Stuart v Telecom Services Centres Ltd [2004] ScotSC 82 (09 December 2004)

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The Sheriff, having resumed consideration of the cause, allows a further case management conference on a date to be hereafter assigned and, meantime, reserves all expenses occasioned by the diet of proof and relating to the undernoted issues.

In this commercial action, the pursuer claimed that the defenders were in breach of contract in that they purported to terminate his contract of employment without giving the requisite 12 months' notice in writing.

Initially, the parties joined issue on the merits of the case. However, the court's interlocutor of 7 April 2004 reflects the fact that, by then, the defenders had conceded liability. On that date, interim decree in the sum of £63,500 was awarded, of consent, in favour of the pursuer but further issues relating to quantum required to be resolved and a 3 day diet of proof was assigned. The hearing took place at the end of June and, in the event, it lasted no more than a day.

In so far as the duties owed to their respective clients permitted, both solicitors had succeeded in narrowing the scope of the dispute and, in that regard, they are to be commended.

At the outset of the proof, the court was informed that the period of notice to which the pursuer was contractually entitled was no longer contentious. That left 2 areas of dispute for the consideration of the court, namely,

Whilst both these aspects of the case were in dispute, the latter was characterised as being "the really contentious issue" and the scope of the factual enquiry, taken along with the closing submissions, served to confirm the agents' anticipation in that regard.

Before turning to the evidence, I should record a development which arose whilst the case was at avizandum.

By the time of the proof, the pursuer had regained employment and it had been accepted on his behalf that any calculation of damages ought to give "credit" (to the defenders) for any such income received during the 12 month notice period. As it happens, prior to a final determination being reached by the court, the pursuer lost his new employment and, quite properly, his solicitor, Mr MacFarlane, immediately drew this matter to the attention of the court. The court refrained from issuing a judgment pending consideration of the ramifications of this development by both sides.

In due course, it was recognised that, were the pursuer to found upon this post-proof development, a minute of amendment would be required and further evidence might be necessary along with any associated submissions. In the final analysis, however, the pursuer, no doubt for reasons of expediency, ultimately conceded that the income from his erstwhile "new employment" should be deducted from any sum of damages flowing from the court's determination and that as if the new employment had continued to the end of the notice period.

By agreement, the defenders led at the proof. On their behalf, the following witnesses gave evidence:

Mr Driscoll was the defenders' Chief Finance Officer. He had joined the business in the middle of March 2003, having initially been engaged as a consultant to facilitate a "smooth transition" in the context of a management "buyout".

Mr Driscoll had been called to give evidence in relation to the pursuer's bonus entitlement. In examination-in-chief, he was referred to an e-mail, dated 10 April 2003, which had been sent to him by the pursuer. Copies of the e-mail had also been forwarded to two named company personnel viz. Bruce MacLeod and Jim Park. The witness was asked about a meeting which had taken place, around that time, involving himself, the pursuer and Jim Park. He recalled such a meeting and stated that Jim Park had outlined to the pursuer what he (Jim Park) believed the pursuer's new role would be, in the "new company". Mr Driscoll characterised the pursuer's involvement as taking up "a new role". A new IT Director had been appointed and the pursuer had previously been responsible for the IT function of the business.

On the question of the pursuer's bonus entitlement, Mr Driscoll's testimony-in-chief was in the following terms:

"To the best of my knowledge his bonus position would have been discussed in general terms, but it was or would be based on criteria to be agreed, going forward. To the best of my knowledge, we did not agree that his bonus entitlement would be paid. There was no discussion regarding parameters or specifics."

In cross-examination, the witness was unable to recall being tackled by the pursuer regarding the need to discuss his bonus and whilst he was also unable to recall a response (by him) along the lines of, "Rod, you'll need to sort it out with Jim" (viz. Jim Park), he stated that such a response would have been appropriate in the circumstances.

Furthermore, Mr Driscoll did not recall the pursuer asking for an assurance that he would be given an opportunity to earn his bonus nor did he recollect a reply to the effect that:

Mr Driscoll stated that what he would have said would have been along the lines of "You'll need to discuss your objectives with your line manager." He added that he would not have replied (to the original query regarding the bonus opportunity) "absolutely" or "of course".

