Mr D Brabon v RJT Window and Exterior Cleaning Ltd: 6037134/2025

EMPLOYMENT TRIBUNALS

Case No 6037134/2025

Between

Mr D BrabonClaimant

RJT Window and Exterior Cleaning LtdRespondent

Before

Employment Judge T Perry

In person for claimant

Mr Fakunle (instructed by solicitor) for respondent

Date 16 March 2026

JUDGMENT

The Claimant’s claims for unlawful deduction from wages and breach of contract fail and are dismissed.

REASONS

[1]I had before me a bundle of 187 pages. I read those pages I was referred to by the parties and the other pages referred to below. I was later provided with a signed copy of the contract at pages [38] to [45] in the bundle.

[2]The parties attended without witness statements from either side. In the end, after discussing it with the parties, I did not hear any evidence under oath from either side as neither side had questions for the other. I clarified a few matters with either side. This was effectively a case on broadly agreed facts.

[3]The sole issue for me to determine was whether the Respondent was in breach of contract/made a deduction from the Claimant’s wages in failing to pay him a bonus in July 2025.

The Law

[4]Contracts may be written, oral or partly both. Their meaning is a question of construction, and therefore of law, to be ascertained in the light of the language used in the context of all the relevant surrounding circumstances.

[5]A party may sometimes wish to argue that a written record should be supplemented by extrinsic evidence, to import additional terms or to explain or interpret some of the written terms. However, there is a strong presumption that an apparent written record of a contract is intended to contain all the terms of their bargain. This presumption can be overturned if the evidence is that the written agreement was not the whole agreement between the parties – if, for example, the written agreement mistakenly recorded the terms of an earlier oral agreement.

[6]A written agreement may be varied by subsequent statements. In the employment context, this occurred in the case of Dresdner Kleinwort Ltd v Attrill

[2013] IRLR 548

where the employer made a company-wide announcement that there would be a guaranteed bonus pool of €400m, to be distributed at the employer's discretion on the basis of individual performance. It was held that this created a binding contractual obligation to pay from the pool, so that the employer was in breach of contract when it tried to reduce bonuses by 90 per cent.

[7]Employers are bound by more than simply the express terms of a contract. When exercising a discretion under contract (such as with regard to a bonus payment) the employer must not act in a manner which is irrational or perverse. Burton J in Clark v Nomura International plc

[2000] IRLR 766

, QBD formulated this in the following terms ''My conclusion is that the right test is one of irrationality or perversity (of which caprice or capriciousness would be a good example) i.e. that no reasonable employer would have exercised his discretion in this way.''

[8]In addition, the court of appeal in IBM UK Holdings Ltd v Dalgleish

[2018] IRLR 4

at [45] held that an employer when exercising a discretion must not ignore factors that are relevant or take into account irrelevant considerations.

[9]The burden of proof in relation to arguments of breach of implied terms rests with the claimant.

The facts

[10]The Claimant started employment with the Respondent in April 2023 as Operations Manager.

[11]There were discussions before the Claimant started about a bonus. I accept at the time that this was not said during negotiations to be discretionary rather there was discussion that it was going to be calculated on the basis of a percentage of gross profit.

[12]I have seen the job description which says [37] ”Your bonus will be 2% of annual gross profit and will be paid once a year, probably in June (once the Year End Accounts have been completed). Gross profit is annual turnover minus direct costs - i.e. those that are proportionate to turnover such as staff salaries, equipment and vehicle running and maintenance costs.”

[13]A written employment contract was produced and signed by both sides on 4 April 2023. This contract does not contain an entire agreement clause. As to bonus, this says [40] “9.1 Your position has the benefit of: 9.1.1 A profit related bonus scheme (Annex C. The details included of the bonus in Annex C do not form part of your contract of employment and may be amended or withdrawn at any time.)”

[14]Annex C says at [46] ” You will receive an annual bonus based on the performance of the Company as determined by the Company’s Gross Profit figures for the year. The structure of the bonus scheme is as follows:• For annual gross profits up to £150,000 you will receive a bonus of 2% of the gross profit total.

