AON Risk Services (UK) Ltd v Child-Villiers

An employment incentive clause must be construed as a whole and against its admissible factual background. The commercial context, the employee’s role, the structure of the employer’s business and the method of remuneration may establish that a bonus provision directed to individual private-client business does not apply to a substantial corporate account acquired through a team effort. Work outside the strict scope of employment may justify a discretionary payment or quantum meruit, but it does not automatically qualify for the contractual bonus. Any alternative remuneration must be assessed by reference to the evidence and the employer’s applicable bonus arrangements, not by treating the rejected contractual bonus as the starting point.

Mr Child-Villiers claimed a sales incentive bonus of £154,823 under paragraph 5 of his employment contract after his employer acquired the Rexam group insurance account. The defendants contended that the clause concerned private-client business, whereas Rexam was a large corporate account acquired by a specialist team and remunerated by fees rather than brokerage.

The Canterbury County Court awarded the contractual bonus and also assessed a quantum meruit. The defendants appealed on construction, reasoning, evidential assessment and quantification. The central issues were the meaning and scope of paragraph 5, the effect of the background factual context, and the proper basis for any discretionary remuneration.

1. Appeal allowed. The Recorder’s judgment could not stand. It failed to identify that the principal issue was construction rather than fact, inadequately addressed the factual background, gave insufficient reasons for rejecting the alleged supplemental agreement, and wrongly assessed the alternative remuneration.
2. Written agreements are not construed by reference to subjective intention. Relevant background evidence is admissible where it places the agreement and the disputed provision in their factual and commercial context. The contract must nevertheless be construed objectively and as a whole.
3. Paragraph 5 was directed to the private-client business for which Mr Child-Villiers had been employed at Caterham. In context, “New Business” meant new private-client business, and “acquired” described the essentially individual process by which that business was obtained. The size of the stated brokerage percentages reinforced that construction.
4. The Rexam account was a corporate account acquired through a substantial team effort. Mr Child-Villiers made a useful contribution but did not acquire the account within paragraph 5. The account generated fees rather than net retained brokerage, which was a further substantive reason why the clause did not apply.
5. The defendants accepted that a reasonable discretionary bonus was payable for Mr Child-Villiers’s contribution. Its assessment had to reflect the Corporate Division’s actual discretionary bonus arrangements and the evidence of payments to team members. The rejected contractual bonus could not be used as the basis for a quantum meruit calculation. The appropriate amount was £15,000.
6. The Court substituted £15,000 for £154,823, set aside the remainder of the Recorder’s order, and ordered the respondent to pay £126,123.68, with costs and interest to be agreed or relisted.

• Court of Appeal (Civil Division): appeal from the Canterbury County Court decision of Mr Recorder Lobo dated 16 December 2001. Appeal allowed; £15,000 substituted for £154,823 and the remaining order set aside.