The witness was then asked various questions regarding the pursuer's "transformation plan" for the business, but his responses, to my mind, had little relevance to the question of bonus entitlement.

The other witness called by the defenders was Anthony Thomas. He had become involved with the defenders in June of 2003, having been appointed interim Chief Executive of the company by Lloyds Development Capital. The latter entity, along with HBOS and other banks, had provided the defenders with funding and were major equity holders in the company. Mr Thomas' appointment arose because the defenders had been failing to meet certain financial targets. Mr Thomas described how the business management team was in disarray and the services of the incoming CEO had been terminated due to under-performance.

Mr Thomas' corporate management credentials were impressive. There is no need to set them out at length. Suffice to say that he had, on his unchallenged evidence, fulfilled the role of "company doctor" with a view to revitalising and achieving a turnaround in the fortunes of several leading, international companies. As I understood the evidence, that was, effectively, the sort of role he had been called upon to occupy in the case of the defenders.

In the event, much of the testimony elicited from Mr Thomas related to his dealings with the pursuer, subsequent to his appointment as interim Chief Executive and the circumstances leading up to the pursuer's ultimate demise. Mr McLaughlin's initial invitation to the witness to express a view on the pursuer "and his team" was met with an objection from Mr MacFarlane, on behalf of the pursuer. Mr MacFarlane reminded the court that liability had been admitted and argued that the line of questioning "went to performance". However, the court was merely asked to note the objection and to allow the evidence to be led, under reservation. That proposition was put into effect and matters proceeded.

Mr Thomas had previously explained how something he referred to as the "100 day programme" had been put in place. He had described this programme as a "designated and agreed programme of various activities to capture as many financial benefits" as possible. At the heart of the programme, the key project was a "15% efficiency programme in respect of which the pursuer had direct responsibility".

Against that background, Mr Thomas held meetings with the pursuer and his team. The purpose of the initial meeting was to review the (then) current programme. Put shortly, Mr Thomas "didn't agree with the approach taken by" the pursuer. He told the court that he (Mr Thomas) wanted "sharp, front-end thinking". He wanted "a route to goal".

The project, as espoused by the pursuer, had been presented to the senior management team at a time when the pursuer was on holiday. It had been "unanimously rejected" for various reasons and Mr Thomas had stated at the time that:

"...the programme should be re-designed and spelled out with the level of detail and rigour which I'd requested at the first, second and third meetings with Rod Stuart and his team."

Thereafter, Mr Thomas had a discussion with Jo Sawbridge. He told Jo Sawbridge that he did not consider that the current team were capable of "driving" the 15% efficiency programme; that she should consult with the pursuer's line management and take a view on the next step regarding his employment; and that he (Mr Thomas) did not see a role for the pursuer at a sufficiently elevated level within the company.

Specifically in relation to the pursuer's entitlement to bonus payments, Mr Thomas testified that he had never had any discussions with the pursuer on that topic. Mr McLaughlin sought to explore this aspect of the witnesses' evidence further and asked what Mr Thomas' reaction would have been (on the hypothesis that termination of the pursuer's contract was envisaged) had the pursuer asked about setting the level of any bonus payments to be made to him. That question was objected to with the evidence, once again, being heard under reservation. In a sense, however, Mr Thomas' response defused the dispute on admissibility as he simply stated that "there was no way I'd need or want to discuss any bonus entitlement" with the pursuer.

Mr Thomas was cross-examined on the decision to dismiss the pursuer. His position was that Mr Park took the decision on his recommendation, although he subsequently conceded that, in reality, it was his (Mr Thomas') decision. Had Mr Park rejected Mr Thomas' recommendation, he would probably have been overruled.

The relatively short period within which Mr Thomas had formed a view regarding the pursuer's capabilities and performance was conceded by him.

