‘Home-Made’ Contract Leads to Legal Tangle

Posted: 4th November 2013

The parties to a ‘home-made’ contract, which an employee argued entitled her to performance-related bonuses and commissions, may now be wishing that they had taken legal advice after disputes arose as to the authenticity and legal effect of the document.

universityThe employee worked for a further education college and argued that she was entitled to bonus payments in respect of her introduction of new students and commissions on successfully letting out college rooms. She submitted that a contract to that effect had been signed by her and the college’s principal and launched legal proceedings on the basis that she had not been paid sums due to her.

The college and its principal (the defendants) accepted in their defence to the claim that the document had been created at the time alleged by the employee and that it bore the principal’s signature. However, they later sought to amend their defence to allege that the document was not authentic and that the principal’s signature had been forged.

The High Court refused to allow that late amendment but nevertheless dismissed the employee’s claim. Despite accepting that both the employee and the principal were reliable witnesses and that neither of them had sought to give misleading evidence, the Court found as a fact that the principal had not signed the document.

Upholding the employee’s challenge to that ruling, the Court of Appeal observed that the decision below was ‘not a model of clarity’ and that the judge had ‘failed to face up to the fact’ that the document was either a forgery, or it was not. The principal and the employee could not both have been honest witnesses and the judge’s handling of the evidence had been ‘most unsatisfactory’.

The Court dismissed a cross-appeal by the defendants, ruling that the judge had been correct to disallow such a late amendment to the defence. The ruling means that, at the re-hearing of the employee’s claim, the defendants would be precluded from challenging the document’s authenticity and would be confined to making submissions relating to its interpretation and legal effect.