The Claimant resigned after the Respondent did not pay his quarterly bonus on what he contended were the due dates, and after he was told to return to London from France where he had been working on a contract (the Omega assignment) which had ended. He claimed that the Respondent's behaviour was in breach of contract or a breach of the terms of trust and confidence in him. The ET dismissed his claim of unfair constructive dismissal on the basis that one of the requirements for a term implied by custom and practice (i.e. that of the bonus being paid quarterly) was that it must be notorious in that it is widely known by employees. On the issue of place of work, the ET said that once the Omega assignment had ended, the Respondent was contractually entitled to require the Claimant to return to his normal place of work. The Claimant appealed.

The EAT allowed the appeal. The ET erred in holding that it was necessary in order for a term to be implied into an employee's contract of employment as a result of custom and practice that it must be widely known by other employees.  Further the ET erred in failing to consider or to give reasons for rejecting important matters advanced by the Claimant to support an allegation of breach of trust and confidence entitling him to resign and claim constructive dismissal.

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Appeal No. UKEAT/0310/16/BA

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

At the Tribunal

On 7 June 2017

Before

THE HONOURABLE MRS JUSTICE SLADE DBE

(SITTING ALONE)

GHIGLIERI (APPELLANT)

**

**

SYSTECH GROUP EMPLOYEES LIMITED (RESPONDENT)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellant
MR GRAHAME ANDERSON (of Counsel)
Instructed by:
Wynterhill LLP t/a Solesbury Gay
9 Disraeli Road
Putney
London
SW15 2DR

For the Respondent
MR RUPERT PAINES (of Counsel)
Instructed by:
Walbrook Law LLP
150 Minories
London
EC3N 1LS

**SUMMARY**

CONTRACT OF EMPLOYMENT - Implied term/variation/construction of term

UNFAIR DISMISSAL - Constructive dismissal

The Employment Tribunal erred in holding that it was necessary in order for a term to be implied into an employee's contract of employment as a result of custom and practice that it must be widely known by other employees. The different bases advanced by the Respondent for upholding the decision on implied term were rejected. Further the Employment Tribunal erred in failing to consider or to give reasons for rejecting important matters advanced by the Claimant to support an allegation of breach of trust and confidence entitling him to resign and claim constructive dismissal. Appeal allowed. Claim remitted to an Employment Tribunal.

**THE HONOURABLE MRS JUSTICE SLADE DBE**

1. Mr Ghiglieri, the Claimant, appeals from the Decision of an Employment Tribunal (Employment Judge Balogun sitting alone) sent to the parties on 8 July 2016. The Claimant appeals the dismissal of his claim of constructive dismissal and claim for a bonus.

1. The points rightly relied upon on appeal, in challenging the dismissal of the Claimant's constructive dismissal, are that the Employment Tribunal erred in concluding that the Claimant was not entitled to be paid his bonus quarterly and so the Respondent was not in breach contract in failing to make such payments. Further, that the Respondent was not in breach of the term of trust and confidence in certain respects, and in finding that the Respondent was not in breach of contract in requiring the Claimant to return to London after a period of working abroad in France.

**Background Facts**

1. The Claimant was employed by the Respondent from 23 April 2007 to 23 January 2015, latterly as Commercial Director. The Respondent provides services of specialist individuals to companies involved in construction projects in relation to commercial or claims assistance and support, typically where there are delays or loss and expenses issues on the project in question.

1. An Agreement between the Claimant and the Respondent entered into on 30 March 2007 contained the following relevant provisions, by clause 3.4:

"The Executive's normal place of work shall be the Company's offices at Chapter House, 18-20 Crucifix Lane, London SE1 3JW and such other locations within the United Kingdom as agreed between the Company and the Executive from time to time. The Executive shall not be required to move permanently outside the United Kingdom without his consent. In addition the duties of the Executive shall require him to travel throughout the Territory and elsewhere in the world for such periods as may be required by the needs of the Business and on occasions such trips may occur on minimal prior notice. The trips shall not be for periods longer than one week."

By clause 5.3, it was provided:

"The Board may (at its absolute discretion) award the Executive bonus payments (and may suspend or discontinue such payments at any time whether generally or in relation to the Executive only) of such amounts as the Board may determine from time to time. …"

1. On 13 January 2012 the Claimant's terms and conditions of employment were amended to include, by clause 3:

"For the avoidance of doubt an annual bonus will be paid which shall be £32000 plus an element based on KPIs to give a guaranteed minimum of £37900 and which shall include the European working set out above in 1 above [sic]."

1. Several documents in the bundle before the Employment Appeal Tribunal and before the Employment Tribunal referred to a bonus being paid quarterly; that bonus being £32,000 annually.

