The Plaintiff, Pat Keating, who is the Chief Executive Officer (‘CEO’) of Shannon Foynes Port Company (the Defendant) brought proceedings to the High Court to seek relief that he is entitled to performance related payments (‘PRP’) for the period 2010-2016 pursuant to clause 8.3 of his service agreement with the Defendant. The Plaintiff claimed that he is entitled to the payments, the amounts of which were approved by the remuneration committee of the defendant in each of those years, but which the board of directors of the company declined to authorise for payment.

Mr Pat Keating was appointed interim CEO in 2006 and was appointed to the position in 2008 on a permanent basis. For the years 2008 and 2009, Mr Keating’s bonuses were reduced to 17% and 9% respectively and in evidence he said that he was prepared to accept a reduction for those years at the request of the shareholders.

The Defendant submitted that at no time, in respect of any year in dispute, did the Defendant make a decision to award payment to the Plaintiff of a bonus, as required under the terms of his contract of employment. Therefore, no entitlement to receive such a payment arose. The decision of the Defendant not to award the Plaintiff bonus payments for the years in question was made in accordance with clear and unequivocal government policy and/or under Ministerial directive within the meaning of section 37 of the Harbours Act, 1996, which policy and/or directive the Defendant was at all times obliged to follow.

The Defendants further submitted that the decision of the Defendants not to award the payment was a lawful and permissible exercise of its discretion under clause 8.3 of the Plaintiff’s contract of employment properly construed, and was a bona fide, rational and reasonable exercise of its discretion in all of the circumstances.  The Defendants also submitted that the contractual pre-requisites for payment of the bonus were not met for the years in question.

Mr Justice Sanfrey ruled that a failure by the port company directors to use their discretion to pay the bonus “constitutes a breach by the company of the contract which has caused damage and loss to Mr Keating” and granted judgment against commercial semi-state firm, Shannon Foynes Port Company, to Pat Keating in the amount of €297,863 which represented unpaid bonuses between 2010 and 2017.

Mr Justice Sanfrey found that if the directors had exercised their discretion in a manner consistent with their fiduciary duty, “they would have authorised payment to Mr Keating of the Performance Related Pay (PRP) determined by the remuneration committee to be due to him in the period 2010 to 2016".

Mr Justice Sanfrey stated that the consistent position of the board from 2010 to 2016 was that it was in the best interests of the company that the CEO’s PRP be discharged. However, the board exercised its discretion not to discharge Mr Keating’s PRP “…only because of the instructions of the shareholder…” as it was the Government Minister’s position that PRP should not be discharged to CEOs of commercial semi-state companies.

Guidance for Employers

Although the policy not to discharge PRP was advocated by the Minister as shareholder of the company, Mr Justice Sanfry highlighted that the minister is not a party to the contract between the company and Mr Keating.

He said: “In exercising their discretion not to pay PRP to Mr Keating year upon year, the directors were taking a course of action which they themselves considered was not in the best interests of the company, solely on the basis that this was what the shareholders wanted.” 
https://www.courts.ie/acc/alfresco/b7058408-399d-4d0c-8e3e-db2dfab3a96a/2022_IEHC_505.pdf/pdf#view=fitH