Number 6/6 of process was referred to. This was an e-mail from Gary Bettis to Jo Sawbridge and Mr Thomas, dated 26 June 2003. It related to various matters for which the pursuer had been responsible and was fairly damning in its terms. Mr MacFarlane raised the issue of whether the e-mail had been sent after the decision to sack the pursuer had been taken. Mr Thomas seemed to think that it had been. However, to my mind, little turned on this point given the quantum related issues under consideration.

At the outset of his testimony, the pursuer was referred to the e-mail dated 18 March 2003, being No 5/10 of process. In relation to his bonus, the pursuer stated that he had discussions with Tony Driscoll and, separately, with Jim Park. He had presented Tony Driscoll with calculations for bonus payments and then asked him regarding selling objectives for the remainder of the year. Mr Driscoll's response to that was, "You'll have to speak to Jim about that." However, the pursuer was adamant that Tony Driscoll had assured him that he would be given the opportunity to "earn his bonus".

At the material time, Jim Park was the defenders' Managing Director. According to the pursuer, he had spoken with Jim Park within days of his conversation with Tony Driscoll. Mr Park "wanted to completely sort out" the pursuer's package. The pursuer was told by Mr Park not to worry. Mr Park assured him that "it would be good news" for the pursuer and his family and that he was "going to make lots of money working for" Jim Park.

The pursuer gave evidence to the effect that he had regular conversations with Jim Park on a day-to-day basis. He had been told twice since the dialogue referred to above that "the matter" (viz. of the pursuer's bonus) "was in hand and that it was going to be sorted soon". The pursuer had accepted Jim Park's assurances. He had trusted him and believed what he said to the pursuer.

The pursuer was shown his service agreement with the defenders dated 7 November 2002 and numbered 5/1 of process. Clause 8 thereof dealt with the issue of bonus payments. He was also shown No 5/67 of process, being a schedule, prepared by the pursuer, detailing (i) bonus payments made between September 2001 and February 2003 and (ii) bonus payments said to be due thereafter. The past figures had been obtained from the pursuer's payslips. The bonus history disclosed that the pursuer had "over-performed".

Number 5/68 of process was a calculation prepared by the pursuer setting out what he and his advisors considered to be due to him by way of a "12 month package from October 1 2003". The "5 months' mitigation" figure of £34,500 emanated from the income derived from the pursuer's fresh employment with Coltas. For the purposes of the proof, it had been accepted by the defenders that the pursuer had, indeed, made efforts to secure fresh employment. However, they challenged the propriety of his decision to decline an offer of employment made at or about the beginning of 2004.

The pursuer was shown an e-mail (acknowledged on 5 January 2004) which he had sent to a company called MGt plc. That company had offered him a position based in Kirkaldy. The pursuer's reasons for turning down the offer were based upon the amount of commuting time involved; the substantial drop in remuneration; and the nature of the job itself. With regard to the latter feature, the pursuer explained that the job on offer didn't match his "job aspirations".

In contrast, the position with Coltas was exactly what he had been looking for. It was an opportunity to "fix and grow the business"; it was situated in Glasgow city centre; there was an opportunity to acquire some equity in the business; and the initial financial package, including the provision of a car was more attractive.

The pursuer confirmed that a verbal agreement was in place whereby he would be given the opportunity to acquire shares in the company should he be able to "turn the business around". He envisaged that happening in or by September 2004. His (then) current performance was ahead of target. He had succeeded in doubling "capacity and profitability".

There was, however, no written contract of employment and no agreed notice period, with the result that his new employers, Coltas, could terminate his employment at any time.

Under cross-examination, the pursuer accepted that his role within the defenders had changed and that the same "bonus parameters" no longer applied to his new role. That was why he had e-mailed Mr Driscoll and Mr Park with a view to setting new parameters. He was also asked about his decision to decline the position at MGt. However, his responses simply tended to confirm his testimony in chief.

