Group 4 Nightspeed Ltd v Gilbert [1996] UKEAT 521_96_2609

EAT

Group 4 Nightspeed Ltd v Gilbert

[1996] UKEAT 521_96_2609 · 1996-09-26

JUDGE J HICKS QC :

We shall direct that this appeal go to a full hearing but in our view that hearing should be confined to the jurisdiction point concerning the extension of the time for lodging the application.

The second limb of the appeal in our view should be dismissed and we therefore give our reasons for that conclusion and that decision.

Mr Gilbert was employed by the Appellants on a basis which included the provision of additional sums by way of bonus, or commission, or however one describes it, in relation to his obtaining contracts. When those were what were called minor contracts, or more strictly not major contracts, the calculation of that commission was perfectly straightforward. In the case of major contracts, however, there was a clause which provided as follows:

"Commission on major contracts may be considered in the following manner:

Contribution to first quarter's trading - paid in full.

Above target commission may be based on profitability of Cost Model approval and subsequent audits."

The Tribunal, not surprisingly, took the view that to an outsider without familiarity with the nature of the business that might not be very informative, but found that the parties themselves, employer and employee, had an understanding of what considerations were indicated by that provision and should be taken into account. It was not, as we understand it, contested by the employee and was certainly accepted by the Tribunal that that clause gave the employer a discretion.

What happened in relation to a major contract called the Compton Webb contract was that the employer, in purported exercise of that discretion, fixed the employee's, Mr Gilbert's, quarterly commission at a figure of £5,000. Had commission been paid at the full rate without any discretionary deduction it would have been very much more, because the Tribunal found that, on that basis, there was an underpayment of over £6,000 in respect of the September quarter and over £10,000 in respect of the December quarter.

The Tribunal, having construed the contract as giving the employer discretion to reduce commission on major contracts, went on to say that that discretion must however be based on a comparison between the profitability shown in the approved cost model and that shown in subsequent audits. That is their finding of the meaning of the words used in clause 4(vii) in the light of the evidence that obviously they had had about the whole way in which this business operated and the existence of what they described as the approved cost model and of audits of performance.

Then they go into the evidence and make findings of fact which, of course, cannot be challenged so far as the primary facts are concerned, and they express their conclusion in paragraph 29 as follows:

"29. Our conclusion is that Mr Brook [who was the relevant manager] did not exercise the respondent's discretion in accordance with the contract term. Instead, he chose an arbitrary figure of £5,000 in respect of each quarter. It is arbitrary because Mr Brook has not demonstrated its relationship to a comparison of profitability on the approved cost model and on the subsequent audit. Further, if he was exercising a discretion, he was bound to make some adjustment to the December payment once the respondent conceded that a sum as large as £55,440 should be removed from the costs column ..."

That is a reference back to their finding of fact that such an error was pointed out by Mr Gilbert and accepted as being the case. That finding was in the context that the decision to fix at £5,000 had already been made but was not altered when this error was pointed out. They go on as follows:

" ...Whilst we do not doubt that Mr Brook had the audit result when he decided to cap the applicant's commission payments, we infer from his refusal to adjust the payment for the December quarter and the real importance attached by the respondent to this contract, that its performance was, if anything, a secondary consideration in Mr Brook's mind. His primary consideration was the potential size of the applicant's earnings and a desire to reduce those earnings to what senior management saw as an appropriate level."

The Appellants seek to challenge that conclusion on the basis that once the Tribunal had found that there was a discretion that was an end of the matter but, in our view, it plainly is not the end of the matter. Where a discretion is to be exercised in these circumstances the Tribunal is entitled to investigate whether there has been any genuine exercise of it by reference to relevant considerations and without taking into account irrelevant considerations. They made findings of fact which fully justify their conclusion that there was no genuine exercise of the discretion by reference to relevant considerations here, because when relevant considerations of a substantial nature were pointed out that did not affect the result. Moreover they were entitled to take into account, and we are sure they did, that a fixing of a round sum of £5,000 itself raises a question as to whether there has been a real exercise of discretion or simply an arbitrary cap, as they describe it, on the employee's commission.

We see no error of law in their treatment of the substantive issue before them and we therefore dismiss the appeal sought to be brought on that ground. As we have already indicated, however, the appeal will go forward on the separate point of jurisdiction.