The High Court has considered a financial trader’s breach of contract claim which related to the way in which a bank exercised its discretion to award him an annual bonus in Paturel v DB Serviced Ltd .
Mr Paturel was employed by Deutsche Bank (DB) on its money market derivatives desk and was entitled to a discretionary bonus. Mr Paturel claimed that before he commenced employment, he had been led to believe that his annual bonus would be between in the region of 5-10% of the profits he generated. However, in 2008 and 2009 Mr Paturel was awarded a discretionary bonus of 1% of the profits that had been generated in the relevant year. Mr Paturel alleged that he was told that the low bonuses were attributable to other losses within the bank and that all members of the money market derivatives desk had been treated similarly. However, he discovered that two of his colleagues, who were entitled to guaranteed bonuses, had received bonuses of 8% and 11% of the profits they had generated.
Mr Paturel issued breach of contract proceedings against DB and claimed compensation for the loss of bonus in 2008 and 2009. He alleged that the way in which DB has exercised its discretion breached the implied duty of mutual trust and confidence, as amongst other things, DB had failed to give a proper explanation for the reduced bonus, had breached his reasonable expectation that he would receive a bonus of at least 5% and had given misleading statements as to how his colleagues had been treated.
The High Court held that Mr Paturel’s claims had no real prospect of success and dismissed his claim. Mr. Paturel had a “mere expectation” that the bonus would be a minimum of 5%, rather than a “reasonable expectation” and any breach of the duty of mutual trust and confidence which had occurred after the bonus had been awarded (in relation to the explanation given to Mr Paturel), was irrelevant.
Although in this case there was no breach of contract, this was largely due to the fact that whilst Mr Paturel’s bonus was discretionary, his colleagues’ bonuses were guaranteed. The outcome may well have been different if all of the employees had only been entitled to a discretionary bonus. Employers should be cautious about awarding substantially different bonuses to employees who are entitled to a discretionary bonus on the same basis and ensure that they can justify any differential treatment.