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Grounds publishedDecided 7 Jan 2014
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High Court

Daniel John Brader and others v Commerzbank AG

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[2013] SGHC 284Case no. Suit No 486 of 2011

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  1. Lionel Yee JC:

  2. [1] Are there circumstances in which an employee can have a legally enforceable right to a bonus? That was the question that arose for decision in this case. The Plaintiffs’ former employer had promised its employees that they would be paid bonuses from a pool of funds that had been specifically set aside for that purpose. The bonus that was eventually paid out did not accord with that promise, and the Plaintiffs brought this action seeking to enforce it.

  3. The Facts

  4. The Parties

  5. [2] Dresdner Bank AG (“Dresdner Bank”) was at all material times a bank incorporated in Germany. It had a Singapore branch (“DB Singapore”) and a global investment banking division, which was not a separate legal entity, known as Dresdner Kleinwort or DKIB. The Plaintiffs are 10 employees who formerly worked in DB Singapore and within DKIB. Dresdner Bank was originally a wholly owned subsidiary of Allianz SE (“Allianz”). However, it was sold and became a wholly owned subsidiary of the Defendant, Commerzbank AG (“Commerzbank”), from 12 January 2009. By operation of German law, all the assets and liabilities of Dresdner Bank passed to Commerzbank. It is for that reason that Commerzbank is the named Defendant in this suit.

  6. The Witnesses

  7. [3] All of the Plaintiffs gave evidence in court. In addition, they relied heavily on the evidence of Dr Stefan Jentzsch, who was formerly a member of the Management Board of Dresdner Bank (“the Management Board”) and the Chief Executive Officer (“CEO”) of DKIB.

  8. [4] The Defendant in turn put forward four witnesses:

  9. (a) Michael Paul Reuther, a member of the Commerzbank’s Board who took over as CEO of DKIB from 12 January 2009;

  10. (b) Joerg Hessenmueller, formerly the Global Head of Financial Control of DKIB and the Head of the Finance Department of the Investment Banking Division of the Commerzbank Group from 12 January 2009;

  11. (c) Helmut Merkel, General Counsel for Dresdner Bank until May 2009; and

  12. (d) Lee Lay Hoon, an employee of DB Singapore working in the Human Resources (“HR”) Department.

  13. Background

  14. The payment of discretionary bonuses by DKIB

  15. [5] Before going into the material events, it is useful to set out the usual process by which DKIB issued discretionary bonuses for context. The 1 to 9 Plaintiffs’ respective employment contracts stated that, “The Bank pays a Performance Variable Bonus at its discretion.” The 10 Plaintiff’s employment contract stated, “As you are aware, the Bank makes discretionary bonus awards and you will be eligible for consideration in early 2009 and annually thereafter.” All of the Plaintiffs’ employment contracts provided that the terms of their employment would be governed by the terms and conditions in the prevailing Employee Handbook. The Employee Handbook included the following clause:

  16. [6] Accruals were made for a bonus pool in Dresdner Bank’s accounts on a monthly basis from the start of the financial year. The amount accrued could be increased or decreased during the year and the final bonus pool could be a different amount from the sum of the 12 months’ accrual. The fact that accruals for bonuses were made on a monthly basis in the accounts did not mean that there was a segregated pool of money set aside in a special account for bonus payments as these accruals were merely book entries. However, the bonus accruals would be communicated to staff members throughout the year, and they would therefore be aware of fluctuations in the bonus pool.

  17. [7] The CEO of DKIB would negotiate an overall bonus pool with the CEO of Dresdner Bank. These negotiations would be influenced by a parallel process between the CEO of DKIB and his direct subordinates as to how much of a bonus pool they were requesting for their respective divisions. A similar process would be repeated down the hierarchy, ending with that between line managers and the individuals in their teams. These figures would be added up and communicated up the line to the CEO’s direct subordinates, who would then lobby the CEO for their division’s share of the overall bonus pool. Once the overall bonus pool was approved by the CEO of Dresdner Bank, the CEO of DKIB would then decide how to allocate that pool among his direct subordinates, with the process again repeated down the line.

