Investec Bank has won a £6m High Court battle against the “driving forces” behind its structured products business, following a three-year wrangle over bonuses.
Andrew Brogden and Robert Reid, previously head and deputy head of equity derivatives at the bank, were suing Investec for a combined £6.3m in unpaid bonuses they claimed they were entitled to under the terms of the contract signed when they joined in 2007.
Each received a basic salary of £120,000 as well as remuneration in the form of a bonus. In the first year Mr Brogden and Mr Reid pocketed “guaranteed” bonuses of £6.2m and £3.8m, with future years’ remuneration to be based on percentage of ‘economic value added’ by the unit.
Following the first year, there were disputes as to how much bonus they should receive but these were “resolved amicably”. However, the pair left in 2011 when they were free to do so without penalty, after an amicable agreement for their final year was not reached.
The two argued in the High Court that the bonuses were not discretionary but a “matter of contractual right”. The judge found against them.
According to the bank’s calculation, the claimants were not entitled to any bonus for that year “because Investec calculated that such EVA was nil”.
However, the claimants contended they were entitled to a bonus pool of over £8m. In June 2011 Investec made discretionary bonus payments of £150,000 to Mr Brogden and £100,000 to Mr Reid, while maintaining that no bonus was contractually due.
In September 2012, the two commenced litigation action. The particular of claims said Mr Brogden and Mr Reid should have been paid £3.6m and £2.7m respectively.
Judge Leggatt concluded it was a discretionary bonus and not a contractual one, but added that despite this the two were “decent and highly talented individuals”.
Judge Leggatt said: “What is fair in this context is dependent on perspective. Mr Brogden and Mr Reid believe that they developed a retail structured product business for Investec which, at least in a broad sense, generated economic value for the bank of which they should be given a share.
“If the lens is broadened further, I doubt there are many outside the world in which the claimants operate who would think that they were under-rewarded by Investec. The task of the court is not to adopt either of those perspectives but 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.”
