Stewarts and Mishcon prevail in £40m battle over banker bonuses
Stewarts Law and Mishcon de Reya have won a high-profile battle over €50m (£40m) in unpaid bankers' bonuses, with a judgment handed down today (9 May) in favour of a group of former Dresdner Kleinwort bankers. The High Court judgment, issued by Mr Justice Owen, found that their former employer Commerzbank acted in breach of its contractual obligations in slashing bonuses to 104 staff after it acquired Dresdner.
May 09, 2012 at 09:18 AM
3 minute read
Stewarts Law and Mishcon de Reya have won a high-profile battle over €50m (£40m) in unpaid bankers' bonuses, with a judgment handed down today (9 May) in favour of a group of former Dresdner Kleinwort bankers.
The High Court judgment, issued by Mr Justice Owen, found that their former employer Commerzbank acted in breach of its contractual obligations in slashing bonuses to 104 staff after it acquired Dresdner.
Commerzbank had sought to rely on its retrospective implementation of a material adverse change clause – a legal provision often found in corporate takeovers that enables the acquirer to refuse to comply with certain terms if unforeseen events make the target materially less valuable.
However, Owen ruled that this constituted a breach of the implied terms of the employees' contracts which entitled them to receive their full bonus payments.
The case, which was first filed with the High Court in September 2009, involved claims brought by the former Dresdner bankers against Commerzbank, following a 90% bonus cut announced after it merged with Dresdner Bank in May 2009.
Before the takeover, Dresdner staff were informed that a €400m (£322m) pot had been put aside to cover bonus expenses. However, after the tie-up, the bank sent out an email saying that bonuses would be reduced, arguing they were discretionary.
The Court of Appeal rejected Commerzbank's attempt to dismiss the case in March last year on a summary basis, leaving the dispute on course for the recent hearing before the High Court.
The case is the largest UK legal dispute seen over bankers' bonuses in the wake of the financial crisis three years ago, when a number of institutions moved to slash bonus awards, and was being closely watched by the banking industry.
Stewarts commercial litigation head Clive Zietman advised 83 of the bankers alongside Nigel Tozzi QC from 4 Pump Court.
Mishcons represented the remaining 21 bankers, fielding a team under employment partners Mark Levine and Daniel Naftalin, with Essex Court's Andrew Hochhauser QC and David Craig instructed as counsel.
Linklaters employment partner Nicola Rabson advised Commerzbank, instructing Matrix Chambers Thomas Linden QC.
Zietman commented: "The judgment delivered this morning represents a decisive victory for our clients. The court held that the bank was bound under the English law of contract to make payments to its employees and it refused to do so. That refusal was wholly unwarranted and without merit as a question of law.
"Employers cannot make serious promises to their employees and then renege on those promises. In this case promises were also made to the Financial Services Authority. The bank clearly thought it could do as it wished. It was mistaken."
Click here for the full judgment.
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