England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Court No. 65 The Royal Courts of Justice Strand London WC2A 2LL
		5th October 2009

HHJ SPENCER:

1. At all times material to these proceedings, the claimant, Deborah Jane Greenland, worked for the defendant company as an account manager. Her job was the selling of broadband facilities. It is her case that she was underpaid commission for the year 2007. The sum which is in dispute is £126,812. Proceedings were commenced by claim form issued out of the Central Office and dated 14th July 2008. The litigation, as one would expect, was preceded by a solicitors' correspondence to the terms of which it is not necessary for me to refer.
2. The claimant's contract of employment appears in the trial bundle and can be found at E1. The contract bears the date 11th August of 2003 and was signed by the claimant on 20th August of 2003. If I turn to that part of the contract which appears at E5, I see that there is provision for her base salary, which at that time was £33,000, and by the year 2007 had been upwardly reviewed to £37,980. That page also has a passage dealing with commission.

'You will also be entitled to participate in the company's sales commission scheme, subject to its terms and conditions in force. On achieving sales targets and objectives, you will be paid commission of £33,000 per annum. Your OTE will be £66,000 per annum. Details of the commission scheme will be supplied to you separately. The company reserves the right to vary the terms of the scheme from time to time.'

3. So far as the triggers for receipt of commission are concerned, it is agreed that under the original terms of the contract entitlement to commission would arise upon placement of an order by the relevant customer. I say that because things changed afterwards. Another word of commentary: the letters OTE which appear are an abbreviation for on-target earnings. I think it is proper to comment that quite plainly the commission was viewed as an integral part of the salary, together with the base salary, always supposing that appropriate targets were attained.
4. I turn now to the topic of variation of the commission. On the 1st of August of 2006, Sandra Marie Beaumont, who gave evidence before me, was engaged by the defendant company to act as its director of sales. One of her tasks was to devise a new scheme to provide for the terms upon which commission would be payable to the sales staff. She devised and produced a substantial document which is to be found in the trial bundle at E18 to E42 inclusive.
5. It is agreed that the terms of this document were incorporated into the claimant's contract of employment. I do not intend to quote more than I have to from that lengthy document. I will say this, because these matters are uncontroversial, first of all it provided for a change in that commission was to be calculated not on orders but on billed revenue. Secondly, and as a corollary of that, it followed that insofar as the account manager or sales person was involved in forecasting revenue and commission, matters to a degree were out of their hands because they, the sales people, were not responsible either for the provision of the service or for the rendering of the invoice and, to a certain extent, a measure of estimation or guesswork had to come into any forecasts which might be made, certainly by the sales person.
6. The new terms which were incorporated in 2007 provided essentially for two elements of commission which could be earned. In the first place, there was the element of commission that dealt with the achieving of targets and this has been generally referred to as performance. The second aspect is the element of commission that relates to over-performance. That is to say achieving sales in excess of one's target figure. So far as the performance element is concerned, that in its components added together made 100% of what the base salary was and, to that extent, it presented no difference in the figures in the original 2003 contract. It was split up. 10% of the base salary was regarded as the appropriate commission figure to be the reward for attainment of particular identified objectives. It is not necessary for me to specify those further. Secondly, 20% went to achieving targets in relation to what was called sales-managed revenue. That essentially was the recurring money that came in from contracts which were already on foot. Finally, most importantly, there was the 70% of salary and that went to reward the increase of sales-driven revenue of new business.
7. The plan for commission which was devised by Ms Beaumont has its introduction at E21 and I quote that not in its entirety but in certain relevant parts. A little over a quarter of the way down,

'The sales compensation pay plan for 2007 has been designed to further strengthen the link between performance and reward. The key changes are that as a sales team we will have a dual focus on billed revenues.'

Hence the reference already made to the commission being calculated on billed revenue rather than orders. Then there follow two bullet points where Ms Beaumont refers to, in the first place, sales-driven revenues. That is to say the new business portfolio. Secondly, the sales-managed revenues. That is to say the annual recurring revenues, sometimes referred to as base revenues, where existing annual contracts exist. The introduction concludes,

'This pay plan is designed to reward outstanding performance. The levels of reward are structured such that there is a clear difference between success and failure, the hallmark of a quality pay plan and a high-performing sales organisation.'

