Supreme Court
Action No. 108 of 1978
20th November, 1981
Moe, J.

Mr.. Denys Barrow for the Plaintiff
Mr.. V.H. Courtenay, S. C. for the Defendant

Contract of employment - Plaintiff entitled to bonus at end of contract - Compilation of bonus not provided in contract - Court to award reasonable bonus - what constitutes a reasonable bonus.

JUDGMENT

The plaintiff is in this matter issued a writ on which was indorsed a claim for (a) an account of the profits of the defendant for the year 1977, and (b) an order for payment of a bonus on the profits of the defendant for the said year. In his Statement of Claim he alleged that there was an oral agreement made in February 1977 between the plaintiff and the defendant under which the defendant agreed to pay him at the end of his employment a bonus of 10% of the net profits of the defendant; that net profits were agreed to be income less expenses, not including income tax and the managing director's salary. He averred that he served the defendant until the 26th May, 1978 but in breach of the agreement the defendant has refused to pay him the agreed bonus. He prayed for relief in the alternative. He sought-

(1) An account of the net profits of the Defendant company for the period February 1977 to June 1978 and of the bonus due to the Plaintiff on such net profits at the percentage aforesaid.

(2) An order for the payment by the Defendant company to the Plaintiff of the amount found to be due to him on the taking of such accounts or alternatively damages in lieu of such bonus.

(3) In the alternative, such bonus as the Court thinks just upon a quantum meruit.

The defendant denied such agreement. In its defence and counterclaim,
there was admission that the plaintiff was employed from 9th February 1977 to the 26th May 1978. It averred however that the plaintiff served in all respects under the terms and conditions set out in a draft contract delivered to the plaintiff for his approval but which the plaintiff did not approve. Further that the defendant agreed to pay the plaintiff as bonus an amount equal to 10% of the net profits of the defendant company computed on the company's profits after income tax, all salaries including that of the managing director and other normal expenses were deducted. That $2,929.80 was due to the plaintiff by way of bonus of which $2,500.00 was paid leaving $429.08 owing to him.

The defendant also counterclaimed for an amount of $3,663.50 which is alleged it incurred as a consequence of the plaintiff's breach of his contract of employment and of his negligence in the performance of his duties.

Decision having been given already that the plaintiff's claim in contract and the defendant's counterclaim must fail, I turn now to the plaintiff's claim for a reasonable sum as bonus for services. It is common ground that after the conclusion of a contract between the parties on the 8th February, 1977, the plaintiff continued to be employed by the defendant as a civil engineer from the 9th February, 1977 to the 26th May, 1978. It is also common ground that the plaintiff would be paid a bonus at the end of his employment with the defendant.

It was submitted that a question for decision is whether the plaintiff merits payment of a bonus in view of the nature and quality of his services and the manner of termination of employment as disclosed in the evidence. I take the view that the matter does not arise. For the defendant in his pleading, by which he is bound, admitted that an amount was due to the plaintiff by way of bonus and indeed paid a part of it. What falls to be determined, in my view, is how much if any is now to be ordered to be paid to the plaintiff as bonus.

It is clear that there was no agreement between the parties as to the method of computation of the bonus to be paid to the plaintiff. The plaintiff's own evidence is that a contract came up for signing but he did not sign it. The proposed contract was similar to the 1976 contract except where it referred to bonus. He and Mr. Mahler the managing director of the defendant company had discussion about the agreement. He pointed out the implications of the wording of the proposed contract and made certain suggestions about it. Mr. Mahler objected on the grounds that he was unsure how the plaintiff's suggestions would work. The plaintiff further said he, another employee Mr. Goff and Mr. Mahler agreed that he and Mr. Goff would continue as before so that their position with regard to bonus would not be worse off. For 1977 they agreed to work under terms and conditions similar to previous years, the bonus percent being left undefined except that it would not be less than previous agreements. In cross-examination he admitted that the managing director refused to exclude the managing director'' salary and income taxes as deductions before arriving at the profits on the basis of which bonus would be calculated.

There being no agreed basis for the calculation of the bonus to be paid to the plaintiff I hold that the sum to be paid as bonus is a reasonable sum. It seems to me the amount must bear a reasonable relationship to the profit of the defendant company.

For this purpose I adopt the definition of profit as set out by Scrulton L.J. in Vulean Motor & Engineering Co Ltd. v. Hampson, (1921) 3 K.B. 597 at 606, "profits mean profits after deducting the expenses of earning them" or in other words the excess of returns over outlay.

The evidence is that the profit of the defendant company for the year 1977 after deducting the amount expended to earn the income was $29,298.00. In determining what would be a reasonable amount as bonus I got some assistance from previous terms of contracts between the parties and hold that 10% of the profits would be reasonable.

The plaintiff is entitled to be paid as bonus the sum of $2,929.80. He was paid on the 23rd February 1978 $2,500.00. He is therefore to be paid a balance of $429.08. Judgment accordingly.