1. By a letter of 5 January 2015, for example, Mr Simon Jones, a Director of the Respondent, wrote to the Claimant:

"Correction of payroll errors

After a review of our payroll, errors have been identified with respects to amounts paid, and payable to you.

You have not been paid:

? your quarterly bonus with respect to Q1 of the 2015 Financial year (1 April - 30 June 2014) - £8,000

? your quarterly bonus with respect to Q2 of the 2015 Financial year (1 July - 30 September 2014) - £8,000

…"

Then the letter continued, "This amount will be paid in 3 equal instalments of £10,567.25". That sum also included other amounts owing to the Claimant in January, February and March. That proposal for monthly payment of the arrears was unacceptable to the Claimant.

1. Also at about this time and towards the end of the previous year there had been difficulties with regard to the Omega project on which the Claimant had been working. From October 2013 the Claimant had been working in France for a client on that particular project. He was paid overseas allowances and had rented a flat in Aix-en-Provence.

1. The Respondent says that they have to earn a margin of 35% on contracts that they entered into. Because of the total cost of the Claimant's contract on the Omega project the price of that project had to be renegotiated with the client. In circumstances which may yet have to be the subject of findings of fact, the contract between the Respondent and the client for the Omega project was terminated and the Respondent told the Claimant to return to work in London. The Claimant objected to being told to return to work in London. He claimed that to do so was in breach of contract or a breach of the terms of trust and confidence in him. He also said not being paid his quarterly bonus on what he contended were due dates was also a breach of trust and confidence. The Claimant resigned on 22 January 2015 and brought a complaint of constructive dismissal.

**The Judgment of the Employment Tribunal**

1. The Employment Tribunal held at paragraph 48:

"48. The entitlement to and amount of the bonus is not in dispute. The issue is about the timing of the payments. The claimant's case is that he was entitled to be paid his annual bonus in quarterly instalments. The contract is silent on this and although records show that the respondent routinely paid the claimant's bonus every quarter, the question is whether it did so out of obligation rather than as a matter of administrative convenience. In the absence of an express term, such a legal obligation would have to be implied. It is clearly not necessary to imply such a term to make the contract workable. Therefore the only basis to do so is custom and practice.

49. One of the requirements for a term implied by custom and practice is that it must be notorious in that it is widely known by employees. I heard no evidence at all about what practice was applied to others; what was known by them or what was communicated to them by the respondent regarding the intervals of bonus payments. The claimant's evidence focused on his own position rather than any wider policy applied by the respondent across the piece. I am therefore not satisfied that the test for terms implied by custom and practice has been met. In the absence of a contractual entitlement to be paid the bonus at specific intervals, the timing was a matter of the respondent's discretion. That said, the respondent is under an implied obligation to exercise that discretion in good faith."

1. So far as the decision of the Tribunal on place of work is concerned, at paragraph 56 the Employment Tribunal held:

"56. Paragraph 12 above summarises the contractual provision relating to the claimant's normal place of work. I disagree with Miss McNair Wilson's submission that this was no longer the case because the assignment in France had turned into something permanent. The length of each of the claimant's assignments was dependant on the length of the commercial contract concerned. That applied equally to the Omega contract, which was not open ended. The claimant's personal decision to base himself permanently in France did not affect the clear contractual position set out in the Service Agreement, which had not been varied. Once the Omega assignment had ended, the respondent was contractually entitled to require the claimant to return to his normal place of work."

1. As for the allegation of breach of trust and confidence more generally, at paragraph 60 the Employment Judge held:

"60. Whilst the decision to terminate the Omega contract may have been detrimental to the claimant's intention to base himself in France, the respondent was entitled to put its commercial needs first. Regardless of his domestic arrangements, the claimant's normal place of work remained the UK and he declined to change this when he had an opportunity to do so. On that basis, the respondent was entitled to insist that he return to the UK pending further assignment, in accordance with his contract. The respondent's reliance on this express provision of the contract was not (and probably could not be) a breach of the implied term of trust and confidence."

1. The conclusion therefore reached by the Employment Judge was that none of the above matters individually or collectively amounted to breach of the implied term of trust and confidence and the Employment Judge dismissed the claim of constructive dismissal.

**The Grounds of Appeal**

Ground 2

1. By ground 2 of the grounds of appeal it is contended that the Employment Tribunal erred in law by finding that the Claimant did not have a contractual right to quarterly payments of annual bonus. In particular it was contended that the Employment Tribunal erred in concluding that it was necessary for a term to be implied in an employee's contract as a result of custom and practice, that it must be notorious and widely known by other employees. Further that the Employment Judge erred in regarding that test as determinative, and that because the Employment Judge had heard no evidence about what practice was applied to others for what was known by them regarding the intervals of bonus payments, she therefore held that there was no implied term of paying the bonus on a quarterly basis.