  18. [8] Even after the overall bonus pool had been decided and approved for DKIB and a pool had been allocated to each of the divisions, the CEO of DKIB could still reallocate the pool among the divisions if he wished to do so. This was to accommodate uncertainties in any of the businesses and the economy. Further, a contingent amount of about 3-5% of the overall pool was usually kept so that the CEO of DKIB could deal with ad hoc requests for bonuses without having to reallocate money among the divisions. If no such contingencies materialised, the unused amount would be retained by Dresdner Bank. During the time that Dr Jentzsch was the CEO of DKIB, the final bonus pool was usually decided in November or December and the day on which the bonus awarded to individual employees was made known to them (known colloquially as “Letter Day”) was in December.

  19. The material facts

  20. [9] I now turn to the background of these proceedings. I will set out as much of the facts as are necessary to enable the parties’ cases to be understood. However, the details will be canvassed more extensively together with the discussion of the issues that arise for decision below.

  21. [10] In March 2008, Michael Diekmann, the Chairman of the Dresdner Bank Supervisory Board (“the Supervisory Board”) and the CEO of Allianz announced to the Supervisory Board that Allianz had decided to separate Dresdner Bank’s investment banking and commercial banking businesses as a prelude to exiting the investment banking business, either by selling DKIB, dramatically reducing the size of DKIB’s operations, or by winding DKIB down. This decision was subsequently made public. The Plaintiffs asserted that the employees of DKIB feared for the future of their careers at DKIB as new owners were not likely to retain existing personnel and there would be no work for them if DKIB were to be wound down. In his AEIC, Dr Jentzsch explained that employees were becoming increasingly restless in April and May 2008 given the uncertainty over their future and expected lay-offs, with morale and motivation deteriorating rapidly. On 16 May 2008, he received an email from Eddie Listorti, the Head of Fixed Income Currency and Commodities (“FICC”), which listed 10 individuals who had resigned and a further four who had resigned but who had been persuaded subsequently to stay. It also named the individuals in the foreign exchange options trading, interest rates and sales teams who were at risk of leaving DKIB. Eddie Listorti proposed the following solution:

  22. [11] Dr Jentzsch in turn raised these concerns with Mr Diekmann, Dr Helmut Perlet (Chief Financial Officer (“CFO”) of Allianz), Dr Herbert Walter, Wulf Meier and Klaus Rosenfeld (who were the CEO, Head of Human Resources and CFO of Dresdner Bank respectively). In an email dated 16 May 2008, he said:

  23. [12] In July 2008, Dr Jentzsch was asked for an explanation for DKIB’s poor performance in the second quarter of the year. One of the issues he cited was:

  24. [13] These were not merely internal concerns: the events at DKIB had attracted the attention of the Financial Services Authority (“FSA”) in the United Kingdom. On 23 May 2008, the FSA wrote to Dr Jentzsch to notify him of its decision to place DKIB’s UK-regulated entities on the FSA’s Firm Watchlist, which was one step short of having its banking licence revoked. The FSA raised concerns about the planned restructuring of Dresdner Bank and the destabilising effect this had. It noted the “continuing uncertainty among management and staff could lead to a significant number of key individuals leaving or becoming disaffected, which may pose a heightened risk to [DKIB] where management acknowledge that resources are already stretched within support functions”. The FSA said that it would consider removing DKIB from the Firm Watchlist when, among other things, an “assessment of the key risks to the UK operations has been completed, including the risk of the loss of key staff and the mitigation plans [DKIB] has in place”. DKIB was required to provide the FSA with its plan to address these issues by the end of June 2008. Dr Jentzsch replied on 30 June 2008. He said:

  25. [14] Dr Jentzsch explained that it was a broadly shared view among the senior executives of Dresdner Bank and Allianz that the best way to keep employees from leaving the bank and keep them motivated to do the best job possible despite the fact that they had limited career prospects left at the bank was to provide them with a financial incentive. He therefore formulated a retention plan and cleared this with the Compensation Committees of Dresdner Bank and Allianz as well as the Management Board. He also informed key members of the senior management in Allianz and Dresdner Bank that he would formally announce the plan to DKIB employees at a Business Update (also known as a Town Hall Meeting) on 18 August 2008. By way of background, Business Updates were monthly meetings during which Dr Jentzsch would inform employees about DKIB’s business and major decisions taken. They would usually be held in London or Frankfurt, with a live screening at the other location as well as in New York City. Employees watching the Business Update at any one of these locations could ask questions in real-time. In addition, Business Updates were broadcast on DKIB’s intranet to allow any employee, including those in Singapore, to listen in. Such employees could send questions via email to a dedicated email address, and the questions would be read to Dr Jentzsch by a member of the Internal Communications Department. Employees were encouraged to attend Business Updates and they were publicised in advance by email and pop-up reminders on computer screens in the week leading up to the meeting.

  26. [15] As planned, Dr Jentzsch announced the retention plan to DKIB’s employees at the Business Update on 18 August 2008 (“the 18 August Announcement”). The precise content and the correct understanding of his announcement were disputed by the parties and will be addressed below at [29]–[61]. However, it was not disputed that statements to the following effect were made:

  27. (a) there would be a minimum bonus pool of €400 million for 2008;

  28. (b) this represented a reduction of approximately 25% from the bonus pool in 2007;

  29. (c) there was potential for the size of the pool to be increased if certain targets were exceeded; and

  30. (d) the announcement did not give rise to individual guarantees and the pool would be allocated on a discretionary basis by reference to individual performance.

  31. [16] Subsequently, further statements were made by Dr Jentzsch in later Business Updates and by the HR Department of DKIB in intranet postings that were consistent with the 18 August Announcement (see [40]–[42] and [99] below). Dr Jentzsch also initiated what he termed an “information cascade”, directing employees in supervisory roles to ensure that their subordinates understood the 18 August Announcement and to reiterate that a minimum bonus pool had been set aside. He explained that the minimum bonus pool was unique and that he wanted to ensure that his announcement was “emphasized, understood and relied upon by everyone”, so that the bonus pool’s purpose of stabilising DKIB could be achieved. In the meantime, it was announced that the whole of Dresdner Bank would be sold to the Defendant by 1 January 2009.

  32. [17] On 21 October 2008, Mark Hindle, DKIB’s Head of HR announced via email that Letter Day would be 19 December 2008 and that the bonuses announced would be paid in full with January salaries through the January payroll. Reference was also made to the bonus pool and the employees were reminded that individual bonus awards continued to be discretionary and determined by the relevant management.

  33. [18] On 19 December 2008, a letter was sent to all DKIB employees who were eligible to be considered for discretionary bonuses, including the Plaintiffs (“the 19 December Letter”). This stated:

  34. [19] The parties referred to the italicised paragraph as the material adverse change (“MAC”) clause. The inclusion of the MAC clause came as a surprise to the Plaintiffs and other DKIB employees as they had been expecting a final, rather than provisional, bonus award. On the same day, Dr Jentzsch explained the import of the MAC clause at a Business Update:

  35. [20] On 18 February 2009, Martin Blessing and Eric Strutz, the CEO and CFO of the Defendant respectively, sent an email to all Dresdner Bank employees noting the difficulties faced by both the Defendant and Dresdner Bank over the past year and announcing that no bonuses would be paid for 2008. This was followed shortly after by an email from Mr Reuther to all DKIB employees announcing that the provisional bonus awards issued on 19 December 2008 would be reduced by 90% pro rata.

  36. The Parties’ Cases

  37. [22] First, the Plaintiffs contended that Dr Jentzsch and other senior employees of the Defendant had made contractually binding promises between August 2008 and January 2009 that there was in existence a bonus pool with a guaranteed minimum of €400 million that would be paid out regardless of DKIB’s financial performance. The Defendant was obliged to pay the Plaintiffs their bonus as declared in the 19 December Letter, and its failure to do so was a breach of its contractually binding promises to the Plaintiffs. In contrast, the Defendant asserted that none of the statements relied upon by the Plaintiffs were intended, or could reasonably be taken as intended, to create legal relations. Moreover, even if any of these statements constituted an offer capable of acceptance, the Defendant denied that there was acceptance, consideration or sufficient certainty to give rise to contractual rights. Further, the Defendant asserted that the 18 August Announcement stipulated that the minimum bonus pool of €400 million was conditional upon DKIB achieving revenues of €2,327.5 million in 2008. DKIB did not achieve revenues of €2,327.5 million in 2008.