Under reference to the case of Clark v BET plc and another [1997] IRLR 348, Mr MacFarlane submitted that, in the present case, the court should adopt a similar approach to the issue of bonus entitlement. He contended that Clark was wholly in point with the pursuer's case and that the service agreement, No 5/1 of process, ought to be read along with the bonus opportunity document appended to it. According to Mr MacFarlane, the circumstances pertaining to the present action were more akin to those in Clark that those in Lavarack v Woods of Colchester Limited [1967] 1 QB 278 CA . Should the defenders seek to found upon the absence of a specific agreement regarding the nature and extent of the bonus entitlement as it applied to the pursuer's new role within the company, Mr MacFarlane argued that they could derive no assistance. The evidence of Mr Driscoll, who occupied a senior role within the company, was clear. There would be a bonus entitlement on criteria to be agreed, going forward. It was submitted that Mr Driscoll's evidence on this point constituted an acknowledgement that there should have been the necessary criteria.

Mr MacFarlane turned to look at the decision in Clark in greater detail. In particular, he referred to Mr Clark's United Kingdom service agreement. Clause 9.2 of that agreement was concerned with annual salary reviews (see Clark at paragraph 9). However, the terms of that clause were similar to the wording of Clause 8 in the pursuer's service agreement (5/1 of process).

In the case of Clark, Mr Justice Walker had concluded that there was a contractual obligation upon the employers to provide, and a contractual right in the employee to receive, an annual upward adjustment in salary (see paragraph 10).

In that regard, Mr MacFarlane placed considerable emphasis upon the appearance of the word "shall" in the first line of Clause 8.

It was also apparent from paragraph 16 in the Clark report that Mr Justice Walker had regarded Mr Clark's case as being "different in principle from the bonus arrangements being considered by the Court of Appeal in Lavarack. In Lavarack, as a matter of fact, the relevant bonus scheme had been discontinued in the year after the plaintiff's departure. Accordingly, the circumstances of that case differed materially from those in Clark and in the present action.

Having taken the court through paragraphs 18 to 21 of Mr Justice Walker's decision in Clark, Mr MacFarlane submitted that, in the present instance, the court should make realistic assumptions and that on doing so it ought to hold that the pursuer's bonus entitlement would have continued.

Aside from the clear, factual discrepancy regarding the discontinued bonus scheme, Mr MacFarlane submitted that the case of Lavarack was nevertheless relevant in that, in principle, the Court of Appeal was prepared to countenance the proposition that a wrongfully dismissed employee, deprived of the chance of receiving bonuses, was entitled to compensation for the loss of that chance, even if the employee had no legal right to receive the bonuses under consideration.

On the facts of the present case, Mr MacFarlane invited the court to accept the evidence of the pursuer. He founded upon the comments attributed to Jim Park and reminded the court of Thomas Driscoll's acceptance of the proposition that a bonus payment would be apt for the job to be undertaken by the pursuer.

Mr MacFarlane stressed that even in the case of Lavarack, the court had been prepared to countenance compensation for the loss of the opportunity to earn a bonus. However, it was the pursuer's submission that, in the present case, there was a contractual entitlement to a bonus. Clause 8 in the contract of employment had never been removed by the defenders by means of any consensual process.

Mr Driscoll had spoken to the contemporaneous arrival of Gary Bettis however, in answer 7, the defenders averred that Gary Bettis had been appointed IT Director "on or around 15 February 2003". There was, observed Mr MacFarlane, a clash between the evidence and what the defenders offered to prove.

Mr Thomas was characterised as a "pompous witness". Mr MacFarlane suggested that he had been guilty of speaking "gobbledegook". The court had been referred to the "100 day plan" and Mr Thomas had indicated that it had been necessary for the pursuer to understand fully and clearly what it constituted. Nevertheless, the court had still to have sight of the "100 day plan". It had not been lodged as a production. All that being so, Mr MacFarlane submitted that the court could not form any proper view regarding Mr Thomas' evidence on this point. It was a matter of importance since, according to Mr MacFarlane, Mr Thomas had sought to link the payment or otherwise of a bonus, to the pursuer, with the pursuer's alleged failure to meet the requirements of the plan. That criticism of the pursuer was foreshadowed in answer 6. However, it was submitted that, on record, the defenders had, in fact, mounted a "two pronged attack". (Answer 7 refers.)