That, therefore, represents what is the performance aspect of the commission part of salary.

8. So far as the over-performance aspect is concerned or achieving in excess of targets, that is something which was rewarded by means of what was described in the introduction as an accelerator. It is dealt with in a sentence in the introduction, 'Sales-driven revenue has an accelerator of three for achievement of certain conditions.' I think if I substituted the word 'multiplier' instead of 'accelerator' that would effectively represent what it boils down to. Essentially a multiplier was applied to the commission which would be earned on the new business insofar as the new business was in excess of target. Quite plainly, the 2007 plan formed a significant part of the arrangements both for the company, the defendant, and for the claimant account manager. The plan set out what part of the claimant's reward was for working for the defendant. Obviously, commission, as the contract makes clear, is in no sense to be regarded as something in the nature of a treat or a discretionary bounty. Quite the contrary. It was a significant part of the consideration which the defendants gave for the claimant's labours on their behalf.
9. I should say a few words more at this stage about the calculation of the commission. So far as the performance commissions are concerned, I think that is relatively straightforward and I have said enough about that for it to be comprehensible. Dealing with the case where the account manager beats the targets and over-performs, what happens then is that an accelerator, that is to say a multiplier, of three is applied to the sales-driven revenue commission. So far as the sales-driven revenue commission, that obviously takes us back to the 70% of the annual base salary. Should one wish to see how the details of this are set out in the plan, reference may be made to sections six, 11 and appendix two which are respectively to be found at E23 to 25 inclusive and E29. Essentially it boils down to this: that the claimant, if she exceeds her sales-driven target and the other targets which she had to attain, would be entitled to a further payment of commission equal to three times the percentage amount by which she exceeded her sales-driven revenue target.
10. That is best explained by an example and probably the most pertinent example to take would be one which relates to the claimant herself. At E268 in the bundle there are set out some figures which indicate a number of persons' earnings, including those of the claimant. The claimant's name appears at the top of E268. The document is otherwise described as appendix 13. It sets out her salary at 37,980. It sets out her 2007 target as being £450,000 and it sets out her 2007 actual revenue attained as being £1,370,504. When one compares those figures, one sees in the adjacent column that £1,370,504 represents 450, the target, to which a factor of 305% has been applied. It follows that if one takes the target as 100%, the percentage by which the actual revenue exceeds the target is 205%. If one applies the multiplier or accelerator of three to 205%, one ends up with a figure of 6.15 so we regard that as the multiplier. The multiplicand is 0.7 of the base salary and when one takes those, the end result is £163,503. So far as the claimant is concerned, that represents nothing more than a clear arithmetical computation on the basis of the contract providing for acceleration or multiplication. So far as the defendants are concerned, I think they would accept that also but quite plainly regard that as an eye-watering figure to be received by somebody whose base salary is £37,980.
11. Given the magnitude of the amount, I have obviously been referred to two ways in which the defendants might have been able, subject to a decision, to restrict the final annual commission entitlement which the claimant would get. The contract provides for reviewing the claimant's targets at the end of each quarter and, obviously, depending on how well or how badly the claimant was doing, adjusting the target so as to produce a figure which, while it might stretch the claimant, would yet leave an attainable target. I do not propose to recite in any detail the target reviews and modes of dealing with target reviews. At E22 I see this at the foot of the page, 'Targets will be reviewed at the end of the first, second and third quarter to ensure that the target is challenging but achievable.' Paragraph seven also deals with targets. Paragraph eight with target areas. If I go to E31, at a little over halfway down that page paragraph four deals with target reviews. One sentence which appears a little way over halfway down that paragraph, 'Any review of the targets that apply in the final quarter of the fiscal year must, whenever practical, be completed before 30th September of the current year. Only in exceptional circumstances should reviews take place after this date.' Although I am bound to say that we have proceeded in the case on the footing, and witnesses appear to have accepted, that the claimant would not have had anything to complain about if the review had taken place before 30th October of 2007. That certainly represents the understanding of claimant's counsel likewise as appears from paragraph 11 of his concluding written submissions.
