Chequepoint (UK) Ltd v Radwan

Where an employment contract gives an employer discretion to pay bonuses but requires the terms of any bonus scheme to be notified, notification of a specific scheme creates contractual entitlement under its terms. The employer’s discretion does not continue as an unrestricted power to withhold bonuses that have become payable. The scheme may be changed or withdrawn, but the employer must notify the employee of that change or withdrawal. The precise form of notice required need not be determined where no notice was given. Whether the documents create contractual entitlement is a question of law, although the amount payable and satisfaction of relevant conditions may involve findings of fact.

The respondent was employed by the appellant currency-exchange company until his summary dismissal during a redundancy process. An Employment Tribunal found that he had been unfairly dismissed and awarded him £11,500 for unpaid Christmas and audited bonuses under his employment contract and a 1992 bonus letter.

The Employment Appeal Tribunal dismissed the other grounds of appeal and, on 4 March 1999, upheld the contractual bonus award. The employer appealed to the Court of Appeal, arguing that the contract preserved an absolute discretion not to pay bonuses. The central issue was whether the contract and letter created an enforceable bonus scheme.

Appeal dismissed unanimously, with costs. Lord Justice May gave the leading judgment. Lord Justice Tuckey and Lord Justice Potter agreed.

1. Clause 18 gave the employer discretion over payment of a bonus, but also required the terms and conditions of any bonus scheme to be notified to employees. The letter of 2 April 1992 constituted notification of a bonus scheme, including quarterly, Christmas and audited bonuses.
2. Once the scheme was notified, the respondent became contractually entitled to bonuses payable under its terms. The employer retained discretion to notify a change in the scheme or its withdrawal, but could not withhold sums due under the notified scheme without such notification. The court did not need to decide what form of notice would have been sufficient because the evidence established no notice of any kind.
3. The issue of entitlement in principle was one of contractual construction and therefore law. The Employment Tribunal’s description of entitlement as a finding of fact did not prevent appellate review. Lord Justice Potter explained that the factual finding concerned the quantum of the bonus, while entitlement arose from the legal construction of the contract and letter.
4. The respondent’s evidence was sufficient to establish satisfaction of the relevant profitability conditions, and the appellant called no evidence to contradict it. The award of £11,500 was therefore upheld.

• Court of Appeal (Civil Division): dismissed the appeal from the Employment Appeal Tribunal and ordered the appellant to pay the costs.
• Employment Appeal Tribunal: on 4 March 1999, upheld the Employment Tribunal’s award for unpaid bonuses. A prior Employment Appeal Tribunal hearing on 18 September 1998 had dismissed the other grounds of appeal.
• Employment Tribunal: found unfair dismissal and awarded £14,030 compensation, together with £11,500 for breach of contract relating to unpaid bonuses.