On the evidence, there was considerable dubiety as to the identity of the person responsible for the decision to dismiss the pursuer and as to the timing of that decision. Mr MacFarlane argued that Mr Thomas' evidence was "all over the place" on these points. In any event, it tended to contradict the defenders' position on record. Reference was made to the defenders' averments at p8 in the record and Mr MacFarlane pointed out that the court had not benefited from the evidence of Jo Sawbridge or Jim Park, the latter of whom had been described as a critical witness for the defenders when a previous proof diet was discharged. Therefore, all things considered, the court was invited to attach little weight to Mr Thomas' evidence.

In any event, argued Mr MacFarlane, there was no basis on record to found the proposition that had the defenders considered the pursuer's situation, they would not have agreed to provide him with a bonus. There was no support for this sort of approach in the authorities referred to by both sides and, moreover, Mr MacFarlane sought to attack the logic of such an argument. In other words, there was specific acceptance on the part of the defenders that they had terminated the pursuer's contract of employment without notice. It had been accepted that such dismissal was "wrongful". All that being so, Mr MacFarlane submitted that, in principle, it was otiose for a wrongful employer to deny a wronged employee the right to or opportunity to receive a bonus in circumstances where prior to the employee's dismissal, such a bonus had been regularly paid. At the outset of the litigation, the defenders had sought to blacken the pursuer's character for the purpose of resisting liability. They then capitulated and conceded liability yet were still intent on "having a second bite at the cherry" as Mr MacFarlane put it. He returned to the themes which, in his submission, emerged from the authorities. The court should either make realistic assumptions (in terms of the Clark case) or (in terms of Lavarack) it should look at the probabilities.

Under reference to the pursuer's bonus history, No 5/67 of process, Mr MacFarlane invited the court to assume that the pursuer's performance would be maintained at or above the sort of levels set out therein. Mr MacFarlane also advanced the contention that the pursuer was performing ahead of the criteria in his new post and that there was no evidence to contradict that.

In determining whether the pursuer would have continued to earn his bonus entitlement or, indeed, whether that was a probability, the court should leave out of account the circumstances giving rise to his wrongful dismissal, especially where liability had been conceded.

With regard to the question of mitigation of loss, Mr MacFarlane submitted that the pursuer was not required to "do unreasonable things" in order to mitigate any loss. The court was also referred to the "contemporaneous" e-mails to and from MGT Plc (No 5/44 of process). Furthermore, it was pointed out that his (then) present post with Coltas was, in fact, bereft of job security.

At the outset of his submission, Mr McLaughlin suggested that there was no factual dispute for the court to resolve. In his submission, the issue for the court was what, if anything, the pursue was contractually entitled to when he was wrongfully dismissed in September of 2003.

The court was once again referred to Clause 8 within the contract of employment. Mr McLaughlin submitted that the terms of the clause did not, in themselves, confer upon the pursuer any contractual right to a bonus payment.

Mr McLaughlin recognised that, as at January 2003, as per No 5/2 of process, it was clear what the pursuer's bonus parameters were. However, the "bonus opportunity FY 2003" document, as prepared by Lennie Moffat, Group Managing Director, pertained specifically to the pursuer's then post as head of technology. Thereafter, the pursuer's role within the defenders' structure had changed materially. Unfortunately, in terms of his entitlement or otherwise to bonus, no fresh parameters had been laid down. Accordingly, Mr McLaughlin submitted that, as at September 2003, the pursuer had no contractual right to bonus payments. Under reference to the case of Lavarack, Mr McLaughlin reminded the court that the law is concerned only with legal obligations. Looking to the pursuer's contractual entitlement as at the point of wrongful dismissal, there was no legal obligation incumbent upon the defenders since, for whatever reason, the pursuer had, by then, failed to agree new bonus opportunity parameters.

There was, argued Mr McLaughlin, a fundamental factual difference between the pursuer's circumstances and those relating to the plaintiff in Clark. In that case, the plaintiff was chief executive of BET immediately prior to and at the time of the take-over by Rentokil. Aside from his summary dismissal there had been no change in his role within the company. Quite obviously, the pursuer's situation was very different.