• For every £15,000 of gross profit added per annum thereafter you will receive an additional 0.3% bonus up to a maximum of 7%. The details included of the bonus above do not form part of your contract of employment and may be amended or withdrawn at any time.”

[15]On 23 July 2024 the Respondent was paid a bonus of £2,718 based on the formula included in the offer letter and appendix C.

[16]On 14 October 2024 an amendment made to the Claimant’s employment contract to reflect the new name of the Respondent.

[17]On 25 October 2024 Chloe Tully emailed the Claimant saying [130] Hi Dean, Please find attached the Profit & Loss report for the company up to 30th September 24. Key points to note on our financial position at this point in the financial year are:• Overall, we're showing signs of growth relative to the accounts for 23-24 which is good. For example, turnover for the first six months of 24-25 is sitting at £162,438.

• Gross profit is currently sitting at £97,235 and your bonus for the first six months is therefore sitting at £1,940. Please note that this does not guarantee you a bonus of at least double this at year end as gross profit relative to turnover may change over the next six months. We strongly recommend that you don't do what you did last year and spend money on your credit card in anticipation of a certain amount of bonus.

• From the perspective of the business, net profit is actually more important than gross profit. On the Profit & Loss report you can see that the net profit is showing at ca. £31,000. The bulk of mine and Rowan's income comes from the net profit so in reality, after our dividends, we've managed to accrue ca. £8,000. This is much better than where we were at the start of this calendar year (when we didn't have enough to cover salaries) but still leaves the company in quite a vulnerable position financially. Our accountant's advice is that we really need to build a reserve of money in the business bank account to give us more financial resilience and the ability to deal with unforeseen financial shocks and things like taking on new staff/purchasing new vans more comfortably. (Rowan & I have had to put money into the business this year to cover such things.)

• With taking Jimmy on and Harry moving to a full time salary, this is going to negatively impact the net profit, until we can grow the turnover enough to balance those additional costs out.

• As I mentioned the other day in our meeting, the net profit is also super important for Rowan and I as if there isn't enough net profit for us to be able to live off the company is no longer working for us.

• Finally, Rowan and I fairly urgently need an additional member of admin staff. This is a tricky one to navigate because that member of staff isn't directly contributing to turnover/the financial growth of the business. Having someone else on board, however, would free up our time to work more on growth (business development, marketing, advertising etc etc). We are looking into options to see how soon we can viably bring someone else on board, even if only part time initially.

[18]This email was, it is fair to say, a bit of a warning to the Claimant not to expect a bonus entirely on the terms of the previous year for the reasons set out there.

[19]The Claimant replied on the same day [130] “One question for now and not in expectation but if we were to repeat the last 6 months profit going forward, would that mean my bonus at end of year would be £5056.22?”

[20]Ms Tully replied on 31 October 2026 [131] “In terms of your bonus, yes, if the next six months mirrors the first six months, then I also calculate it will be ca. £5056.22. As I said in my previous email, please don't bank on this as we don't know what gross profit will look like for the next six months.”

[21]On 20 January 2025 Ms Tully emailed Mr Tully and the Claimant saying [132] “We have cash flow issues again following Christmas and, right now, there's not enough money in the account to cover all wages. By Thursday (pay day), we'll hopefully have had the next payout from GC (£5,910.45) and be OK for wages at least. There are other upcoming costs that need to be considered too though.”

[22]On 20 March 2025 the Claimant emailed asking [133] ”I know we said I wouldn't bring this up for the first couple of years but unbelievable that time is nearly there so just wanted to start the discussion around an inflation based raise to my basic wage.”

[23]On 1 April 2025 Rowan Tully replied [133] ”It's certainly not an unreasonable question to ask. Given the overall context of where we are right now though, I don't feel it's right or fair to offer you a pay rise to basic salary at the moment when no one else in the company is going to get one, including myself and Chloe.”

[24]The financial results for the Respondent for the year ending 31 March 2025 showed a gross profit of £174,121.

[25]By late April 2025, the Respondent’s directors were taking advice from Bright HR regarding the Claimant. There were clearly some concerns about his performance. This included asking [157] ”Can we amend (or even withdraw) his bonus and, if so, is there a process we need to go through before we can do either of these things (I’m not saying we are going to do this but I want to be clear what our options are)?”

