United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 907_93_0203

Appeal No. EAT/907/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 2 March 1995

Before

THE HONOURABLE MR JUSTICE BUCKLEY

MRS M L BOYLE

MR K M YOUNG CBE

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MS SHEILA MARTIN          APPELLANT

CONFEDERATION LIFE INSURANCE COMPANY          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR A NICHOL

(OF COUNSEL)

Messrs McKenna & Co

160 Aldersgate Street

London EC1A 4DD

For the Respondents MR T DUTTON

(OF COUNSEL)

Messrs Speechily Bircham

Bouverie House

154 Fleet Street

London EC4A 2HX


 


MR JUSTICE BUCKLEY: This is an appeal against a decision of an Industrial Tribunal held at West Croydon on 20 August 1993. It was a majority decision in favour of the Respondents against the Applicant, Miss Martin. The claim in a nutshell was that part of Miss Martin's wages was or should have been an entitlement under a company bonus scheme and that there had been a wrongful deduction from wages when as had happened she was made redundant in 1992. In short she had not been paid her entitlement under the company bonus scheme.

The relevant facts found by the Tribunal are that there had been a preliminary interview at which Miss Martin had been told of her entitlement to participate in the bonus scheme and that some details of the scheme had been given orally. Following that interview an offer was made in a letter of the 24 May. The offer was accepted, employment commenced sometime later in 1991 but ended somewhat abruptly in the words of the Tribunal on 14 August 1992 due to redundancy and payments were made accordingly. The relevant terms of the letter and the short paragraph which has caused trouble is set out in the Tribunal's reasons and we quote it as follows:

"As a Manager of the Company you would be included, pro rata for 1991, in the Manager Bonus Scheme and your holiday entitlement - also pro rata for the year -would be at 25 days per annum in addition to statutory holidays."

There is a reference later in the letter to details of the company's sick pay scheme and other contractual matters being set out in a staff hand book which was enclosed and the only other relevant passage that has been relied upon is this:

"I appreciate this is a very brief outline of the main terms and conditions we are able to offer but please, as I have said, let me know of any further and outstanding issues you may wish to raise."

As we have indicated employment was taken up on that basis. In the event the company did decide to pay a bonus and pursuant of the scheme for the 1991 that was paid pro rata to the Applicant sometime early in 1992 and there is a letter in the bundle which shows the computation of that and also we have the notification of the payment, cheques and so forth. The letter paying the 1991 bonus ended:

"I will inform you shortly of the revised basis for 1992"

Now the bonus scheme itself is in our view of some importance, it is exhibited to the reasons, it's in the bundle. There are two documents in our bundle, the first at page 18 which is headed "Re Company Bonus Schemes" in the plural and this seems to be a document which would apply to all bonus scheme the company operated. It is signed by the director of personnel and it makes the following points:

"Firstly, bonus payments are not commission payments. [and that is heavily underlined in the document] Secondly, bonus payments do not represent a basic term or condition of employment. All, or any, bonus schemes or bonus sums the Company may decide to adopt or pay will remain discretionary and may, at any time be withdrawn or discontinued by the Company. Because of this discretionary status, Company Bonus Schemes will not, under any circumstances, be applied negatively.

Lastly, in order to qualify for consideration under any relevant Company Bonus Scheme, an employee [again this is heavily underlined] must be employed on 31st December."

The next document which is a more particular one is headed "Bonus Programme for Managerial Staff, Programme Document, January 1st 1991, Confidential" and this is the document which we would have been bound to act on in any event since no challenge to it had been made below and it is effectively found by the Tribunal to be the relevant document. But since some query was raised before us, we did ask Mr Dutton who appeared for the Respondents to confirm there hadn't been some ghastly mistake and the case had gone off on the wrong basis and he did so and this is in truth the relevant document.

