United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR N BRAND (the Appellant in Person)
For the Respondent	MR PAUL WILSON (of Counsel) Instructed by: Messrs Hammond Suddards Edge Solicitors 2 Park Lane Leeds LS3 1ES


 


MR JUSTICE WALL

1. This is an appeal by Mr Nicholas Brand against the decision of the Employment Tribunal held at Watford on 29 April and 11 June 2002, with reasons for the decision promulgated on 11 July 2002. Mr Brand was represented before the Tribunal, but has appeared in person before us, and we would like to pay tribute to the clear and energetic way in which he has conducted his appeal. It seems to us that he demonstrated in the arguments he put before us precisely why he was so good at the job he had with the Respondent, and that a successful career awaits him in whichever field of employment he chooses.
2. However, we have to deal with the narrow point arising from his employment with the Respondent company, which carried on business as an Employment Recruitment Agency for the information technology sector. Mr Brand was employed as a recruitment consultant from 16 December 1998 to 26 July 2001 when he was made redundant.
3. Before the Tribunal a number of issues arose. Firstly, Mr Brand claimed that he had been unfairly dismissed. Secondly, he claimed that the company, Compro Computer Services Ltd, was in breach of contract in material respects. This claim was upheld by the Tribunal in part and the company ordered to pay him £9,500 odd, and the Respondent's counterclaim for money due under the contract of employment against Mr Brand was dismissed. Another issue which was disputed was the question of a bonus which Mr. Brand said he had earned, and which indeed the Tribunal found he had earned following a miscalculation on the part of the Respondent company.
4. The case also gives rise to a further point which we will deal with at the end of this judgment relating to whether or not the part of the monies received by Mr Brand as a result of the award should have paid to him gross or net.
5. The form IT1 filed by Mr Brand claimed unfair dismissal. The Tribunal did not accept that Mr. Brand had been unfairly dismissed. The Tribunal took the view that there had been a genuine redundancy. There is no appeal against that decision and we need say no more about it. For our purposes the crucial element of the case is the claim by Mr Brand that the Respondent was in breach of contract in relation to commission payments which he claimed were due to him for June and July 2001. He also he says he was not given the opportunity to earn any commission for August which he says he was his entitlement under his contract of employment. He therefore claimed payment for June and July in terms of the commission he earned and also the loss of opportunity to earn commission for the month of August.
6. The question of commission involved a consideration of Mr Brand's contract and what is described as a "Memorandum", which governed the earning and payment of commission. From Mr Brand's point of view, this was plainly a commission led contract. His initial salary when he joined was £17,000 per year although it had increased to £31,000 a year by 1 June 2000 when the latest Memorandum was signed. However, what the contract of employment says is as follows:

"Salary

Your basic salary is £17,000.00 per annum payable by equal monthly instalments in or around the 1^st day of each month. The first three months of your employment will be a probationary period.

In addition to your basic salary you are eligible for Commission on sales. The commission payable is detailed in the Commission Scheme operating at the time and is illustrated below. The Company reserves the right to vary or replace the Scheme in line with operational requirements. Any change to the Scheme as a result, will take effect thereby replacing any previous Commission Scheme. Quarterly targets will be agreed with you on commencement of employment."

The contract then goes on to deal with the percentage commission on gross margins.

7. The relevant Memorandum, which is dated 1 June 2000, which took effect from 1 June 2000 and was to run until 31 May 2001 superseded all other compensation plans. It has two particular clauses which are relevant for present purposes. Clause 4.1 is described as the 'Sales Margin Target' and reads as follows:

"The Sales Margin incentive falls within the framework of your current commission scheme. Commissions are calculated at the end of each month and paid in the next payroll, however, commission is earned only when Compro is in possession of signed timesheets from the contractor. In situations where the customer does not pay or significantly delays payment, Compro reserves the right to recover commissions paid to you but not earned. Each month's results are calculated on a stand-alone basis using the commission table below. There is no cap on earning potential."

8. Clause 6 which is headed 'Plan Interpretation' reads:

"The Plan assumes that you remain in full-time employment with Compro at all times in order to qualify for the commission payments. The payment of commission will be based upon customer payment, in accordance with Compro accounting principles.

In the event of any disputes concerning plan interpretation or conflicts, the issue should be put in writing to the Sales Director, who will respond within 10 working days. In any event the Managing Director's decision is final."