12. To deal with the references which relate to targets, appendix seven is headed, 'Target review methodology,' and appears at E39. It did say at paragraph two that reviews will be documented and a copy of the review must be provided to the sales person and there was some cross-examination of Ms Beaumont on the footing that that had not been done and she agreed that it had not been done and that that was a failing. I do not think it matters in the context of this case because it is agreed on all hands that the claimant's initial target was £317,000. It was revised upwards to £450,000 in July of 2007 and remained at £450,000. Whether the review was documented or not, everybody knows what the target was and when it was fixed and therefore there is no harm done by the absence of the review being documented.
13. Now, the further paragraph to which I should advert is that which appears at E22, paragraph four, under the rubric, 'Capping.' I have already cited the sentence which deals with review of targets and the paragraph carries on and concludes with these words, 'The Sales Director also has the discretion to cap an individual's Q4 bonus at 100% if required, although such cases will be by exception only and require HR,' Human Resources, 'and Finance agreement.' Quite what that means has been the subject of some discussion and I will deal with that at a later stage in the course of what I have to say in this judgment.
14. I would like to say a little more about the targets and how they are set. The office of the company, as appears from the contract, was in Uxbridge. The claimant's home, as appears from the pleadings, was in Chorley near Blackburn in Lancashire. The claimant's place of work, according to the contract, was in Wilmslow which is in Cheshire. It is clear that apart from occasions when specific meetings were convened, the parties operated at some geographical distance from one another. The sales team, there were 44 of them, had to function by reference to a communication with their line managers which, on the evidence I have seen, took place quite a lot by way of electronic mail.
15. In order to set targets for account managers who are engaged in what I might term distance provision of services to their employer, there has to be some dependence by the employer on the forecasts which the account manager can provide as to incoming business. As is clear from the statements of Mr McKenzie-Boyle and Sandra Marie Beaumont, and it is sheer commonsense anyway, an account manager who wishes to ensure that his targets are kept low may well be guilty of a measure of low-balling on his forecasts and the superior employees of the company were alert to that.
16. Nobody has suggested that the claimant was involved in understating her forecasts. In fact, the position is quite the reverse. I have been provided with a document at E138 which is a very useful epitome of more substantial documentation, setting out the claimant's forecasts. For March one can see a forecast in excess of three million. This is for the year of course. April, 2.8 million. May, 2.8 million. June, 2.8 million. July, 2.8 million. September, 3.1 million. It was not until the forecast for October that the epitome seems to indicate figures which approach reality because October is 1.34 million, October again is 1.23 million and November is 1.23 million, December is 1.68 million and the actual figure which the claimant attained by way of billed revenue was 1.37 million. I have rather abbreviated that. I should have said the full figure, £1,370,504. So far as these high figures are concerned, I had evidence from the claimant, which I accept, that there were two reasons why she was pitching her figures so high. In the first place, these particular forecasts which were for sales-driven or new business targets had also had included in them the recurring revenue as well. In those circumstances, obviously the figures were higher than they should have been.
17. The second reason, according to the claimant, was that there were provisioning difficulties. One of the major customers with which the claimant dealt was called Cedegem who sold broadband systems to pharmaceutical companies or pharmacies. They were essentially in the relation of purchasing from the defendant company via the claimant and then selling on to the pharmacies with whom they dealt and the pharmacies were the end user. It was not, however, something on the evidence which could be described as a straightforward wholesaler/retailer arrangement because the evidence which I have accepted from the claimant and from Anthony Prokop is that there was an element of contact between the defendant and the end user in relation to technical matters, in some areas in which the claimant herself was versed. Be that as it may, the problem that arose in the provision of equipment and services to Cedegem, so that they might make onward provision to their customers, was that there were delays in having the service or equipment at the defendant's end so that there might well be an order put in but a delay in meeting the order. If there was a delay in meeting the order, there would clearly be a delay in invoicing. The delay in invoicing was entirely outside the claimant's control but the fact was that she had to guess when the invoice would be delivered.
18. Her evidence was that in some measure the figures for the earlier part of the year were inflated by reason of the fact that she had been proceeding on the footing that orders were being fulfilled when they were not. Her account on this is supported by contemporaneous documentation. If I refer to her email at E63, this is an email for 16th October 2007 and, of course, by this time, as I have already indicated, then reality and her forecasts seemed to be converging. She said,

