In October 2013, a landlord in Westminster let a basement gym to a personal trainer. The residential leaseholders of Romney House had previously enjoyed exclusive use of the facility; now they shared it, but still paid 100% of the service charge costs. When they challenged the arrangement, the case eventually reached the Court of Appeal — and Nugee LJ used it to make a point about contractual discretions that employment practitioners should notice.
Bradley & Anor v Abacus Land 4 Ltd [2025] EWCA Civ 1308 concerns service charges under a residential lease, not employment at all. But its analysis of what an express “reasonably” qualifier adds to a contractual discretion addresses a question that employment law has left surprisingly unsettled.
The Braganza Baseline
In Braganza v BP Shipping Ltd [2015] UKSC 17, Lady Hale confirmed that every contractual discretion carries an implied rationality constraint. The implied term imports both limbs of Wednesbury into contract: the decision-maker must consider only relevant matters and exclude irrelevant ones, and the outcome must not be one that no rational decision-maker could reach.
BP had determined that its Chief Engineer, who disappeared at sea, had committed suicide — a finding that excluded his widow from contractual death-in-service benefits. The Supreme Court held the process was flawed: BP had treated suicide as a conclusion to be reached rather than as an inherently improbable event requiring cogent evidence proportionate to its gravity.
The principle was not new. Burton J had held in Clark v Nomura International plc [2000] IRLR 766 that a nil bonus awarded to a trader who had generated substantial profits was irrational and in breach of an implied constraint on the employer’s discretion. The Court of Appeal reached a similar conclusion in Mallone v BPB Industries Ltd [2002] IRLR 452 on post-termination share options. What Braganza did was consolidate and elevate the principle: the rationality constraint is implied into every contractual discretion, not just discretions where the facts are egregious enough to shock a court.
The Gap That Remains
Employment practitioners are accustomed to a standard of review that sits above bare rationality. In statutory unfair dismissal, the “band of reasonable responses” test constrains the tribunal to asking whether the employer’s decision fell within the range open to a reasonable employer — not whether the tribunal would have decided differently. That standard is well understood and routinely applied.
But the band of reasonable responses is a creature of statute. It governs unfair dismissal claims under section 98(4) of the Employment Rights Act 1996. It has no direct application to contractual claims. When an employee brings a breach of contract claim — for withheld sick pay, an unpaid bonus, or a wrongful exercise of a contractual power — the standard of review is Braganza rationality: Wednesbury, transplanted into contract.
That creates an obvious question. Many employment contracts do not simply confer a discretion. They expressly qualify it: sick pay payable “at the employer’s reasonable discretion”; bonuses determined “acting reasonably”; benefits subject to a “reasonable” assessment. Does the word “reasonably” raise the standard above Braganza? And if so, to what? Full substitution — the tribunal forming its own view? Or something in between?
What Bradley Decides
The Upper Tribunal in Bradley thought “acting reasonably” required full objective reasonableness: the tribunal should form its own view of what a reasonable landlord would have done and substitute that view if the actual decision diverged.
Nugee LJ disagreed. But he also rejected the opposite extreme — that “acting reasonably” is simply coextensive with the bare rationality floor implied by Braganza.
His formulation is precise. A discretion expressly qualified by “reasonably” is not exercised improperly merely because the tribunal would have decided differently. The question is whether the decision was one that a reasonable decision-maker in that position could have reached — not what the tribunal itself would have decided. “Objective reasonableness” is inapt language because it implies the tribunal is the primary decision-maker. The contract allocated the decision to one party. The tribunal polices the outer boundary of permissible choices, not conducts its own primary assessment.
At the same time, the word “reasonably” is not empty. An express qualifier does something beyond the bare Braganza floor. The range of permissible choices is genuinely narrower: positions that a reasonable person in that role could not adopt will fall outside it and breach the contract.
The result is a three-tier framework. At the base, every contractual discretion carries the implied Braganza rationality constraint — Wednesbury in contract. Where the parties have added an express “reasonably” qualifier, the range narrows: the decision must be one a reasonable decision-maker could reach, not merely one that is not irrational. At the top — rejected by Bradley — sits full substitution, where the tribunal simply decides what is reasonable and replaces the employer’s view with its own.
In Employment
Contractual sick pay. Where a contract gives an employer discretion to determine entitlement to enhanced sick pay — and expressly requires that determination to be made “reasonably” — Bradley defines the scope of challenge. The question is not what the tribunal would have decided on the medical evidence. It is whether the employer’s decision fell within the range open to a reasonable employer in that position. Withholding pay from an employee with strong uncontradicted medical evidence may well fall outside that range. A contested clinical picture, resolved on defensible grounds, is harder to disturb.
Discretionary bonuses. Bonus disputes have generated most of the employment case law on contractual discretion. Clark v Nomura established that a nil bonus could be irrational; Keen v Commerzbank AG [2006] EWCA Civ 1536 confirmed the Wednesbury standard applied but that the court could not simply substitute its own view of the employee’s worth. Where the contract says bonuses are payable “in the employer’s reasonable discretion,” Bradley adds a layer. The standard is not bare Braganza rationality, but it is not substitution either. A nil bonus in circumstances of demonstrably strong performance may be reviewable — not because the tribunal would have paid the bonus, but because no reasonable employer exercising that discretion could have withheld it entirely.
The Practical Takeaway
For claimants, the temptation when a contract says “reasonably” is to argue that the tribunal should form its own view and substitute it. Bradley closes that route. The evidence needs to be strong enough to show the employer’s decision was not merely imperfect but genuinely outside the permissible range. For respondents, the message is procedural: a discretion exercised through a coherent process, on relevant grounds, and landing within a defensible range will be hard to disturb. Document the reasoning, not just the conclusion.
A service charge dispute about a basement gym in Westminster has, somewhat improbably, produced the clearest articulation yet of what it means to exercise a contractual discretion “reasonably.” Employment practitioners would do well to keep it in mind.
Cases Cited
- Braganza v BP Shipping Ltd [2015] UKSC 17
- Bradley & Anor v Abacus Land 4 Ltd [2025] EWCA Civ 1308
- Clark v Nomura International plc [2000] IRLR 766
- Keen v Commerzbank AG [2006] EWCA Civ 1536
- Mallone v BPB Industries Ltd [2002] IRLR 452