Bankers' Bid For £42m In Unpaid Bonuses Begins At High Court
A bid by 104 London investment bankers to get €50m (£42 million) in unpaid bonuses began at the High Court today.
The individual claims brought by former employees of Dresdner Kleinwort Limited (DKL) against DKL and its new owner, Commerzbank AG, range from €15,000 to two million.
Opening their case, Andrew Hochhauser QC told Justice Owen that the bonuses should have been paid for the year ending 31 December 2008 from a guaranteed minimum bonus pool of 400 million euro because of "binding and enforceable contractual promises" made between August and December 2008.
They were to be allocated to front and middle office employees in the usual way, taking into account individual performance, and paid in full in cash in January 2009.
"Put briefly, those promises have not been honoured, and that is why we are here today," he said.
"Although the defendants accept that the statements which we rely upon were made, they deny that they amounted to contractual obligations."
Hochhauser said that the pool was created in August 2008 in order to retain staff in the face of a mass exodus, and was formally communicated to them at a business update which they were encouraged to attend.
At that meeting, said counsel, Dr Stefan Jentzsch, then chief executive officer of Dresdner Kleinwort Investment Bank, said that the pool would remain "no matter what", irrespective of financial performance.
Hochhauser said that the promises made by Dr Jentzsch were aimed at stabilising the investment banking division, and had that effect - all of the claimant bankers did stay and continued to work hard.
But, having allocated discretionary bonuses from the pool in December 2008, the bank subsequently decided to "move the goalposts" and introduce a Material Adverse Change (MAC) clause.
This, he added, purported to permit it to review the bonus awards that had been made in the event that there were additional material deviations in the bank's revenue and earnings as against the forecast for November and December, and was later used as a basis for paying only 10% of the awards or, in the case of four claimants, nothing at all.
Hochhauser said: "It is submitted that the position adopted by the defendants in this case, particularly given that it relates to the claimants' remuneration, the most fundamental of an employer's obligations to an employee, is extraordinary, the more so because this case concerns a bank and, after all, as Dr Jentzsch points out, a bank's word is supposed to be its bond."
Counsel said that the court was not being asked to determine all of the issues that arose in the litigation.
The issue for this hearing, which is due to last up to 12 days, was whether it was permissible for DKL to include the MAC clause in letters of 19 December 2008 sent to all of the claimants.
Commerzbank has said that it plans to mount a "vigorous defence" to all the claims made against it.
A spokesman said: "During the forthcoming trial, Commerzbank will show that Dresdner Bank was entitled to reduce its employees' 2008 discretionary bonuses in the light of the significant deterioration in the Investment Bank's performance in late 2008."
It is set to argue that there was no basis for inferring from the August announcement or subsequent references to it, that the bank intended to enter into binding contractual commitments with each of its 3,000 or more relevant employees to pay out the whole of €400m, irrespective of the bank's performance, the state of the market or any other relevant consideration.
This was clear from the context of the announcement, the manner in which it was made, what was said and not said, its inherent uncertainties and the lack of any requirement on the part of the employees that they indicate acceptance or make any promise to the bank in return.
No contractually binding terms were entered into, or intended to be entered into, it contends.
The August announcement amounted to no more than the provision of information as to the bank's genuine intentions, while the claimants merely continued to do the jobs which they were well paid to do.
The decision to notify employees in the December letters that the bonus award was provisional and subject to review was entirely rational in the circumstances of the bank's financial performance.