[26]As at 16 June 2025 Ms Tully emailing to say [163] ”Cashflow remains uncomfortably tight at the moment so we are in a tricky situation”

[27]On 26 June 2025 Ms Tully emailed the Claimant to say “[164-165]” Hi Dean, We’d like to get together to reflect on where we are after two years of working with this business model, discuss our goals and visions for the future and talk through company finances and your bonus for 24- 25. Would you be free on Thursday 17th June at 9.30am? So as not to blindside you in the meeting we want to let you know the situation with regards to your bonus now and give you some time to digest the news before we meet. As you might have gathered, things have been tight in terms of cash flow this past year and we’re sorry to say that, as such, the business is not in a position to pay you a bonus for 24-25. We also need to revisit the terms and structure of your bonus going forward so that it aligns better with the financial health of the business and your contribution to that. We know that this will come as a big and probably unexpected blow and understand that you will be frustrated and disappointed by this. We share these frustrations. It’s not where any of us hoped to be. Financial Situation We’re happy to talk through the financial situation in more detail when we meet but we want to summarise it here so that you understand how we’ve come to this decision. The draft year end accounts show that compared to 23-24, turnover and gross and net profit have all increased and, while there are many positives that can be taken from this (e.g. we are on a positive path and moving in the right direction), unfortunately these increases:• are not in line with what we’d expect given the addition of a new van to our fleet in July 24

• are indicative of organic growth rather than a significant strategy-led increase in turnover

• are skewed significantly by a drop in wage costs (as a result of us having five staff in 24-25 as opposed to six staff for some of 23-24, and the move to fixed salaries at the start of 24-25)

• are lower than they could have been (given that we are ca. two to three weeks behind with the schedule)

• do not reflect the challenges that we are having with cash flow And cash flow is a critical factor here. We’ve been struggling throughout the year to have the funds we need to invest in the business and to cover bigger costs. Importantly, we’ve also, at points, been unable to pay ourselves on time or in full which, I’m sure you can understand, is not a financially viable situation for us personally and causes significant stress. Additionally, profits are still at a level such that we have been unable to build financial resilience within the business (as our accountant advised us to try to do at the end of our first year) and we remain vulnerable to large, unexpected costs (e.g. a van needing to be replaced or requiring major repairs) and cannot easily take on new staff, or invest in new equipment and marketing etc. Essentially, we as a team, have not been able to bring about as large an increase in turnover and profit as we had hoped and, as cash flow remains a significant challenge, there aren’t the funds in the business to cover your bonus without damage to the viability of the business and increased risks to our personal financial situation. (Please remember here that your salary remains significantly higher than either of our individual salaries (including any dividends that we draw from the business).) As per our discussions in the recent strategy meetings we all need to be working together to achieve change that will over the coming years significantly improve turnover, profit and cash flow as well as build financial resilience and security. Altering the terms and structure of your bonus Regarding the alteration of the terms and structure of your bonus, we want to move towards a bonus scheme that is financially viable for the business going forward and more fairly reflects and is more proportionate to:

• the true financial position of the business (gross profit is not proving to be a good marker of the business’ overall health and profitability)

• your personal achievements within the business

• your contribution to the growth of the business Right now, we’re not sure exactly what this might look like, and we need time to research and discuss this with our accountants. We will of course discuss this with you along the way too. In terms of managing your expectations going forward though, we want to establish that any bonus agreed will be discretionary and will not be guaranteed each year. We want to move away from the notion that a bonus is an automatic entitlement. A bonus is an extra reward for exceptional levels of performance and commitment and can only be awarded if the business is thriving. We know all of the above will be disappointing and frustrating to read. We hope you know that this is not a decision we’ve come to lightly or easily and that we are working for the good of the business and its long-term stability and viability. You’ve been part of the RJT family for a long time now and we highly value what you contribute. We value you as a member of this team and hope that as we learn and move forwards together, we can create a thriving and profitable business that serves us all well. With best wishes”

[28]On 27 June 2025 the Claimant replied by email stating “Obviously I'm extremely disappointed in this situation. Mainly in the fact that at no point in any verbal conversations was the bonus ever suggested as discretionary. Although clearly you have had the foresight to add this to a contract.”