Mr McLaughlin stressed that a concession of wrongful dismissal did not equate to a concession that the defenders did not consider anything to be wrong quoad the pursuer's performance as an employee. It could not be ignored that the defenders were highly dissatisfied with the pursuer's performance. There could be no pretence about the situation.

Under reference to Nos 5/67 and 5/68 of process, Mr McLaughlin submitted that the "Lennie Moffat parameters" did not apply for the purposes of the present exercise.

The pursuer's decision to turn down the MGt job offer was criticised by Mr McLaughlin. He argued that having been unemployed for some four months, the rejection of the post, albeit that it was based in Kirkaldy, was not a reasonable decision to arrive at. A further four month period had elapsed before the Coltas job came along.

(1) Inter alia, the parties' joint issue on whether Clause 8 afforded the pursuer a contractual entitlement to a bonus. In this regard, the pursuer founded strongly upon the decision in Clark. In particular, Mr MacFarlane relied upon the terms of Clause 9.2 of Mr Clark's UK Service Agreement and the interpretation placed thereon by Mr Justice Walker. Clause 9.2 related to salary reviews as opposed to bonus entitlement which itself was covered, principally, by Clause 9.3 in the Agreement.

(2) Clause 9.3 disclosed a non-discretionary arrangement whilst Mr Justice Walker also took the view, with regard to Clause 9.2, that an annual upward adjustment in salary was beyond the discretion of the BET Board. Only the amount (if any) of the adjustment fell within the absolute discretion of the Board.

(3) Thus, in Clark, it was not disputed by the defendants that they were under a legal obligation to review the plaintiff's salary each year. Moreover, the Court concluded that Clause 9.3 conferred upon the plaintiff a right to participate in the bonus scheme described therein.

(4) In contrast, I consider that Clause 8 in the pursuer's Service Agreement (No. 5/1 of process) was discretionary. It merely entitled the pursuer "to receive such bonus payments as maybe decided upon by the Board...". Giving those words their natural meaning, the effect would be that the decision of the defenders' Board was inextricably linked to the payment or otherwise of a bonus and vice versa.

(5) In my view, Clause 8 falls to be distinguished from Clause 9.2 in the Clark case where an annual upwards review of salary was held to be mandatory, albeit that the amount remained discretionary. This interpretation was not disputed by the defendants in that case.

(6) The bonus aspect of the agreement in Lavarack was in similar terms to that of Clause 8 viz: "...such bonus (if any) as the directors of the [defendants] shall from time to time determine...". Whilst Lords Diplock and Russell disagreed with Lord Denning's approach to this aspect of the case, all three of their Lordships were, I believe, at one regarding the proposition that the plaintiff in Lavarack "...had no legal right to receive a bonus every year. It was entirely in the discretion of the directors." (see Lord Denning NR at p 287 F - G).

(7) Mr Justice Walker, in the Clark case, concluded that it was therefore different in principle from the bonus arrangements considered in Lavarack, although the passages in Lavarack referred to at paragraph 16 in the report of the Clark case do seem to suggest that he was focusing largely upon the fact that the bonus scheme had subsequently been abolished. As I have suggested, it is in my view, equally relevant to note the distinction between a non-discretionary scheme and a discretionary one.

(8) The de facto history of bonus payments to the pursuer (5/67 refers) is beyond dispute. However, the evidence also established that these payments were (presumably) sanctioned by the defenders' Board of Directors, as constituted at the material time and made to the pursuer in his capacity as managing director of the defenders' Technology Department.

(9) Similarly, there can be no doubt that by the Spring of 2003, changes were afoot within the defenders' organisation. In particular, following the management by-in at the beginning of February 2003, Gary Bettis had replaced the pursuer as Managing Director of the Technology Division. In my view, nothing of great importance turns upon the precise timing of his arrival.

(10) The pursuer had assumed the new role of Director of Business Transformation. Logically, therefore, he had no "track record" in that capacity and, furthermore, it seems to me that the terms of the bonus opportunity document dated 16 January 2003, as framed by Lennie Moffat, could no longer be relevant.