'Discrepancies I believe come from my incorrectly adding in renewals when it should have been purely new business. I thought this pipeline was for revenue being billed, not purely for new business. Secondly, we had too many provisioning issues early on which had a serious knock effect to the roll-out plans for Cedegem and, therefore, when these should have started billing some had been delayed by over two months. Hope this helps.'

It seems to have been accepted, as I understood the evidence of Ms Beaumont, that there had indeed been a provisioning problem and, in any event, the claimant's evidence was supported by Mr Prokop and Mr Jones and I accept that there was this provisioning difficulty.

19. The position is this: that the evidence of Ms Beaumont indicates that so far as the end of the third quarter is concerned, that is September 2007, the billed revenue amounted to 823,000 in respect of the claimant but that so far as the period for January to June is concerned, the actual revenue as against her forecast, which was clearly high, was 161,000. As I say, there is no doubt but that there was a wide disparity in the first two-thirds or three-quarters of the year between the claimant's forecasts and the actuality. Be that as it may, the fact is that the forecasts which she was giving were extremely high so she was in no way making a bid for lower targets and the target of her 450,000 represented what was obviously a figure considered by the company to be an appropriate increase at the time it was imposed in July of 2007.
20. Given the increases in the revenue which in fact took place and which were forecast by the claimant, the position is, and she accepted it, and I quote from my note of her evidence, 'The defendant would have been entitled to increase my target in October 2007.' She added that, 'If they had increased the target to what they chose to then I would not have been able to complain.' At this stage, the defendant's counsel was putting figures to her in the region of £1 million. Now, the fact is that although, as the claimant accepted, the target could have been increased, the defendants did not increase the target, taking the view that to increase it in October of 2007 would have been "demotivating". Their expression, not mine. In the result, what happened was that the claimant had a cap put on the amount of her bonus of 130% and, in the circumstances, that is the cap which appears in the document E268.
21. The evidence for the defendant is that a number of other employees were made the subject of capping. As can be seen on the same document, E268, there is an employee called Watkinson Noel who described a cap being imposed on his commissions of 120% so that his accelerator or multiplier was three times 20%. So far as he is concerned, he made a statement which the claimants do not seek to controvert which contains this at paragraph nine of D24:

'A few days later in October 2007, I was advised by Sandy Beaumont, Sales Director, that I could expect to be capped at around 110%. We had a light-hearted discussion around targeting, whereupon I emphasised my preference for capping rather than target increase. The rationale for this was that whereas I was confident that I could achieve the revised target proposed, it was never guaranteed. Capping, however, offered more certainty that I would achieve my target and, moreover, allow me to excel and, equally importantly, be seen to excel.'

Paragraph 10:

'I out-turned the year at £773,225 at 155% and was capped at 120% with accelerators of three times 20%.'

He thought that was fair. So far as Mr Noel is concerned, I think it is worth observing that his target for 2007 was £500,000 and the position is this: that if he had been capped, say, at £750,000 he could well have thought it touch and go as to whether he would have attained that. That certainly was the figure he thinks was being talked about by his manager, Mark Kelly, in October 2007, paragraph eight of his statement, and I can well understand that Mr Noel may well have preferred the certainty of a cap to the uncertainty of an increase in target.

