Mr Cosgrave, was the managing director of Arley Homes North West Limited (AHNW), as well as a non-executive director of its parent company Arley Homes Limited. Although Mr Cosgrave was appointed director in 2005, it was not until 2007 that he sought to formalise his remuneration package in a service agreement. Mr Cosgrave prepared the agreement and gave it to AHNW’s finance director for him to approve on behalf of the company. However, the agreement was never signed.

When Mr Cosgrave fell ill, he sought to rely on the terms of the service agreement which entitled him to 52 weeks’ sick leave at full pay. This was a more generous sick leave provision than that afforded to the company’s other directors who could only take up to 26 weeks’ paid sick leave. A dispute arose as to whether the service agreement was binding as it had not been signed.

The Employment Tribunal found that the parties had intended to be bound by the unsigned agreement because some of its terms relating to salary and car allowance had been put into practice. The Employment Appeal Tribunal (EAT) disagreed with this decision.

For the EAT, the matter turned on whether AHNW had shown an unqualified intention to be bound by all of the agreement’s terms, rather than just some of its provisions, such as those relating to salary and car allowance. The EAT found that this intention to be bound had not been clearly demonstrated by AHNW’s conduct. In particular, the finance director had not retained a copy of the unsigned agreement, which he said he would have done if AHNW had agreed to its terms.

The EAT also felt the Tribunal should have considered whether Mr Cosgrave’s true employer might have been the parent company, who had employed the previous managing director, instead of AHNW. Whether the agreement should have been with the parent company affected whether AHNW’s finance director had sufficient authority to accept the agreement on the company’s behalf.

The lack of clarity about AHNW ’s intention meant that the Tribunal’s decision could not stand and Mr Cosgrave was therefore successful in his appeal.