The claimant applied for the trial of a preliminary issue or split trial and for costs budgeting to apply to his claim that he was entitled to benefit under his former employer’s bonus and long-term incentive plans.
The claimant worked for the defendant listed house-building group as the group finance director. As a member of the senior management team he was a member of a bonus plan and two long-term incentive schemes. The terms of the scheme were such that if he left before the benefits under the scheme vested, then the entitlement to benefit lapsed. As an exception to that general rule, the employer had a discretion to treat the former employee as a “good leaver” who was entitled to benefit under the relevant scheme. The claimant had been removed as a director and his employment had been terminated on 12 months’ notice. His benefits under the bonus and incentive plans lapsed unless the defendant decided otherwise. Meetings of the remuneration committee and the board of directors decided that the claimant should not be treated as a good leaver. The meetings were attended by the group’s solicitors and minutes were prepared. The minutes disclosed that the group chief executive had reported that the claimant’s conduct and behaviour were such that he had lost the confidence of senior management, despite the fact that there had been no formal adverse review of this performance; the meetings considered that they were in a position to decide that the claimant was not a good leaver without hearing any representations from him. The claimant had brought proceedings in the employment tribunal alleging unfair dismissal and protected disclosures. The defence in those proceedings denied the claims of whistleblowing, and dealt extensively with the reasons for the claimant’s dismissal and the exercise of the discretion not to treat him as a good leaver. That defence was repeated in the High Court proceedings. The tribunal proceedings had been adjourned to await the outcome of the High Court proceedings. The claimant maintained that it was not necessary to have a trial of the full range of issues because it could be seen from the minutes of the meetings that the discretion not to treat him as a good leaver had been exercised arbitrarily and capriciously, and that there should be a separate trial of that issue.
The claimant submitted that the meetings had given decisive weight to allegations against him that had not been investigated or tested and in the absence of any representations; that was a breach of implied terms that the procedure would be fair and would take into account all relevant matters.
HELD: Where contractual terms gave one party to a contract the power to exercise a discretion or form an opinion as to relevant facts, that power should be exercised not only in good faith but also without being arbitrary, capricious or irrational in a public law sense; where the court found that the decision-making process was flawed it could re-make the decision and therefore conclude that the claimant was entitled to be treated as a good leaver, Braganza v BP Shipping Ltd  UKSC 17,  1 W.L.R. 1661 considered. In the circumstances there was nothing wrong with the claimant seeking to put forward a narrower case that would avoid the need to consider evidence about the alleged conduct and behaviour leading to his dismissal and about the claims of whistleblowing. A trial of the issue of the exercise of the discretion based on what was said in the minutes might be determinative and would be more cost effective and fairer than an otherwise open-ended trial that would investigate the whole of the claimant’s past conduct, Steele v Steele  C.P. Rep. 106 applied. The court directed the trial of that issue, limited to whether the decision disclosed by the minutes was unlawful and whether the claimant ought to have been treated as a good leaver, and excluding the other allegations. The claim might exceed £10 million but the court directed costs budgeting in the exercise of its discretion, CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd  EWHC 3546 (TCC),  1 All E.R. (Comm) 765 applied. The claimant’s resources were tiny compared to the defendant’s. He needed to know the potential downside in order to obtain ATE insurance if he could. That was a sufficient justification for costs budgeting, to level the playing field and focus on restraining unnecessary expenditure.