High Court dismisses bonus claim by former Investec traders

Two former traders at a specialized bank and asset manager have lost their legal claim for bonuses that they alleged that they were entitled to during their employment.

Andrew Brogden and Robert Reid, the former head and deputy head of Investec’s equity derivatives desk, brought a claim for breach of contract against their former employer, claiming that the firm had failed to honour a verbal agreement to pay them a set amount for their bonuses during their employment. They resigned in 2011 and subsequently launched a claim in the High Court for £6 million in bonuses that they claimed had been withheld from them.

The case came to the High Court in June 2014, with both of the claimants giving evidence in their favour at the hearing. Mr Brodgden and Mr Reid claimed that the issue of contractual bonuses were integral to their discussions with Investec before they joined the bank in 2007, stating that they would not have joined the bank if their bonuses were simply discretionary. They therefore claimed that they had a contractual right to receive a set bonus each year and that Investec had breached their contracts of employment by failing to pay them the correct amount of bonus, alleging that the amount of bonus that they should have been paid should have been set by an “institutional market rate” formula rather than the amount of profit or loss that the bank had made.

Investec’s defence to the claim was that the bank had not made a pre-contractual agreement with the two traders to pay them a set amount of bonus and that the amount of bonus that they would receive was discretionary in nature. The bank said it had paid bonuses to each of the men in each year and that in 2011 it had paid £150,000 to Mr Brogden and £100,000 to Mr Reid.

The High Court dismissed Mr Brogden and Mr Reid’s claim for breach of contract, holding that there had been no pre-contractual agreement to pay the claimants a set contractual bonus and that the bonus scheme was in fact discretionary. Mr Justice Leggatt dismissed the claim that their bonuses should have been based on the ‘institutional market rate’ as “wholly incredible” but also stated that he found the claimants’ evidence to be honest, although not reflective of events that had occurred at the time of the contract.

Mr Brogden and Mr Reid were ordered to pay the legal costs of Investec in defending the claim, at more than £1.5 million.

Chris Hadrill, an employment solicitor at Redmans, commented on the High Court case: “This case demonstrates the risks that claimants in the High Court take when attempting to prove that there has been a breach of contract – whether this is a breach of their contract of employment or otherwise. Although the rewards of legal action can be high if you’re successful, this case has apparently cost the claimants £1.5 million in Investec’s legal costs alone – let alone their own legal costs.”