9. The essence of Mr Brand's complaint is as follows. He says that when his employment was terminated on 26 July 2001 he was entitled to a period of four week's notice, and therefore he is entitled to all commission earned during June, July, and the period up to the termination of his notice period in the latter part of August. The Respondent's response is that pursuant to the contractual terms, which we have just set out, and in particular in relation to clause 6 of the Memorandum, in order to be paid commission Mr Brand had to be employed by the company at all material times. The phrase used is "at all times" in clause 6. The Respondent argued that Mr. Brand was not employed by the company at the end of July, and certainly after the end of August. Therefore he was not entitled to commissions payable at the end of July since he was not, they say, on the payroll at that point; and in any event he is not entitled to the payment due at the end of August because on the expiry of his notice he was self-evidently not on the payroll.
10. That was the issue that the Tribunal had to resolve and we think that the best way to approach it is to see how the Tribunal analysed it. The Tribunal gave what, we respectfully think, is a very careful and fair judgment. It goes through the various issues it was asked to decide; it makes appropriate findings of fact; it applies the law to them; it reaches a conclusion on the question of unfair dismissal; it finds for Mr Brand on the £10,000 bonus which was important, and then it comes to the question of the breach of contract and the commission payments. Although the passage is quite lengthy, we think it important to read it.

27 "Under the terms of the Compensation Plan, the Applicant was entitled to generous commission payments if he met certain targets. Until June 2001, these commission payments averaged about £9,200 per month. By clause 4.1 of the Compensation Plan, commission was calculated at the end of each month and paid in the following payroll. Accordingly, the commission earned in July was to be paid in the payroll on the 31 August and that earned in August was to be paid on 30 September. The commission earned by the Applicant in July up to his dismissal on 26 July was calculated in the early part of July in the sum of £9,646.08. Commission earned by the Applicant in July up to his dismissal on 26 July was calculated by the Respondent as being £5,720.63 but the Applicant argued that this was less than the commission he would have earned had the Respondent not broken his contract of employment. No calculation was made of the commission to which the Applicant might have been entitled in August had he not been dismissed.

28 The Applicant submitted that the Respondent was in breach of contract in failing to pay him any commission in respect of the contractors he had placed and were working for customers during June, July or August 2001. He argued that had he been allowed to work out his notice to 25 August, he would not only have earned commission for the whole of June but also for the whole of July and most of August.

29 The Respondent argued that the Applicant was not entitled to any commission for June, July or August, relying upon the first paragraph of Clause 6 of the Compensation Plan. This states:

'The Plan assumes that you remain in full-time employment with Compro at all times in order to qualify for the commission payments.'

The Respondent maintains that the effect of these words is that the employee must be in employment at the date of the proposed payment to be entitled to that payment, regardless of the fact that the commission may relate to an earlier period of work actually performed by the employee. The Respondent accepted that this was a very onerous clause from an employee's perspective but argued that it was not as unreasonable as it might appear having regard to the generosity of the scheme itself and the nature of the Respondent's business. In his evidence, Mr Turner stated that such clauses are common in the recruitment industry. He explained that commission payments are calculated when the Respondent receives time sheets from the contractors and that they are usually paid to the employees before the customers actually pay the Respondent. However, if a customer defaults in making the payment, it is usually possible to recover an overpayment of commission from the employee's ongoing monthly payments. He stated that when an employee is leaving the commercial reality is quite different and the recovery of overpayments becomes more difficult. It is also self-evident that the Respondent has less commercial reason to continue such a generous scheme in the case of someone who is leaving and that an employee may well accept such onerous terms on termination in order to enjoy the large commissions paid during the employment. For the Applicant, Mr Norman argued that this clause should be interpreted as meaning that the Applicant was entitled to be paid commission based on the signed time sheets of the contractors he had placed up to the time that he left the Respondent's employment, irrespective of the date of calculation or date of payment and that any ambiguity in the relevant Clause should be construed against the Respondent.

30 We have not found Clause 6 to be an easy Clause to apply to the facts of this case but we accept the Respondent's evidence of the commercial background to the Compensation Plan. Against this background, we note that the Plan contains four incentive elements of which the Sales Margin Target is one. Clause 4 sets out the entitlement to these incentives but each of them is subject to the overriding conditions in Clause 6. In our judgement, it is a condition of entitlement to a commission payment that an employee remains in full time employment to the time that he right to payment crystallises. We find this is made clear in Clause 6 by the requirement that the employee remains in full-time employment "at all times in order to qualify for the commission payments". We further find that in respect of the Sales Margin Target the entitlement to commission crystallises on the date the payment was due to be made, by which time the amount of the payment will have been calculated. We find that, before this time the employee had not "qualified" for the payment. Accordingly, we conclude that in order to be entitled to a payment under the Sales Margin Target Scheme, the Applicant would have had to be in employment on the date that payment was due to be made. The Applicant was not in employment on the last days of July, August or September and he was not therefore entitled to such payments in respect of June, July or August.