22. So far as Mr Morgan is concerned, who is another witness who has given a statement on this topic, his position is this: that he was told, this is D31, paragraph nine, that he could expect an increase in his target to around £600,000 or he could expect to be capped at £110,000. Now, so far as Mr Morgan is concerned, if he had received an increase in target to around £600,000 in October or November I do observe from E268 that his actual outturn for the year was 650,507 so, again, Mr Morgan would have been in rather uncertain territory had he received an increase in his target. With hindsight, he would have achieved it but would he have known that in October or November?
23. So far as Mr Slack is concerned, I have been provided with a statement from Mr Slack and I do not query its contents any more than do the claimants but I do see from 268 that the position is that the issue of capping never arose in his case at all because from a target of 183,000, he attained 45,000 so I think Mr Slack is really not in the picture in this area of discussion.
24. So far as the witnesses who have been read are concerned, I can readily accept that in arithmetical and human terms the certainty of a cap against the downward sleigh ride of a target may well have appeared more attractive but I do not myself see that that has much to do with the claimant's situation.
25. Now, going back to the position of the claimant, she was capped at 130% which was obviously a substantial reduction on the amount by which she exceeded the target. I must now apply my mind to the issue as to whether that was something which the defendants were entitled to do. The defendants home in on that paragraph already cited at E22. I will repeat it, 'The Sales Director also has the discretion to cap an individual's Q4 bonus at 100% if required, although such cases will be by exception only and require HR and Finance agreement.'

There has been canvassed certainly in the pleadings and in statements some issue as to whether there was HR and Finance agreement to the cap. Well, I would have been satisfied on the evidence of Ms Beaumont alone that there was HR and Finance agreement to the cap. She is perfectly entitled to give evidence that Human Resources, a lady named Helen Judd, and the Finance Director, a man named Peter Green, agreed. Neither of them were called to give evidence. It is said that Mr Green has left the employment of the company and their efforts to trace him, whatever they were, have proved unavailing and that so far as Ms Judd is concerned, she is on maternity leave, having fairly recently become a mother. If there had been any challenge to the obtaining of the agreement of Human Resources and Finance which I felt was seriously intended, I would have possibly had to consider whether the absence of Ms Judd and Mr Green from the witness box rendered the evidence that they gave their agreement as something that was improbable. In fact, I am entirely prepared to accept the evidence of Ms Beaumont about that. I can scarcely think that she would want to mislead me on that topic so one point that was raised is not I think a live issue.

26. Points I will focus on are these: first, the clause makes clear that the Sales Director has a discretion. The discretion is that of the Sales Director, nobody else. The discretion is to cap the bonus at 100%. Comment has been made certainly in writing about it being 130% but I would have thought the greater included the less and if she can cap at 100, she can cap at 130 or 110 or 140 for all that matters. I have not received much by way of submission on the words, 'if required.' Quite when capping is required raises obviously a question. We then go on to, 'although such cases will be by exception only.'
27. Now, the claimant's counsel points out that we are not dealing here with a case such as Keen v Commerzbank, 2007 Industrial Case Reports at 623. That case involved litigation where a former employee of the Bank was seeking to argue that the bonuses which were paid to him in the context of a discretionary bonus regime were too small or, more exactly, that they should have been more substantial. I have read the case and I appreciate that that case highlights the uphill struggle which faces someone who seems to assert that failure to pay a discretionary bonus in a sufficiently large amount is an act which is to be called either irrational or perverse. We are not dealing with that.
28. This case posits an employee who is seeking the promised reward and presents a case which is based upon a calculation using the correct processes of arithmetic to say what that was to be. In this case the discretion is not to deal with shall I give this employee a bonus or not and, if so, how much? The question is this employee has complied with the contract and, on the face of it, earned a certain sum by way of commission but does the clause, capping, paragraph four, entitle the employer to reduce a figure which might otherwise, would otherwise, be payable? The submission of the defendants is that it does. We quite clearly here have a state of affairs where the Sales Director is granted a discretion and the document, as is agreed, has been incorporated into the contract and so the claimant accepts that Ms Beaumont had a discretion.
29. It seems to me that in these circumstances I should refer at some length to the statement of Ms Beaumont in order to ascertain how she viewed the discretion and what factors influenced her in the exercise of it. I think it will probably be sufficient if I start in paragraph 16. Paragraph 16 starts with a reference to the inaccuracy in the claimant's forecasting and it incorporates a reference to the email of 16th October 2007 which I have already made reference to. That is the email that is to be found at E63.
30. Going on to 17:

'The core of the claimant's claim is the fact that she was unhappy with the capping of total annual commission/bonus in quarter four of the financial year. I have worked in a number of businesses in which targeting and capping are related. I have explained how the company was not in a position to be confident of setting accurate targets during quarters one and two of 2007. The provision for capping in the plan is at clause four.

