Sidley Austin has triumphed in defending Investec against a £6.3m High Court battle brought by two former traders against their 2010/11 bonuses.
Mr Justice Leggatt today ruled that the bank had not breached its contract in denying ex-head and deputy head of equity derivates Andrew Brogden and Robert Reid more than £6m in bonuses, as the pair had no contractual right to the money.
The former bankers argued that they had an unwritten agreement with the bank that their bonuses would be calculated based on an “economic value added” formula, rather than the profit and loss accounts of their desk.
However, the bank countered that no such oral agreement had taken place and that bonuses were discretionary. It defended its decision to hand £250,000 to both former bankers in 2010/11, instead of their demanded £6.3m.
Leggatt J said: “The task of the court is to judge what is fair simply in terms of adherence to contract. Judged by that standard, I conclude that the claimants had no right to be paid any bonus for the 2010/2011 year and the claim therefore fails.”
Brogden and Reid turned to turned to Doyle Clayton Solicitors partner Peter De Maria for the case. He instructed 11KBW’s John Cavanagh QC.
The bankers moved over to Investec from Santander in 2007 and were engaged in discussions about their bonuses every year. In 2008/09 Brogden and Reid were ultimately paid £1.45m and £1.4m respectively. The following year they settled on sums of £3m and £2.25m.
But in 2010/11 the bankers clashed with Investec after Brogden suggested a bonus pool of £5m for his team, not including his own bonus.
In an email from Brogden to head of capital markets Andrew Clapham he said: ”Obviously the reported P&L is not too pretty this year, but we would make the case that for a variety of reasons (some good, some bad) this is not a fair reflection of the achievements of the business.”
The traders claimed that they joined Investec from Santander partly due to an understanding that their bonuses would be calculated using an “economic value added” formula. But the bank argued that its bonus payments were discretionary and calculated by interest rates credited to the Structured Equity Derivatives desk by the Bank’s Central Treasury on the funds.
In June, the bank handed Brogden a discretionary bonus of £150,000 and Reid £100,000. However, the pair argued they were due £3.6m and £2.7m respectively.
They both resigned the following month and pursued the bank for breach of contract.
Leggatt J said: “It can be seen that the description of the bonus formula is on any view elliptical” and praised the claimants as “decent and highly talented individuals”. However, he ordered them to pay costs and denied leave to appeal the ruling.
The legal line-up
For the claimant Andrew Brogden and Robert Reid
11 KBW’s John Cavanagh QC and Amy Rogers instructed by Doyle Clayton Solicitors partner Peter De Maria
For the defendant Investec Bank
3 Verulam Buildings Jonathan Nash QC and Scott Ralston instructed by Sidley Austin partner Matthew Shankland