Brader v Commerzbank: Enforceability of Discretionary Bonus Promises & Contractual Obligations
In Daniel John Brader and others v Commerzbank AG, the Singapore High Court addressed whether employees have a legally enforceable right to a bonus. Ten former employees of Dresdner Bank's Singapore branch sued Commerzbank, Dresdner Bank's acquirer, for breach of contract, claiming that Dresdner Bank made contractually binding promises to pay bonuses from a specifically set aside fund. The court, presided over by Lionel Yee JC, found in favor of the plaintiffs, holding that the 18 August Announcement created a binding contract. The court awarded the plaintiffs damages for breach of contract, representing the unpaid balance of the bonuses.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Judgment for Plaintiffs
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore High Court case concerning the enforceability of bonus promises made to Dresdner Bank employees before its acquisition by Commerzbank. The court found a binding contract existed.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Daniel John Brader and others | Plaintiff | Other | Judgment for Plaintiff | Won | Kenneth Tan, Soh Wei Chi |
| Commerzbank AG | Defendant | Corporation | Judgment for Defendant | Lost | Lee Eng Beng, Lai Yew Fei, Alec Tan |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Lionel Yee | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Kenneth Tan | Kenneth Tan Partnership |
| Soh Wei Chi | Kenneth Tan Partnership |
| Lee Eng Beng | Rajah & Tann LLP |
| Lai Yew Fei | Rajah & Tann LLP |
| Alec Tan | Rajah & Tann LLP |
4. Facts
- Dresdner Bank's investment banking division (DKIB) faced staff departures due to uncertainty about its future.
- Dr. Jentzsch announced a minimum bonus pool of €400 million to retain employees.
- The announcement stated the bonus pool was 'guaranteed' but not an individual guarantee.
- Commerzbank acquired Dresdner Bank and subsequently reduced the announced bonuses by 90%.
- Plaintiffs, former DKIB employees, sued Commerzbank for the unpaid bonus balance.
- The 19 December Letter included a material adverse change (MAC) clause, allowing for review of the bonus.
- DKIB reported operating losses of €6.275 billion.
5. Formal Citations
- Daniel John Brader and others v Commerzbank AG, Suit No 486 of 2011, [2013] SGHC 284
6. Timeline
| Date | Event |
|---|---|
| Allianz decided to separate Dresdner Bank’s investment banking and commercial banking businesses. | |
| Eddie Listorti proposed securing a bonus pool at FICC Sales & Trading level. | |
| The Financial Services Authority notified Dresdner Kleinwort of its decision to place DKIB’s UK-regulated entities on the FSA’s Firm Watchlist. | |
| Dr Jentzsch replied to the FSA regarding concerns about the planned restructuring of Dresdner Bank. | |
| Management Board meeting held where Dr Jentzsch said that the pool was to be at the expense of Allianz. | |
| Dr Jentzsch sent an email setting out what he planned to say on 18 August 2008. | |
| Meeting of the Management Board. | |
| Dr Jentzsch announced the retention plan to DKIB’s employees at the Business Update. | |
| FAQ posted on DKIB’s intranet regarding Allianz’s commitment to the bank. | |
| Presentation by Dr Jentzsch to Allianz. | |
| Mark Hindle announced via email that Letter Day would be 19 December 2008. | |
| Commerzbank announced that it would receive an initial €8.2 billion in guaranteed funding commitments and €15 billion in debt guarantees from the German government’s stabilisation fund. | |
| Mr Blessing wrote to Dr Walter to express his opinion that the minimum bonus pool could be an emotional burden for the integration of Dresdner Bank and the Defendant. | |
| Mr Blessing wrote to Mr Diekmann regarding the variable remuneration in the sector. | |
| A letter was sent to all DKIB employees who were eligible to be considered for discretionary bonuses. | |
| Dr Jentzsch explained the import of the MAC clause at a Business Update. | |
| Announcement that the whole of Dresdner Bank would be sold to the Defendant. | |
| The German government approved the provision of further funding and capital to the Defendant. | |
| Commerzbank AG became the wholly owned subsidiary of Dresdner Bank AG. | |
| Martin Blessing and Eric Strutz sent an email to all Dresdner Bank employees announcing that no bonuses would be paid for 2008. | |
| Provisional bonus awards issued on 19 December 2008 were reduced by 90% pro rata. | |
| Judgment reserved. |
7. Legal Issues
- Breach of Contract
- Outcome: The court found that Dresdner Bank made a binding promise to pay a minimum bonus, and Commerzbank breached that contract.
