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Strike Out

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Was it wrong to strike out part of a wrongful dismissal claim when the employer had the option to terminate with a PILON on basic salary rather than provide full pay and benefits for the notice period?
Not on the facts of this case, held the Court of Appeal in Mackenzie v AA Ltd.

The Claimant was the Chief Executive of the AA, dismissed without notice after an unprovoked assault on a junior colleague at a work away-day event; he claimed wrongful dismissal in the High Court.
The Claimant’s contract specified three methods of termination: 12 months’ notice (with benefits including scope for a bonus, and share options); a PILON with basic salary only; or dismissal without notice for gross misconduct.

Before trial, part of the claim, for loss of benefits including a discretionary bonus on top of notice pay, was struck out by the High Court as having no real prospect of success. Under a long-established rule in contract law, the court assumes that the employer would have chosen the ‘least burdensome’ method of terminating the contract from its alternatives (here a PILON for basic salary only), rather than also paying the additional benefits. So, even if the Claimant were to win at trial, his damages would have been based on a basic salary PILON.
The Claimant’s appeal failed, the Court of Appeal noted that whilst ‘least burdensome’ did not necessarily mean the ‘cheapest’ or ‘quickest’ way of terminating a contract, on the agreed facts the Claimant’s case was ‘wholly implausible’, and it could not be reasonably arguable that making the PILON was not the ‘least burdensome’ mode of terminating this contract.

Thanks to Ed McFarlane for preparing this case summary.