(11) I am satisfied, on the evidence, that the pursuer did, indeed have conversations with Mr Driscoll and Mr Park regarding his bonus situation and it may well be that he was given certain "assurances" in that regard, particular from Mr Park. However, as a matter of fact, it is clear that nothing was sorted out. In reality, the pursuer was faced with a situation in which the individuals in positions of power within the defenders, especially Mr Thomas, were unimpressed with his performance. Considering the facts in isolation for the moment, it would, in my opinion, have been unlikely for the defenders to have looked favourably upon the pursuer's eligibility for bonus payments. Aside from the somewhat generalised and unspecific promises thrown out by Mr Park and, perhaps, also Mr Driscoll, there was no evidence to the effect that the defenders were minded to frame new bonus parameters for the pursuer's new role. In this connection, it is worth noting what was said by Lord Diplock in Lavarack at 294 C - D:-

"The law is concerned with legal obligations only and the law of contract only with legal obligations created by mutual agreement between contractors - not with the expectations, however reasonable, of one contractor that the other will do something that the other has assumed no legal obligation to do."

All things considered, I take the view that the pursuer's receipt of bonus payments under the new regime and in his new capacity was an unlikely prospect.

(12) I should make it clear that I did not regard the pursuer as an incredible or unreliable witness. As I have already indicated, he probably did receive assurances of sorts from Mr Park, in particular. However, the Court did not have the benefit of evidence from Mr Park and in the face of the evidence led on behalf of the defenders, together with other undisputed facts in the case, I consider that little reliance can be placed upon such assurances.

(13) Therefore, in my opinion, as at the time of the dismissal there was no contractual obligation upon the defenders to provide and a contractual right in the pursuer to receive an annual bonus entitlement. The decision as to whether such an entitlement ought to be afforded to the pursuer lay entirely within the discretion of the Board of Directors responsible for the management of the defenders' affairs at that time.

(14) I do not consider that the bonus entitlement dispute in the present case can properly be determined by applying one or other of the two authorities cited to the Court. The Court simply requires to invoke the law as it applies to the facts and circumstances disclosed in the evidence and in those averments which are not the subject of dispute. Neither side sought to challenge what Lord Diplock described as the "general rule", as stated by Scrutton L J in Abrahams v Reiach (Herbert) Ltd [1922] 1 KB 477, "...that in an action for breach of contract a defendant is not liable for not doing that which he is not bound to do." Indeed, Lord Diplock's own comments in Lavarack at 294 B - C also went unchallenged, and, in any event, were specifically accepted by Mr Justice Walker in Clark (see paragraph 11). All that being so, the pursuer's case in my view, falls foul of the aforementioned general rule. The defenders were not bound to provide the pursuer with annual bonus payments.

(15) Whilst the case of Clark falls to be distinguished, I should perhaps comment upon the manner in which the bonus in that case was determined by Mr Justice Walker, especially given the reliance placed on the case by Mr MacFarlane. The thread running through his submission to the Court was to the effect that the Court should make realistic assumptions and that on doing so it ought to hold that the pursuer's bonus entitlement would have continued.

(16) It is not apparent to me from whence came the "making realistic assumptions" approach adopted by Mr Justice Walker. Indeed, it is not necessarily clear from the report precisely which assumptions were made by the court. The submissions before this Court seemed to proceed upon the basis that the resolution of a party's claim for compensation by "making realistic assumptions" was materially different from basing compensation upon "the probabilities of the case". (Compare Lord Denning in Lavarack at 288 E - F).

(17) Of course, in respect of the bonus question in Lavarack, Lord Denning was in the minority and, therefore, it is, perhaps, difficult to ascribe: "The probabilities approach." to the Court of Appeal as a whole. As it happens, Lord Diplock referred to the making of an assumption and to the probability of the occurrence of events extraneous to the contract itself (294 F - G). In any event, for my part, I consider that any exercise which involves "making realistic assumptions" would also involve assessing and invoking the probabilities of a situation. Similarly, a consideration of the probabilities must proceed, largely, upon the making of realistic assumptions.