"The Sales Director also has the discretion to cap an individual's Q4 bonus at 100% if required, although such cases will be by exception only and require HR and Finance agreement."

'In the claim form, the claimant acknowledges that the company was entitled to apply a cap but that this was only possible,

"if the circumstances were exceptional."

'This is at paragraph 10 of the particulars of claim. That does not accurately reflect the wording in the plan which states that I have discretion to cap the bonus if required and that such cases would be by exception only.'

I have to confess myself that I had written on these statements, 'What do you say that means?' Since Ms Beaumont was the author or draughtsman of the payment plan, no doubt if she had been asked specifically she would have been able to give some exposition of what, 'by exception only,' was intended to cover. I agree with her point that it may well not be intended to be synonymous with, 'in exceptional circumstances.' I confess that I feel rather defeated in trying to establish what it does mean. I take the view that the provision of commission in accordance with the agreement amounts to what you might call a default situation and that if one is to get out of the default situation by capping, that certainly would be an exception. In that light, the expression, 'by exception only,' strikes me as a tautology but, as I say, I feel rather defeated as to quite what it was intended to signify.

31. Paragraph 18:

'The claimant also asserts that the cap was applied by a rule rather than an exception. That is not the case. Out of 44 sales personnel, a cap was applied in 10 cases. Details of the targets and actuals of the 10 sales personnel in respect of whom a cap was applied is set out in documentation.'

I refer here again to the important document E268.

'It will be seen that the claimant was capped at 130%, higher than any other individual who was also capped. It will be noted on those figures that the claimant's over-achievement against target was more than double that of the next highest over-achiever against target. She was at 305%, the next being at 155%.'

It may be as a matter of arithmetic she is just less than double that of the next highest over-achiever. Then she says:

'These statistics underline just how exceptional the circumstances were that the company faced in relation to the claimant's commission at the end of quarter three of 2007. They demonstrate how her targets, even after being revised with objection from the claimant, had been set far too low.'

32. Paragraph 19:

'By the end of quarter three, i.e. September 2007, revenue amounted to 823,000 in respect of the claimant. This was by now almost 300,000 above the revised target which had been in place since August and which the claimant had objected to at the time.

'Before the target increase was implemented following the end of quarter two, the claimant's forecasts for the period January to June had cumulatively amounted to £820,764 for that six-month period. The actual outturn against her forecast was £161,000, representing an accuracy level in forecasting of just 30%. Based on the claimant's forecasting, she projected revenue of 1.3 million for the first three quarters. By the end of quarter three, the actual outturn was 534,000, an accuracy level of just 62%. This underlined the problems the company had in relying upon the forecasts provided by the claimant.

'By the end of quarter three, it was apparent that the claimant was going to massively over-perform against a revised target of 450,000 which she had so strenuously objected to when implemented in August 2007. The plan does provide for a further review of the targets to take place at the end of quarter three. Had the company decided to set targets for the claimant in accordance with the forecasting that she provided throughout the year, then it is clear that she would have been provided with targets that she would not have reached. I have already referred to the figures provided by the claimant in March 2007 where she was forecasting revenues for the year of three million. In September, she was still predicting revenues of three million.

'By the time the claimant provided her October forecast, 1.34 million on 16th October 2007, it was apparent that she was likely to achieve revenues very significantly in excess of her revised target of 450,000 based on the massive acceleration in revenues in quarter three. The company was also aware by this time that Tesco was due to roll out a very large implementation programme on the Cedegem contract in November 2007. This would mean significant increased revenues were likely during the last two months of the year.