[29]On 17 July 2025 at the meeting, the directors proposed to either put the Claimant into a lower role or put him on a PIP if stays in post [171-172]. The Claimant decided to stay in post.

[30]On 24 July 2025 The claimant emailed to say [111] “Dear Rowan and Chloe, Following taking legal advice regarding the recent decision to withhold the bonus from the previous year, I wanted to share the findings with you. Your employer could withdraw or change the bonus scheme going forward, but they cannot do so retrospectively. So they can’t take away your entitlement to bonus for the last financial year (April 2024 – March 2025) based on the formula in your contract. I’d be interested in your response to discuss this further”.

[31]The Claimant wrote to resign the same day. Conclusions The terms of the contract

Conclusions

[32]The terms of the contract between the parties were contained in the written agreement signed by both parties on 4 April 2023.

[33]Whilst I accept that there had been previous discussions, which had not mentioned the bonus being discretionary, I do not consider that a binding oral or written agreement was reached that was then inaccurately recorded in writing in the contract. Rather, I consider that the earlier discussions were about the anticipated amount of the bonus but the written agreement was the first and final legally binding agreement about bonus. The Claimant did not really argue otherwise. By signing the contract, the claimant explicitly accepted its terms.

[34]Clause 9.1.1 of the contract provides that the position has the benefit of a profit related bonus scheme but that the details of this scheme could be amended or withdrawn at any time. This expression was repeated in Annex C. The decision to amend or withdraw the scheme was a discretion given to the employer under the contract. Exercise of the discretion

[35]That was a discretion that had to be exercised in a manner that was not irrational or perverse and taking account of relevant factors and ignoring irrelevant factors. The factors that were taken into account are set out in the email of 26 June 2025. These were tight cash flow, lack of growth, figures being skewed by a drop in wage costs, inability of the directors to pay themselves fully, and potential liability to large unexpected costs. The claimant did not seek to argue that these factors were not genuine or that any of these factors were irrelevant or that other relevant factors had not been taken into account.

[36]In essence, the claimant’s aargument was and is, as set out in his email of 24 July 2025, that there was no right to remove retrospectively the bonus scheme for the last financial year but only to change it for future years.

[37]I do not agree that that is the correct interpretation of the contract. The contractual discretion is not limited to future years; it applies at all times. It might have been different had a bonus been declared or confirmed for the year (as it was in the Attrill case) but that did not happen here. Indeed, there was communication during the year that warned the claimant not to expect a specific bonus at year end (albeit I accept the gross profit calculation was not abandoned at that point).

[38]Overall, the claimant has not satisfied me that the decision not to award a bonus was irrational or perverse. It seems to me that removing a bonus in circumstances where the company was suffering cash flow issues was an action that a reasonable employer might take. Equally, the Claimant has not satisfied the burden of showing that the decision was made not taking into account relevant factors or relying on irrelevant factors. None of the factors taken into account seem to me irrelevant. I am unaware of any other relevant factor that the Claimant says should have been taken into account.

[39]It follows that the Respondent’s decision to withdraw the Claimant’s bonus scheme was not in breach of contract. There being no legal entitlement to receive a bonus, the claimant’s claim fails and is dismissed. Approved by: Employment Judge T Perry 16 March 2026 Sent to Parties. 31 March 2026 Notes All judgments (apart from judgments under Rule 51) and any written reasons for the judgments are published, in full, online at https://www.gov.uk/employment-tribunal-decisions shortly after a copy has been sent to the claimants and respondents. If a Tribunal hearing has been recorded, you may request a transcript of the recording. Unless there are exceptional circumstances, you will have to pay for it. If a transcript is produced it will not include any oral judgment or reasons given at the hearing. The transcript will not be checked, approved or verified by a judge. There is more information in the joint Presidential Practice Direction on the Recording and Transcription of Hearings and accompanying Guidance, which can be found here: www.judiciary.uk/guidance-and-resources/employment-rules-and-legislation-practice-directions/