Finnegan v J & E Davy

• Jurisdiction: Ireland
• Judge: MR. JUSTICE T.C. SMYTH
• Judgment Date: 26 January 2007
• Neutral Citation: [2007] IEHC 18
• Court: High Court
• Docket Number: 7884P/2002
• Date: 26 January 2007

[2007] IEHC 18

THE HIGH COURT

DUBLIN

7884P/2002

FINNEGAN v J & E DAVY

EAMON FINNEGAN

PLAINTIFF

and

J & E DAVY

DEFENDANT

O'REILLY v IRISH PRESS 1937 71 ILTR 194

COWEY v LIBERIAN OPERATIONS LTD 1996 2 LLOYD'S REP 45

CLARK v NOMURA 2000 IRLR 766

CANTOR FITZGERALD INTERNATIONAL v HORKULAK 2004 EWCA CIV 1287

MALLONE v BPB INDUSTRIES 2002 IRLR 452

HORKULAK v CANTOR FITZGERALD INTERNATIONAL 2005 ICR 402

MARSHALL v NM FINANCIAL MANAGEMENT LTD 1995 4 AER 785

SADLER v IMPERIAL LIFE ASSURANCE CO OF CANADA LTD 1988 IRLR 388

BULL v PITNEY BOWES 1966 3 AER 384

JOHN ORR LTD v ORR 1987 ILRM 702

INTERFOTO PICTURES LIBRARY LTD v STILETTO VISUAL PROGRAMMES LTD 1988 1 AER 348

TERMS OF EMPLOYMENT INFORMATION ACT 1994 S3

Abstract:

Employment law - Deferred Bonus Scheme - Stockbrokers - Unilateral retrospective alteration of termination of contract - Loyalty of employees - Discretionary bonus scheme - Forfeiture - Consent - Whether deferred bonus payment scheme was lawful

Facts: The plaintiff claimed that he was entitled to a payment of Eur260K from his previous Stockbroking firm employer in respect of bonus payments arising from a deferred bonus payment scheme over several years that remained unpaid, which he alleged to have constituted an unfair restriction on his mobility as an employee The defendant alleged that the deferred payments scheme was to reward employee loyalty and that a broad margin of discretion existed in this regard.

Held by Smyth J., in finding for the plaintiff, that the deferral of the scheme was a form of forfeiture and that the defendant had sought to unilaterally and retrospectively alter the plaintiff's terms of employment. The plaintiff committed himself for six years of employment before he had been informed of the onerous nature of the condition.

Reporter: E.F.

1 APPROVED JUDGMENT OF MR. JUSTICE T.C. SMYTH DELIVERED ON FRIDAY, 26TH JANUARY 2007

2 JUDGMENT OF MR. JUSTICE T.C. SMYTH DELIVERED THE 26TH DAY OF JANUARY 2007

3 The Plaintiff who qualified as an accountant, decided on the completion of his articles not to remain in professional practice. He came to be employed with the Defendants after an interview with a Mr. Robbie Kelleher. He was employed initially for what was in effect a probationary period of one year and in this regard he was given in writing a document dated 13th September 1990 incorporating the terms of his engagement.

4 There is a conflict in the evidence on the recollection of the parties to the interview. Mr Kelleher candidly said he did not remember the details of the conversation and that his remembrance of employing the Plaintiff was vague. The Plaintiff on the other hand was firm that he asked about the bonus situation, by which expression I understood to be, in the nature of a general enquiry that an intending employee to a business might make - in short an exploratory enquiry as to the future financial prospects he might have with his prospective employer. While I accept that there are many aspects to the business of stockbroking, it is a business very largely concerned with the buying and selling of stocks and shares for customers or clients.

5 From such trading are profits made and I think it most probable that a young, qualified accountant would, on interview, have an eye to future prospects and be conscious that commission is charged on deals and be concerned that if he generated some multiples of his salary his services might be recompensed in some way, by way of increase in salary, some percentage of the commissions earned directly or indirectly, or some perquisite(s) which might flow from his successful endeavours or that of the firm as a whole. The Plaintiff said he was informed at the interview that there was a year- end bonus scheme which would depend on how the business did and how successful he was if he took up employment. Mr. Kelleher said he did not believe that he could have given the Plaintiff any such indication, as his recollection was that there was no bonus scheme in operation until 1991. I believe some form of incentive was given to the prospective employee. Mr. Kelleher opines it might have been a salary or general performance review, as in the case of a Mr. Conway who was employed with the Defendants.