1. Mr Anderson, counsel for the Claimant says that this case concerns a bonus negotiated and paid to an individual on an individual basis - it was not a situation where a bonus was applied generally to a group of employees - and the observations of the Employment Judge and the basis upon which she reached her adverse decision were errors of law. Quite rightly Mr Paines, counsel for the Respondent agrees that the Employment Judge erred in this regard. It is a plain error of law and Mr Paines does not seek to support the decision with regard to bonus on the basis relied upon by the Employment Judge. He relies on two matters raised in the Respondent's answer in the Employment Appeal Tribunal.

1. The first matter is that the implication of a term for payment of the annual bonus on a quarterly basis would have been inconsistent with the express terms of clause 5.3 of the Claimant's Service Agreement of 30 March 2007 and/or clause 3 of the amendment to the contract dated 13 January 2012.

1. Mr Paines seeks to contend that the 30 March 2007 Agreement is to be read as giving the Respondent a discretion as to when the bonus is to be paid and what intervals. He points out that so far as the Amendment is concerned, the Claimant is given an entitlement to a certain fixed amount of bonus but is not entitled to receive that bonus at any specific fixed intervals. In my judgment it is clear that both the original contact and the Amendment are entirely silent on the intervals at which the bonus is to be paid. The bonus under the 2007 Agreement is discretionary as to whether it is paid at all and discretionary as to the amount. However there is no express discretion reserved as to the intervals at which that bonus is paid. The contract is silent as to that.

1. So far as the Amendment is concerned, in clause 3 there is an entitlement to a fixed amount of annual bonus. Again the Amendment is silent as to when and at what intervals that bonus is to be paid. It was therefore necessary for the Employment Judge to consider whether a term should be implied based on custom and practice. There was before the Employment Judge, and is before the Employment Appeal Tribunal, evidence of payment of regular quarterly payments of bonus until towards the end of the Claimant's employment with the Respondent and in respect of which the Respondent wrote an apologetic letter on 5 January 2015 for not paying quarterly. In my judgment the implication of the term for quarterly payment of annual bonus would not be contrary to the express terms of clause 5.3 of the original Agreement or clause 3 of the amended Agreement as contended by the Respondent.

1. The second basis upon which Mr Paines, on the behalf of the Respondent, seeks to uphold the decision of the Employment Judge that there is no contractual entitlement to quarterly payment of the bonus, is that the Claimant at trial adduced no evidence properly capable of justifying the implication of a custom and practice of paying a bonus on a quarterly basis. In my judgment that argument is not sustainable in light of the documentation in the bundle which shows regular quarterly payments of bonus and the documents included with the letter which I have referred to on several occasions; that of 5 January 2015. Accordingly ground 2 of the Notice of Appeal succeeds and the Decision of the Employment Judge holding that the Claimant did not have a contractual entitlement to auto-repayment of his bonus succeeds.

Ground 1

1. Under ground 1 of the Notice of Appeal it is alleged that the Employment Tribunal erred in applying the test of an implied term of trust and confidence. The ground is particularised in paragraph 9 of the Notice of Appeal. In particular it is alleged that the Employment Judge erred in law in finding that the Respondent had proper cause for terminating the Claimant's assignment in France because it was insufficiently profitable and in finding at paragraph 60 that the Respondent was entitled to put its commercial needs first. In reaching that finding it is asserted that the Employment Judge failed to take into account two salient, and what were said to be unchallenged - although Mr Paines says that it is not correct that these matters were unchallenged - aspects of the evidence. These are:

(1) that at the same time the Respondent had terminated the Claimant's assignment ostensibly on commercial grounds, it had offered the services of another employee, Ian Sisley, at exactly the same pay rate. The language "No cost difference" was used in the email correspondence. Had there been a genuine need to improve profit margins, the Claimant's replacement would have been offered at a higher price;

(2) the Respondent had invited Omega, the client, to pay a higher rate for the Claimant, however, it took the decision to terminate his assignment before Omega had given its answer. The instruction was given by Mr Woodward-Smith to terminate the Claimant's contract of employment before the response had been received. Mr Woodward-Smith wrote "If you don't hear from him by close of business just send the email giving notice of termination to Patrick".

1. It is submitted on behalf of the Claimant that the Employment Judge erred by finding that the Respondent had proper cause for requiring the Claimant to return to the United Kingdom because that was where his normal place of work was stated to be. It is said that this conclusion was perverse in circumstances where the Claimant's employment contract only required him to work in UK locations with incidental travel overseas. There was no provision for assignment to a foreign country for periods of years and that the Claimant's contract of employment therefore did not reflect the reality of his working life and his right to be consulted at a minimum after such a long period abroad.