'Based on the reality of the position which was now known to us, consideration was given as to how to deal with the claimant's targets and commission levels in quarter four. One option was to increase the claimant's target to reflect the actuality of the position. I was well aware of how deflating that course of action would be for the claimant and other sales personnel who were well ahead of their targets at that time. Had we decided to increase the targets at the end of quarter three to something which was at or close to the likely actual revenues by year end, the claimant could have ended up failing to reach her annual target or only just reaching her annual target. The plan did provide for us to adjust the target in this way but I decided against that course of action. Instead, I decided to apply the discretion available to me in the plan to apply a cap to the commission levels of 10 sales personnel.'

33. She also said this at paragraph 26:

'The company had set aside a pool for commission payments of 616,000 for 2007. This was a further relevant factor in considering whether to apply any cap at the end of 2007.'

I also observe that in the course of her evidence she did say, 'We should have set her target at 3.2 million based on her forecasts.'

I did have the impression that the position is that the witness was rather rueful about not having taken the target adjustment course.

34. Now, there is no question but that the state of affairs was an unenviable one for the defendant company but the claimant's essential submission is that it was the defendant company which got itself there. The position is that the target was set at 450,000 in July and months went by in the course of which the claimant was, as I would accept, giving of her best for the agreed commission. In the result, the position is that revenues were obviously increasing, as Ms Beaumont accepts, and the targets could have been increased and it was not done so because it would be a deflating course of action. One has to remember that the account manager occupies the position of a revenue generator for the company and if the account manager is deflated, then so is the company's profit and loss account. The claimants may say that it has a tinge of unfairness to jolly the account manager along and then impose the cap when the money is largely earned.
35. Be that as it may, I take the view that what we have here is a situation where there was a discretion but I think to say there was a discretion is not the be-all and end-all. Mr Duggan submits that given that there was a discretion, the whole claim is misconceived. The claimant submits that far from it, the discretion was exercised taking into account an irrelevant factor. It is not an appropriate exercise of discretion in those circumstances to say that we will impose the cap because the money, which the rules and regulations for commission indicate the claimant will get, amounts to a sum considerably more than we want to pay. I cannot myself accept that that is a relevant factor for the exercise of a discretion. The circumstances are that the target, it seems, was too low but they are responsible for their targets. The defendant company cannot use money which would otherwise be the claimant's to get themselves out of a hole which they have got themselves in.
36. In those circumstances, I take the view that none of the considerations which are referred to in the statement and evidence of Ms Beaumont are relevant factors for the purposes of withdrawing the money which had been earned by way of commission by imposing a cap. In those circumstances, since relevant factors were not taken into account and irrelevant factors were, then I must conclude that the decision to impose the cap was irrational.
37. In those circumstances, there will be judgment for the claimant for the amount claimed.
38. 
     
    

MR DAVIES: My Lord, I am grateful. Two other matters are that we have agreed, I think we have agreed, the correct interest figure.

JUDGE SPENCER: Yes.

MR DAVIES: Which is appropriate on the judgment which is £12,757.60.

JUDGE SPENCER: Yes.

MR DAVIES: And to ask for my client's costs of the claim.

JUDGE SPENCER: Yes. Well, is that on the basis of detailed assessment or agreement?

MR DAVIES: Detailed assessment, if not agreed.

JUDGE SPENCER: Yes. Well, that is the usual...

MR DAVIES: My Lord, yes.

MR DUGGAN: My Lord, I think I also need to ask for leave to appeal. I obviously-

JUDGE SPENCER: Well, only if you want to.

MR DUGGAN: Well, My Lord, yes, I am instructed. My Lord, Your Lordship did say on Friday that this was a fairly finely balanced case and, My Lord, the question of the definition of what I-

JUDGE SPENCER: Well, can I see what Mr Davies says? You will have gathered I have not found it an easy case to interpret that clause. What do you say, Mr Davies?

MR DAVIES: Well, I oppose any application for leave to appeal. Ultimately, I mean, as Your Lordship indicated it was finely balanced, ultimately this is an individual contract of employment which the defendant could amend at any time. For the defendant to have another bite at the cherry in a finely balanced case, in my submission, isn't in the interests of justice but... On the... That is all I have to say really.

JUDGE SPENCER: Yes. Well, I think it is a point of construction largely and I think you should have permission to appeal.