  38. [23] Second, the Plaintiffs contended that the Defendant’s failure to pay their 2008 bonuses in full in accordance with its promises to them was perverse, arbitrary, capricious or inequitable. Alternatively, they contend that it was a breach of the Defendant’s implied duty to behave in a way that preserved the trust and confidence that an employee should have in his employer. As will be seen below, the Plaintiffs’ emphasis was on the latter allegation, with the former receiving little attention in the submissions. The Defendant responded by noting that it and Dresdner Bank had acted reasonably and with proper cause in the light of the difficulties and losses they were facing at the time, which were communicated to the employees in Martin Blessing and Eric Strutz’s email of 18 February 2009.

  39. [24] Third, the Plaintiffs contended that Dresdner Bank was bound by the MAC clause. As the requirements of the clause for altering the quantum of the provisional bonuses were not met, the Defendant was in breach in rescinding the declared bonuses. The Defendant denied that the 19 December Letter or the MAC clause gave rise to any legally enforceable obligations. In any event, the Defendant said that the MAC clause was complied with. The Defendant accordingly denied that the Plaintiffs were entitled to any compensation.

  40. My Decision

  41. [25] I will address each of the Plaintiffs’ causes of action in turn. As an aside, I note that similar proceedings have been initiated against the Defendant by its former employees over the same subject matter in various other jurisdictions. Most pertinently, one such set of proceedings was heard before the High Court of England and Wales (Attrill & Others v Dresdner Kleinwort Limited & Another [2012] EWHC 1189 (QB) (“Attrill (HC)”)) and the Court of Appeal (Dresdner Kleinwort Limited & Another v Richard Attrill & Ors [2013] EWCA Civ 394 (“Attrill (CA)”)) (collectively, “the UK proceedings”). The claims advanced by the employees in those proceedings having been upheld. Mr Kenneth Tan SC, the Plaintiffs’ counsel, referred to the findings made in the English courts to buttress his arguments. However, the evidence before me was not identical to that raised elsewhere and Singapore law is solely a matter for our courts to decide. It was with that in mind that I heard such submissions.

  42. The contractual effect of the 18 August Announcement and subsequent communications

  43. [26] The Plaintiffs’ first argument was that their pre-existing contractual right to a discretionary bonus was augmented by the 18 August Announcement alone or in combination with the other statements made by DKIB after 18 August 2008. In this regard, their argument took two alternative forms. The first was that the 18 August Announcement was a unilateral but binding variation by Dresdner Bank of their terms of employment pursuant to the following clause in their Employee Handbook:

  44. [27] However, I am not persuaded that this applies to the current facts. Without expressing a view on the precise contours of this clause, I note that it is unlikely to extend to such weighty matters as remuneration, having regard to the fact that it vests great discretion in Dresdner Bank and variations pursuant to this clause could be to the detriment as much as they could be to the benefit of employees. In my view, that clause is more likely to apply to routine matters of administration, with which the Employee Handbook is largely concerned. While a similar argument premised on a variation clause contained in the UK employee handbook found favour before the English courts, the provisions of that variation clause were not identical to that in the present case and it is unclear if the considerations I have articulated were fully canvassed before the English courts. This is yet another reason why the analysis in the decisions rendered there does not necessarily have a bearing on the case before me.

  45. [28] The second form of the Plaintiffs’ argument, which I will consider in detail, was that the 18 August Announcement gave rise to a separate contract between themselves and Dresdner Bank. In contrast, the Defendant’s case was that the 18 August Announcement communicated merely a management decision by the Dresdner Bank Board which could be reviewed or revised as circumstances required. It did not vary the Plaintiffs’ contracts of employment or constitute a separate contract between the Defendant and the Plaintiffs. The Defendant denied that any of the elements necessary for a valid contract to arise existed. Accordingly, I will consider each of these elements in turn to determine whether the Plaintiffs have proven the existence of a valid contract arising from the 18 August Announcement. However, before addressing those issues, it is first necessary to ascertain what was said by Dr Jentzsch.

