice Strand, London, WC2A 2LL
		11/02/2009

LORD JUSTICE HOOPER:

1. Mr Alexandre Mouradian, the respondent, has been employed since 1997 by the appellant and remains so employed. The appellant is a world wide broker of financial and non-financial products. The respondent is head of the London Exchange Traded Options on the Fixed Income Desk. In that position he manages a team of seven employees and one consultant and trades mainly futures and options on various exchanges around the world. In September 2005 he entered into a four year fixed term contract with the appellant. In addition to his base salary of £300,000 per annum he was entitled by virtue of Clause 5.2 "to receive a bonus in accordance with this Clause in relation to the desk." By virtue of Clause 5.2.1 "the bonus will be paid from a bonus pool equal to 60% of net billed Company Income after deductions of the following costs". There is then set out a list of the costs which can properly be deducted. The Clause continues by telling the respondent that the bonus "will be divided [amongst the members of the desk] in such amount as you deem appropriate in consultation with the Chief Executive Officer whose reasonable decision will be final."
2. The bonus is calculated and paid twice a year. The bonus with which this appeal is concerned is one which was due to be paid in January 2007 and related to the period July-December 2006.
3. There follows a provision relating to the form in which the bonus will be paid. I shall return to that provision later.
4. Although the Clause states that the amount of the bonus would be divided in such amount as the respondent considered appropriate "in consultation with the Chief Executive Officer whose reasonable decision will be final", the Employment Tribunal ("ET") made the following unchallenged finding of fact in paragraph 21:

"I am satisfied that there never has been any checking of the bonuses in relation to the Claimant's Desk and that the apportionment has always been determined by the Claimant at his absolute discretion."

5. The dispute in this case arises because the appellant decided to reduce the bonus pool by deducting costs of a nature which the respondent argues were not permitted by Clause 5.2.1. Thus, the appellant argues, on the face of it, the respondent was in breach of its obligations under the contract. I should add that the appellant claims to have been entitled to deduct the further costs by virtue of what is said to be an agreement dated 4 April 2006. But for the purposes of the decision on jurisdiction the Tribunal accepted, as it had to, that the additional costs should not have been charged to the respondent's Desk.
6. In a little more detail the facts are as follows.
7. When the appellant declared the bonus pool in early 2007, it reduced the sum otherwise payable under Clause 5.2.1 by £154,286 for costs which were not within the identified list of costs in the Clause. As a result the net shortfall to the bonus pool, under the terms of Clause 5.2.1, was £92,571,60.
8. Having deducted the costs which were not within the identified list of costs in Clause 5.2.1, the appellant declared that the bonus pool was £1,429,000.60.
9. The three members of the team were paid the sum of £100,000 which had been allocated to them by the respondent, and the respondent received the balance. If the costs which were not within the identified list of costs in Clause 5.2.1 had not been deducted, then the respondent would have been entitled to a further £92,571.60. The respondent claims, therefore, that there has been an unlawful deduction of his wages in the precise and quantified sum of £92,571.60.
10. The respondent made a claim for unlawful deduction from wages in the sum of £92,571.60 under the Employment Rights Act of 1996. Section 13, the heading of which is: "Right not to suffer unauthorised deductions", provides in sub-sections (1) and (2):

"(1)An employer shall not make a deduction from wages of a worker employed by him unless—

(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contract, or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.

(2) In this section "relevant provision", in relation to a worker's contract, means a provision of the contract comprised—

(a) in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction in question, or

(b) in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion."

11. By virtue of section 27(1),

"In this Part "wages", in relation to a worker, means any sums payable to the worker in connection with his employment, including—

(a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise …"

12. Section 13(3) provides that

"Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion."

