Taylor v Motability Finance Ltd.

Applications for summary judgment or strike-out may be determined where the pleaded case has no real prospect of success and raises no serious unresolved factual or legal issue. A discretionary bonus must be assessed by reference to the contractual structure, including applicable caps and contractual signposts. The question is not what a reasonable employer would have paid. If the discretion was exercised irrationally, the court assesses what the employer should have paid by reference to the contract and comparable payments. Where an employee has performed contractual duties and contractual remedies are available for breach, restitution cannot be used to bypass the contract or recover more than its limits.

The claimant, a finance director, brought contractual claims arising from his dismissal and from the defendant’s decision to award him a special project bonus capped at 50 per cent of salary after his work on a successful residual-value insurance claim.

The defendant applied under Civil Procedure Rules 1998, rule 24.2, for summary judgment on claims alleging bad faith, an entitlement to a percentage of the insurance settlement, and restitution. It also sought strike-out of related pleas concerning the introduction and communication of the bonus scheme and an alleged obligation to pay a bonus outside the contractual schemes.

1. Bad faith. The particulars did not explain how the failure to communicate the bonus cap before the insurance negotiations ended amounted to bad faith in the later decision to award the maximum bonus. The allegation added nothing to the pleaded irrationality and breach of trust and confidence. It was struck out as disclosing no reasonable grounds.
2. Discretionary bonus. Following Horkulak v Cantor Fitzgerald [2004] EWCA Civ 1287, the exercise of a contractual bonus discretion had to be genuine and rational. If irrational, the court would assess what the employer should have paid, taking account of contractual signposts and bonuses paid to others of similar standing. The test was not what a reasonable employer would have paid. A claim above the 50 per cent contractual maximum had no real prospect of success while the bonus scheme itself was not challenged. Summary judgment was granted on that issue.
3. Restitution. The claimant had performed duties falling within his employment contract and had been paid salary for them. Repudiation ended future obligations but did not rescind the contract ab initio or destroy accrued rights. Contractual damages, including any claim concerning the implied term of trust and confidence, were the available remedy. Restitution could not provide an alternative route to recovery outside the agreed contractual structure or permit recovery exceeding the contractual entitlement.
4. The further pleas alleging bad faith, failure to communicate the bonus decision, and an obligation to pay beyond the bonus schemes were struck out. They lacked adequate particulars, causation, or a reasonable legal basis. The defendant’s applications succeeded, with costs to follow the event subject to further submissions.