1. It is further said that before the Judge rejected important aspects of the evidence - which are those just referred to - it was at least incumbent upon her to set out why they were not material to her conclusions. That she did not do so amounts to an error of law. It is said that her Decision was not Meek-compliant (Meek v City of Birmingham District Council.

1. Further matters were referred to in the grounds of appeal but not developed at all in oral argument: not providing a Christmas hamper for the Claimant and not inviting him to the Christmas party in London as evidencing a breach of trust and confidence.

1. Mr Paines points out that it is not entirely clear whether ground 1 is advanced on the basis of challenging the Employment Judge's decisions as perverse in light of what is set out in ground 1 or whether this is a Meek challenge for failure to give adequate reasons for her decision. In my judgment, it is both; both a perversity challenge and a Meek challenge. Perversity in the sense of failing to take into account relevant matters, namely those matters set out in paragraph 9(a)(i) and (ii). In my judgment the matters set out in 9(a)(i) and (ii) are capable of being relevant to an allegation of breach of trust and confidence. The Claimant alleged and his case was that there was no genuine decision taken by the Respondent to terminate his assignment to Omega and that a decision had been taken that he should leave before the matter became clear to him. It is said that the matters set out in 9(a)(i) and (ii) are capable of and do support that contention.

1. Mr Paines points out that the matters alleged in the grounds of appeal are contentious, that they raise factual matters which are questioned if not challenged by the Respondent and that there would, if the matter were to proceed, need to be findings of fact in relation to them.

1. So far as those matters in paragraph 9(a)(i) and (ii) are concerned it is not clear from the Tribunal's Judgment whether they are matters which were considered by the Employment Judge and rejected by her or whether they were simply not considered. If they were considered but not included Mr Paines says it is not necessary for an Employment Judge in delivering a Judgment to set out in the Judgment every argument and every point which is raised. That submission is in general sustainable, however, where points raised are capable of being material to the issues in the case it is incumbent of the Tribunal to set out the points in its Judgment and to decide any material facts relating to them and to say whether it accepts that those points support the arguments advanced or do not and why it reaches the conclusions it does.

1. This Judgment is simply silent on the points raised and therefore either the Judgment is not Meek-compliant in this regard or perverse in the sense that the Employment Tribunal failed to take into account and make decisions on matters which were potentially relevant to the argument of breach of trust and confidence. Accordingly the grounds of appeal in paragraphs 9(a) and 9(c) succeed.

1. The ground of appeal in paragraph 9(b) is a challenge to the conclusion of the Employment Judge that the Respondent was contractually entitled to require the Claimant to return to London after the conclusion of his assignment to the Omega contract.

1. In my judgment Mr Paines is correct in contending that the Claimant's statement of terms of employment entitles the Respondent to require the Claimant to return to London and that the contrary argument advanced by Mr Anderson that the terms of the contract had been departed from in practice and therefore should be regarded as no longer applicable is to be rejected. In my judgment the Employment Judge did not err in her decision in paragraph 6 of the Judgment. There may, however, be or have been an issue as to whether the reason for the exercise of the contractual right to require the Claimant to return to London was exercised for an ulterior motive, in which case there may be an argument that to do so was a breach of the term of trust and confidence.

1. Ground 1(d) which raises the matters of not providing the Claimant with a Christmas hamper and not inviting him to a Christmas party were not developed in oral submissions and rightly so because they do not play a real role in the issues before the Employment Appeal Tribunal or indeed before the Employment Tribunal.

1. Ground 3 of the grounds of appeal is not pursued.

**Disposal**

1. As ground 2 and ground 1(a) and (c) succeed, the Decision of the Employment Tribunal is set aside. The claim of constructive dismissal and for unpaid bonus is remitted to the Employment Tribunal to determine:

(1) first, whether the Claimant had a contractual entitlement to be paid his annual bonus on a quarterly basis, whether the Respondent was in breach of the implied term of trust and confidence by first not paying a bonus on a quarterly basis, if contractually obliged to do so; and

(2) second, in the respects alleged in the Notice of Appeal, ground 1 in paragraph 9(a)(i) and (ii) and whether the Respondent, in breach of the obligation of trust and confidence, sought to bring about the termination of the Claimant's employment.

1. The issues identified in the agreed list of issues still remain to be determined. However they are not the subject of this appeal The Employment Tribunal to whom this matter is to be remitted will no doubt consider carefully whether at the remitted hearing some or all of those matters should also be considered and decided.