Under paragraph two "Eligibility" it states that all staff meeting the eligibility requirements on 1st January 1991 would be members of the programme effective from that date and for staff becoming eligible after 1st January 1991, it gives the two dates of entry into the programme. One is the date of appointment, if it occurs between 1st January and 1st September 1991 or the January 1st following the date of appointment if appointment to the appropriate manager level occurs October to December. So that deals with eligibility and that indeed is entirely in accordance with the letter of offer sent to the Applicant in respect to 1991 because of course according to that paragraph she would have been eligible.

Paragraph six is the only other one that we need to refer to headed "Payment of Bonuses" and it says this:

"A bonus is earned on the 31st of December provided that:

(i) the manager is a member at that time or

(ii) the manager;s membership ceased during the year as a result of retirement, permanent disability, death, transfer or promotion

and is payable on or before the 31st of March in the following year.

In the event that a member's employment is terminated for reasons other than retirement, death or permanent disability, the member will forfeit entitlement to the current year bonus."

and I think that is all we need to refer to as far as the scheme is concerned. Now Mr Nichol who has appeared for the Applicant, made the following submissions and I am only summarising and undoubtedly not doing full justice to them.

The first point he made was on the letter of offer of 24 May, a paragraph which we have quoted which refers to the manager bonus scheme. Now the submission was that the only fair and sensible construction to be placed on that was that there would not only was there a bonus scheme but there would be a pro rata computation for any part year.

Consequently he submitted that as the Applicant had been employed for part of 1992, there was or should have been a calculation pro rata to give her a bonus for 1992 for the appropriate part. In support of that he relied on the case of Scally v Southern Health and Social Services, that case is to be found in 1992 1 Appeal Cases page 294. Mr Nichol relief on that in this sense that he said is not the duty of the employee to prove every detail of the contract. It is up to the employer to bring any clause to the employees attention and particularly in this case when, as he contended, the clause in question was really by way of an exclusion clause, that is the clauses which we have sighted which refer to 31 December and so forth.

Alternatively Mr Nichol submitted that if he is wrong and that there was no contractual entitlement founded on the letter of 24 May, either in the terms he submitted or in any terms, then there was an expectation and he referred us to the Kent Management Services Ltd v Butterfield [1992] ICR 272 and the submission was that clearly both the parties had a common expectation that this bonus would be paid in 1992 and again part of the common expectation, and he comes back to as he would put it common sense, and particularly the letter of 24 May, the expectation included a pro rating if necessary.

Mr Dutton in his submissions also referred to the letter of 24 May and submitted that the relevant paragraph did not lead to any contract for the future but if it did it was no more than an agreement that the Applicant would participate in the management bonus scheme. He pointed out that clearly in order to find out the details of the scheme, one would have to go to it.

The letter was not in itself in any way and obviously not intended to be exclusive of the terms of the scheme itself as is clear from the fact that there was nothing in the letter as to the amounts or how the amounts would be calculated or how one qualified for entitlement or may lose the entitlement or anything of that sort and he said that clause six was not an exclusion clause and that at the end of the day therefore whether one viewed the case as contractual or as an expectation case one had to go to the terms of the scheme to see what the terms of the contract or the scope of the expectation was.

We have already indicated that the Tribunal's decision was a majority one in favour of the Respondents. It was the Chairman who was in the minority on this particular occasion. The lay members who were the majority found that the letter of 24 May in effect conferred on the Applicant a pro rata participation in the scheme for 1991 only and that she had no entitlement for any subsequent year by reason of the terms of that letter. That was part of their finding, we have to say that we don't share that particular view. It seems to us to be a far to narrow technical reading of the letter.

The lay members went on to conclude that any reasonable person in the position of head of investment and research, such as the Applicant would have been put on notice both by the letter and by what she had been told at the interview, sufficient to enquire into the bonus scheme arrangements and that had the Applicant made enquiries, the contents of the documents from which we have quoted would have been revealed to her.