(18) Mr MacFarlane's submission seemed to proceed upon the basis that even if the case of Clark were to be distinguished, the pursuer could still find solace in the case of Lavarack where, as Mr MacFarlane put it, "...there was compensation for the loss of the opportunity to earn future bonus payments". Firstly, as I read the report, the Court of Appeal held that the plaintiff in Lavarack was not entitled to be compensated in this respect. The view that compensation for the loss of "that chance" was apt notwithstanding the absence of any contractual obligation to continue the bonus scheme is derived solely from Lord Denning's dissenting judgment. Secondly, even if the Court had decided that the defendants, by wrongfully dismissing the plaintiff, had deprived him of the chance of getting either future bonuses or their equivalent, with all respect to Lord Denning, I consider that there must be a serious question over the way in which the loss of that chance falls to be quantified. On the facts of Lavarack, I find it difficult to accept that the loss of that chance properly equated with a full payment of the salary increase equivalent of the bonus viz. £1,000 for each of the two years in question. In any event, on the hypothesis that Lord Denning's approach were to apply to the present case, I consider that the pursuer's chance of getting future bonuses was fairly slim for the reason given earlier.

(19) Those reasons, characterised principally by the defenders' disenchantment with the pursuer's performance did not form part of the defenders' case on record, Mr MacFarlane had argued. Nevertheless, it was, in my view, abundantly apparent from the defenders' pleadings and the evidence led on their behalf that, inter-alia, "serious performance issues had been identified", (Answer 6 refers). Furthermore, it ought to have been clear to the pursuer that such issues would potentially have a bearing upon "performance related" payments claimed over and above basic entitlement. In any event, this is a commercial action, and I would not be prepared to exclude such a line of argument even if there were a pleading defect. The court itself would always require to be satisfied that the pursuer had established all and any losses claimed and, with that in mind, the absence (if any) of express written notice in the pleadings does not give rise to material prejudice.

(20) Similarly, I do not consider that an employer who concedes wrongful dismissal should thereafter be prevented from arguing that the nature and extent of any compensation deemed to flow therefrom ought to be limited, to the extent that bonuses, in addition to salary, would not be paid. Whether payments, such as bonuses, should form part of any award of compensation is a question which falls to be determined on the particular facts and circumstances of each case. In my opinion, there is nothing illogical about such an approach and it was clearly something which Lord Diplock felt was worthy of notice in Lavarack. (See p293B)

(21) Much will depend upon the precise terms of the employee's contract of employment and whether, for instance, the "bonus clause" is discretionary or otherwise. For my part, I cannot accept that there is anything otiose about a situation in which an employer merely seeks to resist the contention that payments were due under a contract when, in fact, they were not due, or, at least, were unlikely to have been due in the circumstances which prevailed. Against that background, I have decided to repel the objections taken by Mr MacFarlane in the course of Mr Thomas' evidence and to rule that any evidence elicited, which "went to performance", was relevant and admissible.

(22) Turning to the question of mitigation of loss in light of the pursuer's decision to refuse the job offer from MGt, put shortly, I consider that there was nothing untoward about this. The explanatory reasons given by the pursuer in the course of his evidence were perfectly understandable and his position remained unshaken by cross-examination. In this respect, it cannot be said that the pursuer failed to mitigate his loss.

(23) The effect of my decision, therefore, is that sums said to be payable by way of bonus entitlement do not form part of any compensation in respect of wrongful dismissal. At the outset of the hearing, it was a matter of agreement that the court should issue a determination and that, thereafter, the agents would, as Mr MacFarlane put it, attend to "the number crunching". Accordingly, I have meantime refrained from giving effect to any particular plea-in-law or from pronouncing decree in any particular sum. As the court's interlocutor suggests, a further case management conference will be held on a date to be hereafter assigned. However, should it be possible to conclude matters by an exchange of e-mails a hearing may not be required. I have also reserved all questions relating to the expenses of the proof and the incidental procedure which followed the termination of the pursuer's employment with Coltas.

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	Scottish Sheriff Court Decisions
You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Stuart v Telecom Services Centres Ltd [2004] ScotSC 82 (09 December 2004) URL: http://www.bailii.org/scot/cases/ScotSC/2004/82.html Cite as: [2004] ScotSC 82

Scottish Sheriff Court Decisions