Locke v Candy & Candy Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jackson,Lady Justice Arden,Lord Justice Pill |
| Judgment Date | 29 October 2010 |
| Neutral Citation | [2010] EWCA Civ 1350 |
| Docket Number | Case No: A2/2010/0807 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 October 2010 |
[2010] EWCA Civ 1350
(Master Eyre)
Before: Lord Justice Pill
Lady Justice Arden
and
Lord Justice Jackson
Case No: A2/2010/0807
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr A Stafford QC (instructed by Taylor Vinters) appeared on behalf of the Appellant.
Mr J Laddie (instructed by Dundas and Wilson LLP) appeared on behalf of the Respondent.
(As Approved)
Lord Justice Jackson:
This judgment is in five parts namely;.
Part 1. Introduction,
Part 2. The Facts,
Part 3. The Present Proceedings,
Part 4. The Appeal to the Court of Appeal,
Part 5. Decision
Part 1. Introduction
This is a claim for payment of a bonus or equivalent damages made by an employee who was dismissed a few days before the bonus fell due. The employer in this case is Candy and Candy Limited, an interior design development management company. Mr Christian Candy is Chief Executive of that company. The claimant in this action is Mr Andrew Locke, a chartered surveyor with long experience of property development.
A contractual term which provides for payment in lieu of notice is often referred to as a ‘PILON’ clause. I shall use that abbreviation in this case.
After these brief introductory remarks I must now turn to the facts.
Part 2. The Facts
In 2007 the claimant was engaged by the defendant as development director for a project in Chelsea. This project was the development of Chelsea Barracks for the Qatari Government. The project was known within the defendant company as “Project Blue”.
The claimant's employment commenced on 17 th September 2007. The claimant's contract of employment included the following terms:
“2.1 You shall be employed in the capacity of Development Director of Project Blue project at Candy & Candy Ltd, reporting to the Board of Candy & Candy Limited. In addition to the duties which this job normally entails you may from time to time be required to undertake additional other duties as are necessary to meet the needs of the Company's business.
4.1 Your salary will be £200, 000 gross per annum paid monthly in arrears; you will be entitled to a work black berry to handle e-mails when you are out of the office: there are no other benefits. Your salary will be reviewed in accordance with Company policy as in force from time to time and in any event not less than once a year; C&C's current policy is to review on or after the 1 st October each year with any amendment taking affect from the 31 st October of that year; however your first review will be 17 th September 2008 with your second review being 1 st October 2009.
4.2 You will be eligible for an annual bonus which will be awarded at the discretion of the Board. You should note that the bonus is discretionary and does not form part of your contractual remuneration. Any bonus awarded will be notified in your salary review meeting and paid in your October salary each year. In the first year you will receive a guaranteed bonus of £40,000 gross after six months employment and a further guaranteed bonus of £160,000 gross after 12 months employment. You must be employed by the company in order to receive the bonus;
7.1 The company may terminate your employment by giving to you not less than:
• Three months notice if the notice is to be servied in the first six months of your employment;
• Six months notice thereafter.
7.2 You may terminate your employment with the Company by giving not less than:
• Three months notice if the notice is to be served in the first six months of your employment;
• Six months notice thereafter.
7.3 Notice of termination of employment must be in writing.
7.4 The Company may terminate your employment without notice or payment in lie of notice in the event of serious or persistent misconduct by you.
7.5 The Company reserves the right to make a payment in lieu of notice.
7.6 During any period of notice, and provided that the Company continues to pay your salary and to provide all benefits to which you are contractually entitled (or to pay a sum in lieu of such benefits) until the termination of your employment (‘Garden Leave’), the Company shall be entitled at its absolute discretion:
• To require you not to carry out your duties or to exercise your powers or responsibilities under this agreement during your notice period (or any part of such period);
• To require you not to attend your place of work or any other premises of the Company or any Group Company during your notice period (or any part of such period);
• To require you not to make contact with any employees, agents or customers or clients of the Company or any Group Company except as directed by the Company during your notice period (or any part of such period);
• To require you to work from your home and/or to carry out exceptional duties or special projects outside the normal scope of your duties and responsibilities;
• To announce to employees, clients, suppliers and customers of the Company or any Group Company that you have been given notice of termination or resigned (as the case may be).
Unless the Company agrees otherwise, you will not, during Garden Leave:
• Do any work, whether paid or unpaid, for any third party;
• Hold yourself out as a director or other officer of the Company or any Group Company;
• Make any comment to any person about the change to your duties, except to confirm that you are on Garden leave.
You acknowledge that you remain employed by the Company and the terms of this agreement apply during any Garden Leave.
7.7 During Garden Leave you will be deemed to be using up any accrued but unused holiday entitlement.”
It will be noted that clause 7.5 is a PILON clause. Although laconically phrased, it is common ground that the clause means that the employer can summarily dismiss the employee by making a payment in lieu of notice. The only other contractual term to which I should refer is clause 11.5. This imposed restrictive covenants on the claimant for a period of six months after termination. During that six-month period the claimant was restrained from soliciting the defendant's customers or competing with the defendant.
The claimant appears to have given satisfaction in his work on the Chelsea Barracks project. On 2 nd April 2008 the claimant and his team submitted a planning application for the proposed development. It appears from e-mail exchanges in early April that both Christian Candy of the defendant and representatives of the Qatari Government were well pleased with this work.
During the summer of 2008 the defendant sought to make changes to the claimant's contract of employment, which the claimant was not willing to accept. The details of the differences between the parties are not material. Suffice it to say that on 7 th September 2008 Mr Christian Candy orally terminated the claimant's contract of employment with immediate effect. By letter dated 8 th September 2008 the defendant gave written notice of termination with effect from 7 th September 2008. The defendant stated in that letter that it would pay six months salary in lieu of notice. In other words, the defendant was operating or purporting to operate the procedures set out in clause 7.5 of the contract of employment.
Following that termination the defendant paid six months salary to the claimant by monthly instalments. However, the defendant did not pay to the claimant the bonus payment of £160,000 referred to in clause 4.2 of the contract. Correspondence between solicitors followed. The defendant's solicitors asserted that this bonus payment was not due because the claimant had ceased to be employed before 17 th September 2008.
The claimant was aggrieved by the defendant's failure to make the bonus payment. Accordingly the claimant commenced the present proceedings.
Part 3. The Present Proceedings .
By a claim form issued on 19 th October 2009, the claimant claimed payment of the unpaid bonus. The claim was framed as a claim for (a) payment of the bonus of £160,000, alternatively (b) damages of £160,000 for breach of contract by not paying the amount of the bonus. Other breaches of contract were also pleaded in the Particulars of Claim. However, it is common ground that even if those other breaches are established, they are not relevant to the issues in this appeal.
On 16 th November 2009 the defendant served a defence, denying liability. The essence of the defendant's defence is that the defendant lawfully terminated the claimant's employment pursuant to clause 7.5 of the contract of employment. The claimant's claim for the bonus is precluded by the last sentence of clause 4.2 of the contract. This is because the claimant's employment came to an end just before the expiry of 12 months.
On 27 th January 2010 the claimant applied for summary judgment in respect of his claim on the basis that the defendant's defence had no real prospect of success.
The application for summary judgment came on for hearing before Master Eyre on 18 th March 2010. On that date the parties agreed that the hearing of the application under Part 24 should be treated as the trial of the action. This was because the case depended entirely on the correct interpretation of the claimant's contract of employment. There was no relevant dispute of fact between the parties which required determination at a full trial.
Master Eyre duly considered the parties’ submissions concerning the interpretation of the contact. He concluded that the claimant had no entitlement to...
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