UK: Higher standard of investigation may be required where contractual discretion to decide facts

Where an employer had a contractual discretion to decide whether an employee had committed suicide (and therefore whether his widow would receive death in service benefits), the employer had an obligation to consider all relevant matters and exclude from consideration irrelevant matters.  Further, the decision could not be one which no reasonable decision-maker could make, in other words the employer should have acted in good faith and not arbitrarily, perversely or capriciously.

The Supreme Court has ruled that, although the decision that the employee had committed suicide was not perverse, the employer had failed to take into account the need for particularly cogent evidence before finding that an inherently improbable event (such as the suicide of a devout Catholic) had occurred. The implied duty of trust and confidence meant that a higher standard of investigation was required.

Although based on unusual facts, the decision may be used to support similar arguments that the duty of trust and confidence requires a more thorough approach to other types of contractual decision-making, such as whether the employer can lawfully form the opinion that a leaver is a 'bad leaver' for incentive scheme purposes or that the employee has breached a contractual requirement not to bring the employer into disrepute. Employees may seek to use the ruling to support arguments that their employer is in breach of contract in failing to consider all relevant factors or considering irrelevant ones. (Braganza v BP Shipping)