The High Court has decided that a bank was bound by bonus awards as originally announced and could not reduce them to take account of company performance.
The claimants were contractually entitled to be considered for a discretionary annual bonus. The established procedure was that individual allocations were made from a bonus pool each November and bonuses were paid in January. However, in August 2008, to reassure staff following speculation about a possible company sale, the Bank announced (by way of a statement from its Chief Executive at a "town hall" meeting) a "guaranteed minimum bonus pool" of €400m.
In December 2008 individual discretionary bonuses were awarded, to be paid in January as usual, but subject to a "material adverse change" clause: the bonuses would not be paid in the event of material changes in the Bank's position. Following the sale of the Bank in January 2009, and in the light of company performance, these discretionary bonuses were reduced by 90%.
As is typically the case with disputes over the contractual or discretionary nature of bonuses, the issue turned on the Court’s view of the documentation and the way in which staff had been told about the bonus pool. Here, the High Court concluded that the August 2008 announcement was a contract to create a €400m bonus pool. The announcement was intended, and was sufficiently certain, to create binding legal relations; the Bank had made an offer of a bonus pool and any requirement on employees to communicate their acceptance of the Bank’s offer had been impliedly waived.
Since the August announcement created a binding obligation, the Bank accepted that it was not entitled to introduce the "material adverse change" clause in December. The Court decided that the clause would in any event have been a breach of the Bank’s implied duty of mutual trust and confidence to their employees.