The Chairman of the Tribunal felt that the letter had to be construed against the background of the interview in order to flesh it out and that it clearly led him to the conclusion that Miss Martin had an entitlement to participate in the manager bonus scheme. That part of the Chairman's reasoning we agree with. However, he went on to find, at paragraph eleven that the terms of the contract were that the Applicant would be paid pro rata for any part of a year. In other words that was really what Mr Nichol was submitting to us. It is probably apparent from what we have said so far, that whilst we agree with the conclusion of the majority we don't entirely share their reasons and very shortly we would explain why.

The letter of 24 May must of course form the bare bones of the contract of employment between the parties. This was the letter offering employment and it was the letter which the Applicant accepted. The letter however expressly states that it contains only a brief outline of the main terms and conditions and for any further information the Applicant only has to ask. It is also necessary, of course, to construe any relatively short hand letter of this sort against the appropriate background and circumstances.

It seems to us abundantly clear that at interview, the Applicant had been told that there was a management bonus scheme and that she would be entitled to participate in it. It seems equally clear to us that the short paragraph to the letter referring to the pro rata for 1991 and the manager bonus scheme can only sensibly be construed as stating two things, one that there is in operation a manager bonus scheme and that the Applicant will be entitled to participate and secondly that for 1991 at least there will be a pro rating.

This is the type of offer that we refer to as a bare bones offer which if an Applicant accepts, he or she accepts subject to the more detailed provisions that maybe in place from time to time concerning for example matters such as the bonus scheme. The Tribunal found, (as the letter expressly states) if the Applicant wished to know more, before joining and thus committing herself to those more detailed rules, she only had to ask. Any one in that position can of course ask and then make an informed decision as to whether to sign on or not. If you don't, other things being equal, the normal conclusion would be that you are accepting whatever the companies terms are as to these sort of schemes.

It therefore seems to us that whether one regards this as a case of a contractual entitlement to participate in the bonus scheme, or merely as a case in which there was an expectation that the bonus would be paid, the expectation being sufficiently clear for it to form part of or be regarded as part of wages, doesn't matter. Either way one has to go to the terms of the scheme to see what the expectation was or what the detailed terms of the contract were. Either way it seems to us that the terms of this bonus scheme were absolutely plain and we won't recite them again, we have already done so, but the crucial point is that because this Applicant was not in office or in employment at 31 December, her entitlement to such bonuses as might, in the discretion of the company, be declared for that year did not arise. It isn't necessary for us to resolve the question as to whether this is an expectation case or a contract case.

If pressed we would have said it was a contract case, the relevant terms of the contract being that as a manager this Applicant had a right to participate in the bonus scheme. The fact that the bonus scheme is discretionary to the extent that it depends at least in part on the performance of certain funds, and that the company may or may not depending on the outcome, pay a bonus, doesn't strip that part of the contract of business efficiency. There is a perfectly sensible basis to it which is:

"We run a bonus scheme, if things go well enough you as a manager are part of it and if we declare a bonus you will get your fair share of it."

That seems to us to be perfectly comprehensible and business like or sufficiently business like to be contractual, and that is how we would have construed the contract. However, in the event as we have indicated, we are not convinced that it makes much difference which way one looks at this case, one is driven back to the terms of the scheme and the scheme clearly in our view precludes any entitlement of this applicant to be payed the bonus for 1992.

We do not regard the eligibility clause or any other in that bonus scheme as an exclusion clause. We don't think this is a Scully type case at all and as we have indicated in the Kent Management type of case, the expectation type of case, the first question to ask is whether there is any entitlement, what the expectation is. It can be no more in this case than to be paid in accordance with the terms of the bonus scheme. So for those reasons we have reached the clear view that the result reached by the majority of the Industrial Tribunal was correct, albeit we have differed some what in the route by which we have arrived at that conclusion.

It follows that this appeal must be dismissed and it only remains for us to thank both counsel for their assistance. Mr Nichol could not have said any more or said it more forcefully. Thank you both very much.