- Category: Substantive
- Sub-Issues:
- Failure to pay promised bonus
- Breach of implied terms
- Related Cases:
- [1893] 1 QB 256
- [1987] SLR(R) 674
- [2009] 2 SLR(R) 332
- (1875) LR 10 Exch 153
- (1876) 1 App Cas 554
- [1991] 1 QB 1
- [1994] 3 SLR(R) 250
- [2004] 2 SLR(R) 594
- [1964] 1 WLR 349
- [2003] 1 Lloyd’s Rep 1
- (1932) 147 LT 503
- [2000] 2 SLR(R) 30
- [2000] IRLR 766
- [2004] IRLR 942
- [1998] AC 20
- [2010] SGHC 352
- [2013] 2 SLR 577
- [2007] 3 SLR(R) 537
- [2010] IRLR 715
- [2012] EWHC 1189 (QB)
- [2013] EWCA Civ 394
- Intention to Create Legal Relations
- Outcome: The court found that the parties intended to be bound by the 18 August Announcement, considering the context of employee retention and the nature of the promise.
- Category: Substantive
- Sub-Issues:
- Objective assessment of intent
- Reliance on promises
- Related Cases:
- [2004] 2 SLR(R) 594
- Consideration
- Outcome: The court found that the plaintiffs' continued employment and forbearance from resigning constituted valid consideration.
- Category: Substantive
- Sub-Issues:
- Forbearance from resigning
- Practical benefit to employer
- Related Cases:
- (1875) LR 10 Exch 153
- (1876) 1 App Cas 554
- [1991] 1 QB 1
- [1994] 3 SLR(R) 250
- Certainty of Contract Terms
- Outcome: The court found that the terms of the 18 August Announcement were sufficiently certain, despite the discretionary nature of individual bonus allocations.
- Category: Substantive
- Sub-Issues:
- Discretionary bonus allocation
- Minimum bonus pool
- Related Cases:
- [2009] 2 SLR(R) 332
- (1932) 147 LT 503
- Implied Term of Trust and Confidence
- Outcome: The court found that there was no breach of the relationship of trust and confidence.
- Category: Substantive
- Sub-Issues:
- Employer's conduct
- Damage to relationship
- Related Cases:
- [1998] AC 20
- [2010] SGHC 352
- [2013] 2 SLR 577
8. Remedies Sought
- Payment of balance 90% of bonuses declared in the 19 December Letter
- Damages
- Interest
- Costs
9. Cause of Actions
- Breach of Contract
- Breach of Implied Term of Trust and Confidence
10. Practice Areas
- Commercial Litigation
- Employment Litigation
- Banking Litigation
11. Industries
- Banking
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Carlill v Carbolic Smoke Ball Co | Queen's Bench | Yes | [1893] 1 QB 256 | England and Wales | Cited as a seminal case regarding unilateral contracts and the waiver of the requirement of acceptance. |
| Dickson Trading (S) Pte Ltd v Transmarco Ltd | Court of Appeal | Yes | [1987] SLR(R) 674 | Singapore | Cited for the principle that Dresdner Bank would come under an obligation not to revoke the offer should the Plaintiffs commence performance. |
| Gay Choon Ing v Loh Sze Ti Terence Peter and another appeal | Court of Appeal | Yes | [2009] 2 SLR(R) 332 | Singapore | Cited for the definition of consideration and the requirement of certainty in contract terms. |
| Currie and others v Misa | Exchequer Court | Yes | (1875) LR 10 Exch 153 | England and Wales | Cited for the traditional definition of consideration. |
| Manuel Misa v Raikes Currie, G Grenfell Glyn, and Others | House of Lords | Yes | (1876) 1 App Cas 554 | England and Wales | Cited for affirming the traditional definition of consideration. |
| Williams v Roffey Bros & Nicholls (Contractors) Ltd | Court of Appeal | Yes | [1991] 1 QB 1 | England and Wales | Cited for the modern analysis of consideration, recognizing factual or practical benefit to the promisor. |
| Sea-Land Service Inc v Cheong Fook Chee Vincent | Court of Appeal | Yes | [1994] 3 SLR(R) 250 | Singapore | Cited for summarizing the facts and holdings of Williams v Roffey Bros & Nicholls (Contractors) Ltd. |
| Chwee Kin Keong and others v Digilandmall.com Pte Ltd | High Court | Yes | [2004] 2 SLR(R) 594 | Singapore | Cited for the principle that the intention to create legal relations is essential for a valid contract. |
| Edwards v Skyways Ltd | High Court | No | [1964] 1 WLR 349 | England and Wales | Cited for the principle that a party who took the position that there was no such intention would have a heavy onus where the context of the agreement was business relations and not social or domestic matters. |