13. The appellant submitted to the ET that it did not have any jurisdiction to consider the claim. The ET held that it did. Ms Leslie, sitting alone, held that the discretion to award an ascertainable bonus had already been exercised; payment was due in January and, if the deductible costs had been overstated, the additional fixed sum had been unlawfully deducted from the respondent's wages.
14. The Employment Appeal Tribunal ("EAT"), HHJ Peter Clark, dismissed the appellant's appeal from the decision of the ET. The appellant now appeals for a second time to this Court.
15. Mr Linden QC took us through a history of the legislative provisions and reminded us that they have been described as a summary procedure and that they offer a remedy to an employee in circumstances where he might have no such remedy in contract. For example, a deduction agreed only orally by the employee or a deduction agreed retrospectively would not make the deduction authorised for the purposes of the Act. He submitted that claims of the kind in the present case were more suited to be heard in the County or High Court where the employer was more likely to be able to defeat the claim.
16. Notwithstanding these submissions there is no dispute between the parties that if the respondent's claim is in reality a claim for un-quantified damages for breach of his contract of employment then the tribunal does not have jurisdiction to entertain the claim. To succeed on the issue of jurisdiction the respondent has to have been owed a quantified sum of money by way of wages which he asserts has not been paid to him.
17. The appellant maintains that the sum cannot be quantified because the amount of the respondent's bonus was dependent upon the exercise of discretion expressly provided for in his contract of employment.
18. The appellant submits, firstly, that the claim is for an unquantified sum because under terms of the contract the amount of the bonus would be divided in such amount as the respondent considered appropriate "in consultation with the Chief Executive Officer whose reasonable decision will be final". The total sum claimed by the respondent as unpaid wages had therefore not been agreed between the parties. The respondent submits the appellant had exercised its discretion to award the bonus distribution as determined by the respondent and payment of the quantified sum calculated in accordance with the contract was due in January.
19. Secondly, the appellant also relies upon what is said to be a discretion which the appellant has as to the form of any bonus award. I return to that second issue later in this judgment.
20. I turn to consider the first argument.
21. Prior to the appellant declaring the precise amount of the bonus pool, the respondent, as the ET held, had decided to award three members of his team just over £100,000 divided unequally between them, and to retain the balance. The ET said in paragraph 26:

"I accept that the claimant decided how much he would award to each member of [his] team before the amount of the bonus pool was known and that he could therefore be certain that the balance of the pool was his."

The respondent could be "certain" because of the finding of the fact to which I have already referred, namely that the apportionment has always been determined by the respondent in his absolute discretion, notwithstanding the wording of Clause 5.2.1. In paragraph 36 Ms Leslie repeated her finding:

"… I am satisfied that the claimant had determined how much his team would receive prior to the bonus pool being declared and that the balance of the bonus pool was his."

22. Mr Linden submits that the respondent had apportioned himself £1,320,060, that is £1,429,000.60 less the £92,571,60 and relies on paragraph 24 of the decision of the ET. Having decided to take only the £1,320.060 then, so the appellant submits, a decision as to what to do with any balance that became payable would be subject to the discretion of the CEO. Thus he would be claiming not a quantified sum but in effect the loss of a chance. That argument, however, runs contrary to the finding in paragraphs 21 (set out in paragraph 4 above) and 26.
23. In any event, so it is submitted on behalf of the respondent, when he decided to take the balance of the pool for himself, he had then exercised the discretion which he was given under Clause 5.2.1 and, given the finding in paragraphs 21 and 26, the decision was entirely his. There was no room for the exercise of any discretion by the CEO. I agree.
24. Mr Linden sought to persuade us that in paragraph 24 the ET decided that the respondent had apportioned the amounts only after the company declared the bonus.
25. In paragraph 24 of the decision the ET stated that the claimant apportioned the bonus as follows:

"Claimant- £1,320,060

[AW] - £60,000

[SS] - £47,000

[SB] - £2000."