MR DUGGAN: I'm grateful, My Lord.

JUDGE SPENCER: You are not seeking a stay, are you?

MR DUGGAN: My Lord, can I just take instructions on that? My Lord, I think the concern is that if the money is paid to the claimant at this stage then we will have difficulty in recovering it. Can I-

JUDGE SPENCER: She seems like a high earner.

MR DUGGAN: Well, My Lord, we don't know whether she is now but, My Lord, can I suggest that we pay the money into... If we undertake to pay the money into court within 14 days and to intimate to the... Well, My Lord, if we appeal within 14 days and pay the money into court, if we appeal within 14 days, can I suggest that as an option and then the claimant could of course always apply to us to take the money out and demonstrate that she actually would be good to return it. The concern we have is she is an individual. We don't know what she will do with it and it would be completely arid if we were to appeal and then find that actually the money has disappeared and we are never going to be able to see it again or we would have to bring enforcement proceedings if we did succeed. If the money is paid into court, the claimant knows it is there, she knows she is going to get it. The company is good for the money anyway but as a gesture of good faith, I would respectfully suggest it be paid into court.

JUDGE SPENCER: What are your costs likely to be?

MR DAVIES: My Lord, our costs are around 36,000. The claimant is in employment at the moment and she is a high earner.

JUDGE SPENCER: Yes.

MR DAVIES: She is also an extremely responsible person so-

JUDGE SPENCER: Yes. I would suppose that Cedegem are working with her new employers.

MR DAVIES: I have no idea.

MR DUGGAN: My Lord, it does occur to me that in one sense it cuts both ways. If the claimant is a high earner then it is not as though she has got a desperate need for this money. If the money is paid into court, all parties know where it is sitting and they know it is safe there and we know that if we succeed on appeal that we will get the money out. She knows that if we fail then we obviously wouldn't resist an immediate application to be paid out and it will be incurring court interest which, as I understand it, is better than the interest that the Court awards anyway.

JUDGE SPENCER: What do you say, Mr Davies?

MR DAVIES: Well, I don't have my client here to take instructions but I am sure my instructions would be she would rather have the money than it be paid into court but I... I've have said what I can say.

JUDGE SPENCER: Yes. Well, judgment will be for £126,812, will it?

MR DAVIES: Together with the interest.

JUDGE SPENCER: Yes. Well, shall we keep them separate?

MR DAVIES: Yes, the interest is £12,757.60.

JUDGE SPENCER: Yes, all right. Yes. 50,000 will be paid to the claimant and the remainder will be paid into court. £20,000 will be paid on account of the claimant's legal costs.

MR DUGGAN: My Lord, I'm grateful.

MR DAVIES: Thank you, My Lord.

MR DUGGAN: My Lord, I think that concludes your judgment and our submissions.

JUDGE SPENCER: Yes. Well, I am very grateful to both of you. How long does it take for cases to get on in the Court of Appeal these days?

MR DUGGAN: Well, My Lord, if we put the notes of appeal in within the next two weeks, I would have thought we would get on in the spring. Maybe the Associate knows better than I do as to... I think it normally takes… Certainly in the cases I have had it has normally taken about six months at the most.

JUDGE SPENCER: Is that better than it used to be, quicker?

MR DUGGAN: A lot quicker, My Lord, yes.

JUDGE SPENCER: That is fine. Good. Do I have to fill in one of those forms? Okay. Well, will you bring it to my room? All right. Who draws the order? You or...?

MR DAVIES: My Lord, I will draw up the order and provide a copy for Mr Duggan and we will both sign it and I think we file it with you here.

MR DUGGAN: My Lord, I think we have to lodge it. Get it signed by you, with your Associate, and then we can get it [inaudible].

JUDGE SPENCER: Does it need to be signed by me?

MR DUGGAN: No, I think not.

JUDGE SPENCER: No, I do not think so.

MR DUGGAN: It is only interim orders.

JUDGE SPENCER: Yes. Well, that concludes our business, does it not?

MR DUGGAN: My Lord.

JUDGE SPENCER: Yes, thank you very much.