Charles Anthony Joseph Steel v Spencer Road LLP
[2023] EWHC 2492 (Ch)
Shikha Gupta v DB Group Services Limited
5 September 2024
[2024] EWHC 2297 (KB)
High Court
An employee claimed they were promised a bonus but didn't get it. The court said the bonus wasn't guaranteed in the contract and the company's decision not to pay it was reasonable, given their financial problems and strict rules about bonuses. The employee lost the case.
Key Facts
- •Ms Gupta claimed damages from her former employer, DB Group Services Limited, for breach of contract regarding her 2016 bonus.
- •Ms Gupta worked in the Non-Core Operations Unit (NCOU), tasked with offloading high-risk assets, effectively working herself out of a job.
- •Ms Gupta claimed she received oral assurances from managers that she would receive bonuses for her performance.
- •Ms Gupta received no Individual Variable Compensation (IVC) for 2016, only a lower-than-expected Group Variable Compensation (GVC).
- •The Defendant argued the bonus was discretionary, and the decision not to pay was valid and consistent with other employees.
- •The Claimant’s contract explicitly stated that bonus awards were discretionary and not contractually guaranteed.
Legal Principles
Court's supervisory role over discretionary bonus schemes; implied terms in employment contracts ensure oversight of discretionary bonus decisions.
Harvey on Employment Law [33.01]
Where an employer exercises discretion regarding a contractual obligation, both limbs of the Wednesbury test apply.
Braganza v BP Shipping Ltd (2015) UKSC 17
Wednesbury test: (1) whether the decision-maker considered irrelevant matters or failed to consider relevant matters; (2) whether the decision was so unreasonable that no reasonable authority could have reached it.
Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223
In reviewing contractual discretionary decisions, especially in employment contracts, a more intense scrutiny of the employer’s decision-making process may be justified.
Braganza v BP Shipping Ltd (2015) UKSC 17; Johnson v Unisys Ltd [2003] 1 AC 518; Keen v CommerzBank AG [2007] ICR 623
Contractual discretion must be exercised rationally and in good faith, consistently with the contractual purpose.
Braganza v BP Shipping Ltd (2015) UKSC 17
The court decides what is a relevant consideration; the decision-maker attributes weight to considerations, and courts interfere only if unreasonable in the Wednesbury sense.
Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759
Even reasonable expectations do not constitute more than a relevant factor, the decision-maker can, and where appropriate should, take into account in the course of its decision-making process.
IBM UK Holdings Ltd v Dalgleish [2018] IRLR 4
Assurances must create a reasonable expectation (not in the strict legal sense) to be considered a relevant factor.
Brogden v Investec Bank plc [2014] IRLR 924
Outcomes
Claim dismissed.
The Claimant failed to prove that the assurances she alleged were given. Even if assurances were given, the Bank’s decision to prioritize affordability was rational and lawful, given its precarious financial position and regulatory requirements. The Bank's decision-making process was thorough and did not breach the implied term of trust and confidence.