31 However, Mr Norman goes on to argue in the alternative that the Applicant was summarily dismissed breach of contract and that damages for that breach should be assessed, so far as is possible, so as to put the Applicant back into the same position he would have been had his contract been honoured and had he worked out his period of notice. If the Applicant had done so he would have been in employment on 31 July 2001 and his right to the June commission payment in the sum of £9,464.08 would have crystallised. We accept this submission. We find that in dismissing the Applicant summarily the Respondent acted in breach of contract and a loss suffered from the Applicant which flowed from this breach in contract was the loss of commission which he should have been paid on 31 July in the sum of £9,464.08. We therefore award the Applicant damages for this breach of contract in the sum of £9,464.08."

11. We have deliberately read that passage from the Tribunal's reasons because we find that it is soundly reasoned, and we have great difficulty in thinking that in any respect in relation to it the Tribunal could be said to be plainly wrong in law. In order for us to accept Mr Brand's submission it does seem that we would have to leave out of clause 6 in the Plan Interpretation the words 'at all times'. If we did so, we think that Mr Brand's interpretation of the contract would be acceptable and indeed we do think, as indeed we think the Tribunal thought, that Mr Brand has to an extent been hard done by in a clause which is substantially onerous against him.
12. Nonetheless we are of the view that when we read the words "at all times" as we must read them as being in the Plan Interpretation, it can only mean that in order to qualify for payment of commission Mr Brand had to be in employment with the Respondents at the time the commission was due to be paid. The Tribunal was able to extend his employment as it were as indeed it should have been until the latter part of August but on any view he was not in the Respondent's employment in September and as was pointed out by one of our number during the course of argument it must inevitably follow that at some point when an employee leaves under this sort of contract that some commission is going to be lost.
13. We have considerable sympathy for Mr Brand in this respect but we find that the language of the clause is plain, the argument and reasoning of the Tribunal sound and as an appellate body, again as one of our number pointed out during the course of argument, our function is to decide whether or not the Tribunal has made any error of law in its interpretation of the clause. We can see no error of law committed. It must follow therefore that the appeal has to be dismissed.
14. There is a cross-appeal which arises from the payment of the £9,464.08. What appears to have happened is that the Tribunal having concluded argument announced the figures that it was going to award. No argument was addressed to the Tribunal at that point as to whether or not that particular figure £9,464.08 odd should be paid gross or net. Shortly thereafter, and before the decisions were promulgated, the Respondent's solicitors wrote to the Tribunal suggesting that the figure should be paid net in accordance with BTC v Gourley.
15. The Tribunal declined to make an order to that effect and the Respondents sought a review. The review before the Chairman said this:

"The case was argued for two days. Both sides were legally represented. The Respondent made an oral closing submission supported by a 16 page written submission. In its closing submissions the Respondent argued points of law going to quantum of the claim. It had every opportunity to raise issues going to the tax treatment of any damages that might be awarded. It did not do so. It is not unusual after decisions have been given for parties to think of arguments they wished they had put the hearing, but it is then generally too late to do so. It is not the duty of the Tribunal to raise on its own initiative arguments which favour either party. The rules of procedure are not designed to provide parties in such a position with a second bite of the cherry. The interests of justice apply. They include the principality of finality of litigation. On the facts of this application I consider that the interests of finality prevail and the application has no reasonable prospect of success."

16. We endorse that reasoning. In our judgment the Chairman was acting within the broad ambit of a discretion not to allow the matter to be re-opened, and we cannot say that he was wrong in doing so. Even if the Respondent's argument on the point was correct in law, it had not been raised when it should have been, and the Respondent had undoubtedly benefited from the strict terms of the contract. There may, accordingly, be an element of broad justice being done. In any event, however, the discretion not to re-open was for the Chairman to exercise and we take the view that the Tribunal Chairman in refusing a review was acting within the ambit of that discretion.
17. Both, therefore, the appeal and the cross-appeal will be dismissed.