A group of 104 City bankers who claim they are owed £42 million between them in unpaid bonuses today won a major victory in their battle to get the money.
Mr Justice Owen ruled that a verbal promise made by their employer constituted a binding contract.
But the High Court judge distanced himself from the public outcry over bank bonuses, saying his decision “did not concern the wider issues of remuneration in the banking industry.” He said: “The issue concerns the nature of contractual obligations.”
The individual claims range from £12,000 to £2 million and date back to 2008. Mr Justice Owen backed their case that investment bank Dresdner Kleinwort had failed to pay them their full contractual rights.
The bank, now owned by Commerz Bank AG, said it would appeal, insisting it had cut the bonuses by 90 per cent because of heavy losses. But as well as being forced to pay the £42 million, the case could cost Commerz Bank £20 million in legal fees.
Clive Zietman of Stewarts Law who represented 83 of the bankers, said: “Our clients are delighted. In our view it was quite wrong of the bank to renege on its commitment.
“By doing so, it acted contrary to well established principles of English contract and employment law. It would be a pity if this case were to continue since it would seem to us that the only beneficiaries of further action will be the lawyers, not the parties.”
After the ruling, Mark Levine, representing the other 21 bankers, said: “This case is likely to have significance whenever employment contracts are varied, particularly on the basis of verbal commitments or actions.”
The court heard that the bonuses should have been paid for the year ending December 2008 from a guaranteed minimum bonus pool. The bankers said there were “binding and enforceable contractual promises” made to front and middle-office employees.
But later, the bank decided to “move the goalposts” and introduce a “material adverse change” clause which would review the bonus awards. This clause is alleged to have been used as a basis for paying only 10 per cent of the awards or — in the case of four claimants — nothing.
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Commerz Bank defended the claims on the basis that it had been entitled to reduce its employees’ discretionary bonuses “in the light of the significant deterioration in the investment bank’s performance”. Privately the bankers are furious at having to fight their case after bank chairman Martin Blessing had said in evidence: “If the court rules that it was contractually binding, of course I will accept it and pay.”
It comes after Sir Mervyn King criticised bankers last week for defending bumper pay and profits in the face of “essential” reforms to the industry.
The Bank of England Governor pledged to take on “vested interests” as regulators battle to prevent another disaster. Last month Barclays chief executive Bob Diamond faced a shareholder revolt over his £17.7 million pay package.