| Mamidoil-Jetoil Greek Petroleum Company SA and another v Okta Crude Oil Refinery AD | Court of Appeal | No | [2003] 1 Lloyd’s Rep 1 | England and Wales | Cited for the principle that a party had previously taken the position that a contract was binding, only to change its position subsequently. |
| WN Hillas & Co Ltd v Arcos Ltd | House of Lords | Yes | (1932) 147 LT 503 | England and Wales | Cited for the principle that the court should construe business documents fairly and broadly, without being too astute or subtle in finding defects. |
| Latham Scott v Credit Suisse First Boston | Court of Appeal | No | [2000] 2 SLR(R) 30 | Singapore | Cited for the principle that unless the bonus had been expressed to be guaranteed, an employee in Latham’s position could not claim to be legally entitled to a bonus, the granting and quantum of which are entirely at the discretion of the employer. |
| Clark v Nomura International plc | Queen’s Bench Division of the High Court of England and Wales | No | [2000] IRLR 766 | England and Wales | Cited for the principle that the employer’s discretion is not unfettered. |
| Cantor Fitzgerald International v Horkulak | Court of Appeal of England and Wales | No | [2004] IRLR 942 | England and Wales | Cited for the principle that the claimant was entitled, had he remained in the defendants’ employment, to a bona fide and rational exercise by [the defendant] of their discretion as to whether or not to pay him a bonus and in what sum. |
| Malik v Bank of Credit and Commerce International SA (In Compulsory Liquidation) | House of Lords | Yes | [1998] AC 20 | England and Wales | Cited for the principle that there is a term implied in law that an employer shall not without reasonable and proper cause conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. |
| Wong Leong Wei Edward and another v Acclaim Insurance Brokers Pte Ltd and another suit | High Court | Yes | [2010] SGHC 352 | Singapore | Cited for the principle that a claimant will be entitled to damages from a former employer if he or she can prove that the former employer was in breach of the implied term of trust and confidence and which resulted in loss of future employment prospects. |
| Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd | High Court | Yes | [2013] 2 SLR 577 | Singapore | Cited for the principle that unless there are express terms to the contrary or the context implies otherwise, an implied term of mutual trust and confidence, and fidelity, is implied by law into a contract of employment under Singapore law. |
| Lee Chee Wei v Tan Hor Peow Victor and others and another appeal | Court of Appeal | Yes | [2007] 3 SLR(R) 537 | Singapore | Cited for the principle that the function of pleadings is to give fair notice of the case which has to be met and to define the issues which the court will have to decide on so as to resolve the matters in dispute between the parties. |
| Saleem Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbak BA | Employment Appeal Tribunal | No | [2010] IRLR 715 | England and Wales | Cited for the principle that an inference of acceptance by an employee would not readily be drawn where the employer purported to unilaterally vary terms to the detriment of the employee. |
| Attrill & Others v Dresdner Kleinwort Limited & Another | High Court of England and Wales | No | [2012] EWHC 1189 (QB) | England and Wales | Cited as similar proceedings initiated against the Defendant by its former employees over the same subject matter in various other jurisdictions. |
| Dresdner Kleinwort Limited & Another v Richard Attrill & Ors | Court of Appeal | No | [2013] EWCA Civ 394 | England and Wales | Cited as similar proceedings initiated against the Defendant by its former employees over the same subject matter in various other jurisdictions. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Evidence Act (Cap 97, 1997 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Bonus Pool
- Discretionary Bonus
- Guaranteed Bonus
- Material Adverse Change Clause
- Retention Plan
- Business Update
- Information Cascade
- Letter Day
- DKIB
- Dresdner Bank
- Commerzbank
- Employee Handbook
15.2 Keywords
- bonus
- contract
- employment
- dresdner bank
- commerzbank
- singapore
- banking
- discretionary bonus
- guaranteed bonus
- material adverse change
16. Subjects
- Contract Law
- Employment Law
- Banking
- Bonus Entitlement
17. Areas of Law
- Contract Law
- Employment Law
- Banking Law