26. There is some inconsistency between this part of paragraph 24 and paragraph 26, which I have already set out. It seems to me quite clear that the Employment Tribunal was saying no more in paragraph 24 than how the appellant had apportioned the bonus actually declared (albeit, in the light of Clause 5.2.1, wrongfully declared). Paragraph 26 makes it clear that what he had done before the amount of the bonus pool had been (wrongfully) declared, was to decide that the balance of the pool was his. It seems clear that he communicated that to the appellant so that the three members of the team could receive their fixed sums.
27. I reject therefore Mr Linden's reliance on paragraph 24. Paragraph 26 makes the true position clear. Mr Linden does not challenge the findings of fact made by the ET. In the grounds of appeal and in argument Mr Linden did challenge the right of the ET to make the findings of fact, such as those contained in paragraph 26, arguing that these findings were concerned with the merits of the claim and not the issue of jurisdiction. I disagree. In order to decide whether the respondent was in fact making a claim for a quantified or unquantified sum, the ET was both entitled and obliged to make certain findings of fact. Indeed, so Ms Rose QC wrote in her skeleton argument, both sides called evidence before the ET and it was not submitted by the appellant that no factual conclusions were required.
28. Mr Linden further submitted that a reading of the respondent's witness statement tended to support the first view rather than the second. We declined to entertain any argument about the witness statement which had not been foreshadowed in the skeleton arguments and in any event would have necessitated us looking not just at the witness statement but also the evidence in chief and the cross-examination.
29. I therefore agree with both Ms Leslie in the ET and HHJ Peter Clark that Mr Linden's first argument fails.
30. I turn to his second argument, which relates to the form of the payment of the bonus. Clause 5.2.4 provides:

"The Company shall at its sole discretion, determine the form of any bonuses which may be paid as cash or a contribution to a retirement scheme of which you are a member or contribution to an employee benefit trust on any terms the company decides are appropriate but to include a recommendation that the trustees hold the assets for the benefit of you and your family (an 'EBT Contribution'). If an EBT contribution is made, the Company, when calculating the EBT Contribution due, may calculate the contribution so that the cost to the Company of making the contribution is the same net cost, taking [into] account the deferral [or] denial of corporate tax relief, as if a cash bonus had been paid (with no account taken of the prospective value of any corporate tax deduction deferred)..."

31. Mr Linden submits that, given the discretion as to the form of the bonus, there could be no quantifiable sum which the respondent was entitled to receive.
32. Ms Leslie in the ET found:

"So far as the form of payment is concerned, I accept the Claimant's evidence that the form of the bonus was at his sole discretion: that he merely notified Mr … of the form the payment would take and that his instructions were actioned accordingly."

33. Mr Linden does not challenge the finding but submits again that the ET should not have made any finding as to the practice of the appellant, only as to what the contract said. Mr Linden further submitted that absent a determination as how the appellant's discretion would be exercised, it was not possible to conclude that there was a quantifiable sum which the respondent was entitled to receive.
34. In her decision, Ms Leslie concluded:

"37. … I accept that the form of the payment is a distinct and separate matter to the question of the amount of the bonus. It cannot be said that the amount of the bonus varies depending on the form of the payment. Once the bonus has been declared, there is a quantifiable sum that the Claimant is legally entitled to receive irrespective of the form of the payment and which can be enforced under Part II of the Employment Rights Act 1996 in the event of non-payment. The fact that there is a discretion about the form of the payment does not, in my view, exclude the Tribunal's jurisdiction from making an order under section 24 of the Act for payment of the sum owing."

35. HHJ Peter Clark dealt with the argument in the following way:

"I can deal shortly with the second proposition for which no authority is cited. I reject it. The requirement to pay wages in coin of the realm disappeared with the passing of the Payment of Wages Act 1960. A bonus falls within the definition of wages (s27(1)(a)). Provided the bonus is declared in cash terms, as here, it matters not in my view whether it is paid by way of bank transfer, into an EBT or pension scheme or in cash. I make no observations on the status of share options, which does not arise for consideration in this case. For present purposes I am satisfied that the claim here relates to 'wages'."

36. Ms Rose also submits that the bonus having been placed at the disposal of the respondent, the bonus was properly regarded as payable to him.
37. I agree with Ms Leslie and HHJ Peter Clark and, like them, reject this argument.
38. For these reasons I would dismiss the appeal.

LORD JUSTICE WALL

39. I agree

LORD JUSTICE WARD

40. I also agree