Patural v DG Services (UK) Ltd

On an application for strike out or summary judgment, the court must assess whether the claim has a realistic prospect of success without conducting a mini-trial. A contractual discretion concerning discretionary remuneration must be exercised in good faith and rationally, but the court must not substitute its own view of the appropriate award. The rationality inquiry includes both the decision-making process and the outcome. An employee’s reasonable expectations may be relevant, but a merely subjective expectation does not alter the contract. Where the contract confers no entitlement to a bonus pool or particular pool size, the employer’s choice of bonus structure will not itself establish breach.

The claimant, an employee of the defendant bank, claimed damages for alleged breaches of express and implied terms governing discretionary bonuses for 2008 and 2009. He alleged that the defendant had treated him inconsistently with comparable employees, exercised its discretion irrationally, breached the implied term of trust and confidence, and made misleading statements about the basis of the awards.

The defendant applied under CPR 3.4 and CPR 24.2 for strike out and summary judgment. The central questions were whether the contractual provisions supported the claimant’s construction, whether the pleaded case disclosed any realistic prospect of proving irrationality or causation, and whether the disputed evidence justified a trial.

1. Application allowed. Summary judgment was entered for the defendant. The pleaded claim had no realistic prospect of success and there was no other compelling reason for a trial.
2. The express bonus term had to be read as a whole. The reference to treatment broadly consistent with peers did not require identical treatment of every employee working on the same desk. It referred to peers at a similar level of compensation and recognised that guaranteed and discretionary arrangements could coexist. The employer could also take account of other relevant factors for the business.
3. The court applied the principles governing contractual discretions. It could not substitute its own assessment of the appropriate bonus for that of the employer. Under Braganza v BP Shipping Limited [2015] ICR 449, the rationality inquiry included both whether relevant matters had been considered and whether the outcome was one which no reasonable decision-maker could reach. Those principles had to be applied in their contractual context.
4. The particulars of claim did not allege a process error, such as reliance on an irrelevant consideration or failure to consider a relevant one. The pleaded case challenged the outcome. The evidence that formula-based arrangements had been agreed with two other employees for retention reasons showed a rational basis for treating them differently. The claimant therefore had no real prospect of establishing irrationality or perversity.
5. The implied term of trust and confidence could not support the damages claim. The alleged misleading explanations were said to have occurred after the bonus decisions, and the pleaded loss arose from the size of those decisions. The necessary causal link was absent.
6. The claimant’s asserted expectation of receiving a stated percentage of profits was no more than a mere expectation. It was not a reasonable contractual expectation, particularly in light of the written agreement and its entire-agreement wording. Nor was there any promise of a bonus pool or of a particular pool size. The defendant’s decision to adopt its bonus structure therefore disclosed no viable breach of contract.