6 While undoubtedly the Plaintiff may have had an interest in conveying his recollection of the interview - he was the person immediately concerned about his future prospects and Mr. Kelleher's recollection, he fairly states as "vague". Even if bonuses only first became payable by the Defendants in 1991 - this could have been put beyond yea or nay at the end of the Plaintiff's case when both the Plaintiff and Mr. Conway had given evidence, by the production of documentary evidence by the Defendants (the subject of some cogent criticism by Mr. Hugh O'Neill SC for the Plaintiff) - rather than relying on a recollection, which as to its details referable to the Plaintiff, was vague. Even if Mr. Kelleher's recollection as to the beginning of the payment of bonuses beginning in 1991 is correct such would be referable to the previous year's performance. While I accept his evidence that a person merely "in the door" could not expect to participate in the bonus scheme (however structured), nevertheless a person who had given satisfactory service during a probationary or first fixed year contract and thereafter, continuing to be employed, could reasonably expect some improvements in his rewards. Furthermore if bonuses were first paid in 1991 and it was determined in late 1991 or early 1992 its applicability I consider as a probability was held out to the anticipated beneficiaries in either January 1990 or January 1991, whichever is the applicable "starting date" and it is in my opinion probable that it was discussed with the potential staff ahead of either date i.e. in or about the time of the interview and engagement of the Plaintiff in August/September 1991. While not making adverse findings on the evidence of the Defendant's witnesses I think it more probable than not that the incentive of the payment of a bonus in the future was discussed at the interview and that the component basis described by the Plaintiff is credible. Whether bonuses would be an important element of the Plaintiff's remuneration is a relative expression, however the fact of the possibility of bonus payments was a relevant matter. I am satisfied that salary, bonus, holidays and conditions of employment was the totality of what would be held out to a person going to work - a view confirmed by Mr. McLaughlin in his evidence. (T2 p98 Q348/9) In the events the Plaintiff was engaged as an equity research analyst and at the end of the fixed term contract, and it contains no reference to bonus, he was kept in the employment by the Defendants. The Plaintiff began his employment in late October/early November 1990 and on the expiry of the fixed term contract he carried on as a research analyst until 1995; and, towards the end of that year he moved to the equity desk. At the end of the calendar year or perhaps January 1992 the Plaintiff avers that he had a meeting with Mr. Kelleher and was told that his bonus for the year was £3,000 and also he received an increase in salary. (T1 p17 Q12) Thereafter bonus payments accrued over the years in the amount set out in the document referred to as "salary and bonus data for the period 1991 – 2000", the accuracy of the information therein was not seriously contested nor was the fact that the Plaintiff's claim was to an entitlement of £65,000 in respect of bonus payments due from the year ended 31st December 1998 and £140,000 in respect of the year ended 31st December 1999 measured in the statement of claim as €260,296.31.

7 Prior to the transfer to the equity desk of which the Plaintiff's immediate superior was one Ronan Godfrey, the Plaintiff said he spoke with the overall head of the Equities Division, Mr. Kyran McLaughlin, and that when he sought an increase in salary he was informed by Mr. McLaughlin that he would revert to him on the issue at the bonus time. The Plaintiff said on enquiry, as to the source of the bonus, that he was told it would come from the equity desk and not to be concerned about the bonus issue.

8 In late 1995, early 1996 the Plaintiff met with Mr. McLaughlin and was given an increase in salary to £40,000 and a bonus of £35,000. The following year the lot of the Plaintiff improved when his salary increased to £45,000 and his bonus to £40,000.

9 The calendar year 1997 was the first full year of the Plaintiff on the equity desk, which he considered had been quite successful as a result of his efforts and he had estimated in his own mind that his bonus would be of the order of £90,000 to £110,000. His basis for the estimation was on his own performance and the performance of the company - which he averred was the basis indicted to him by Mr. Kelleher.

10 When the time came to discuss the amount of the bonus to be paid to the Plaintiff he met with Mr. McLaughlin who informed him that the bonus for the calendar year 1997 was going to be £50,000. The Plaintiff considered this unreasonable.

11 Mr. McLaughlin contacted the Plaintiff the following morning and told him his bonus for the year would be double what he had offered the previous day, i.e. £100,000. The Plaintiff was told that £60,000 of the figure would be paid as normal in the new year but that £40,000 of it would be deferred for one year, but if he left the employment of Davys he (the Plaintiff) would not receive the £40,000. Queried further by the Plaintiff on this Mr. McLaughlin informed him that if he joined a competitor of Davys he definitely would not receive the money, but if he left to pursue some other career he probably would receive the money. Therefore, such funds/moneys were not available for the purposes...