Mishcon de Reya and Stewarts Law have won their bid to force Dresdner Kleinwort to pay out bonuses promised to its investment bankers prior to its takeover by Commerzbank in 2008.
The 104 ex-bankers launched a High Court claim in September 2009, with Stewarts Law partner Clive Zietman instructed for 83 claimants while Mishcon acted for 21.
Nigel Tozzi QC of 4 Pump Court was instructed by Zietman to lead the battle for 83 claimants, while Mishcon instructed Essex Court’s Andrew Hochhauser QC.
Linklaters partner Nicola Rabson instructed Matrix Chambers’ Thomas Linden QC to defend the claim for the German bank.
The claimants alleged that in June 2008 Dresdner Kleinwort had told the Financial Services Authority that it had taken action to mitigate the risk of significant staff defections by creating a staff retention scheme that included a minimum bonus pool.
Instead of receiving their traditional Christmas bonus letter, the claimants were told that any bonus would be subject to a so-called material adverse change clause, effectively meaning that the bonus would be paid in February pending the financial performance of Dresdner Kleinwort. Consequently payments to staff were reduced by 90 per cent.
The failure of Dresdner Kleinwort to pay bonus deals as stated in December “was wrongful and in breach of express and implied terms”, the claimants had argued.
Mr Justice Owen upheld the claim.
Welcoming the ruling Mishcon partner Mark Levine said: “Dresdner made repeated promises to employees prior to its sale to Commerzbank in an attempt to avoid a mass exodus of staff - namely that they would be financially rewarded from a guaranteed retention pool for remaining at the bank and performing well.
“We welcome the High Court ruling that these promises constituted a binding contract and, with the staff having performed their side of the contract, that the bank breached it by refusing to honour the payments it had promised. This case is likely to have significance whenever employment contracts are varied, particularly on the basis of verbal commitments or actions.”
Zietman added: “Our view is 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. Our clients would now very much like to be able to say that these proceedings are closed.”
However, Commerzbank said that it will appeal the decision.A spokesperson said: “We’re disappointed with the court’s decision and will seek leave to appeal. The bank believes that the decision to reduce discretionary bonuses in light of €6.5bn of losses at Dresdner Kleinwort for 2008 was responsible and justified.
“The main argument revolves around whether the announcement on 18 August amounted to a legally binding agreement. It’s the bank’s submission that there’s every prospect that the Court of Appeal would come to a different view on this matter.”
The legal line up:
For the claimants:
Essex Court Chambers’ Andrew Hochhauser QC and Essex Court Chambers’ David Craig, instructed by Mishcon de Reya partners Mark Levine and Daniel Naftalin.
4 Pump Court’s Nigel Tozzi QC and 4 Pump Court’s Kate Livesey, instructed by Stewarts Law partner Clive Zietman.
For the defendants:
Matrix Chambers’ Thomas Linden QC, Brick Court Chambers’ Martin Chamberlain and Oliver Jones also of Brick Court, instructed by Linklaters partner Nicola Rabson.