  46. The contents of the 18 August Announcement

  47. [29] No recording or written transcript of Dr Jenzsch’s 18 August Announcement was kept. This was DKIB’s usual practice, as commercially sensitive information was often shared during Business Updates. The parties relied on several pieces of contemporaneous evidence:

  48. (a) an email sent by Dr Jentzsch on 11 August 2008 setting out what he planned to say on 18 August 2008;

  49. (b) slides used at a presentation during a meeting of the Management Board on 12 August 2008;

  50. (c) minutes taken at the meeting on 12 August 2008; and

  51. (d) brief handwritten notes taken by one Louise Beeson and one Emma Bryant at the Business Update itself.

  52. [30] The email on 11 August 2008 was addressed to Mr Diekmann, Dr Perlet, Dr Walter and Mr Rosenfeld. It read:

  53. [31] The Defendant had admitted in the English proceedings that (save that it had to be proved that Dr Jentzsch had said that the amount of any bonuses would be dependent on individual performance) the content of the 18 August Announcement was as set out in this email. Mr Reuther confirmed that the Defendant made the same admission in the present proceedings. The Defendant can therefore be taken to be of the view that this email was reliable evidence of the content of the 18 August Announcement.

  54. [32] The material parts of the slides used at the meeting of the Management Board stated:

  55. [33] Minutes of this meeting were taken by Mr Merkel. The material parts read:

  56. [34] Ms Beeson’s handwritten notes taken during the 18 August Announcement stated as follows:

  57. [35] In response to a question about whether the bonus pool would be affected by a sale of DKIB or in negotiations with a potential investor, Ms Beeson’s notes recorded Dr Jentzsch responding as follows:

  58. [36] Ms Bryant recorded the 18 August Announcement thus:

  59. [37] As noted above at [15], it was not disputed that statements to the following effect were made:

  60. (a) there would be a minimum bonus pool of €400 million for 2008;

  61. (b) this represented a reduction of approximately 25% from the bonus pool in 2007;

  62. (c) there was potential for the size of the pool to be increased if certain targets were exceeded; and

  63. (d) the announcement did not give rise to individual guarantees and the pool would be allocated on a discretionary basis by reference to individual performance.

  64. [38] However, the parties joined issue on three points. First, the Plaintiffs claimed that Dr Jentzsch had made statements to the effect that the “minimum cash pool, of 400 million Euro, was guaranteed”. In contrast the Defendant said that what was in fact announced was Allianz’s agreement to guarantee to make available to DKIB a pool of €400 million from which bonuses would be paid had been secured. Second, the Defendant contended that Dr Jentzsch had said that the existence of the €400 million cash pool was conditional upon DKIB achieving baseline revenues of €2,327 billion for 2008. The Plaintiffs denied this. Third, the Plaintiffs contended that the allocations out of the bonus pool would be decided according to individual performance alone. However, the Defendant said that there was nothing to suggest that DKIB intended to waive its right to determine an individual’s bonus award according to its financial performance as well as the individual’s performance as provided for in the employment contracts.

  65. [39] As regards the first issue, I accept that there was some communication prior to 11 August 2008 about the bonus pool being guaranteed by Allianz. In his AEIC, Dr Jentzsch said that he had informed the FSA that he would shortly announce “a minimum bonus pool for DKIB to be guaranteed by Allianz, and that certain key individuals would also get guaranteed bonuses”. The minutes of a Management Board meeting held on 5 August 2008 also recorded Dr Jentzsch saying that the pool was to be “at the expense of … Allianz” and that he had told the FSA that the announcement was to be “a minimum bonus pool for DKIB to be guaranteed by Allianz”. However, in my judgment, although the word “guaranteed” was likely to have been used by Dr Jentzsch in his 18 August Announcement, it is unlikely that he said that it was guaranteed by Allianz. First, this is because there is in fact no evidence of any guarantee by Allianz or any plan for Allianz to provide one by the time the minimum bonus pool was approved by the Management Board on 12 August 2008. At trial, Mr Merkel was referred to his 12 August 2008 minutes which recorded that Dr Jentzsch had explained that the “minimum pool should be guaranteed and allocated on a discretionary basis”. When asked if he understood this to mean “guaranteed by Allianz”, Mr Merkel responded:

  66. [40] Second, statements made subsequent to the 18 August Announcement also contradict the Defendant’s position on the meaning of the word “guarantee”. An FAQ posted on DKIB’s intranet on 5 September 2008 stated:

  67. [41] It would appear that Allianz’s role was confined to agreeing to and supporting Dresdner Bank’s decision to create a minimum bonus pool. Similarly, slides used at a presentation by Dr Jentzsch to Allianz on 19 September 2008 stated:

  68. [42] No reference was made to an Allianz guarantee. On the contrary, this email indicates that the understanding between Dresdner Bank and Allianz was consistent with the Plaintiffs’ case and not the Defendant’s: the word “guarantee” was used in contradistinction to a conditional bonus contingent on performance.

  69. [43] Third, and more pertinently, whatever may have been the internal thinking of the higher management of DKIB, Dresdner Bank and Allianz, this would not be dispositive of what was in fact conveyed in the 18 August Announcement itself. Dr Jentzsch’s email of 11 August 2008, which set out what he intended to say, made no reference to the word “guarantee” other than in connection with the fact that this was not an individual guarantee. The contemporaneous note by Ms Beeson, which I find to be a reasonably accurate record of exactly what Dr Jentzsch said, recorded that “minimum bonus pool guaranteed for DK [ie. DKIB]” [emphasis added], rather than by Allianz. Ms Beeson’s reference to Allianz in her note was in the context of Allianz’s approval, together with the management of DKIB and Dresdner Bank, of the decision taken regarding the employees’ compensation.

  70. [44] From the foregoing analysis of the evidence, while it is likely that Dr Jentzsch in his 18 August Announcement did describe the minimum bonus pool as guaranteed, he did not say that it was guaranteed by Allianz.

  71. [45] What would an employee hearing the words to the effect that the pool was “guaranteed for DK” have understood them to mean? This has to be considered together with the fact that it was undisputed that Dr Jentzsch had in the 18 August Announcement also warned that “this is not an individual guarantee”, which was only meaningful in contrast with the global sum set aside for all employees which, by implication was guaranteed. As noted at [35] above, Dr Jentzsch had also said that the bonus pool would remain “no matter what” happened in the negotiations over the ownership of Dresdner Bank or its eventual sale. This indicates that the guarantee was not merely a guarantee by Allianz to make available to DKIB a bonus pool and that it would remain whether or not a change of ownership occurred. Consequently, I am of the view that it is not likely that employees watching the 18 August Announcement would have understood the word “guaranteed” in the rather abstruse sense proposed by the Defendant. They would instead have reasonably concluded that the bonus pool was being guaranteed to them by their employer, with the approval of its sole shareholder, without which approval the guarantee would presumably not have been given.

  72. [46] I should add that, in my judgment, this would be the case even if Dr Jentzsch did in the 18 August Announcement say that the bonus pool was guaranteed by Allianz. The employees hearing this would still regard it as a representation by DKIB that the pool was guaranteed to them through DKIB with the reference to Allianz being an explanation as to how the pool was to be constituted internally.

  73. [47] I turn for a moment to consider the Defendant’s assertion that the Plaintiffs had conceded that their understanding of the word “guaranteed” as used by Dr Jentzsch was the same as that which the Defendant proposed. It is not clear to me that this was the case. The Defendant cited the 2 Plaintiff’s AEIC, which stated:

  74. [48] At trial, the 2 Plaintiff testified as follows:

  75. [49] In my view, the 2 Plaintiff’s rather ambivalent remarks regarding the guarantee suggest that she did not understand the bonus pool to be guaranteed by Allianz in the manner proposed by the Defendant. She did not appear to have clearly distinguished between the concepts of agreeing to and guaranteeing the bonus pool. Instead, she took it as a matter of course that the bonus pool would have been agreed to in discussions between Dr Jentzsch, the Dresdner Bank Board and the shareholder, Allianz.

  76. [50] The Defendant also relied on the following testimony by the 3 Plaintiff:

  77. [51] I note that it is not at all clear that the question posed to the 3 Plaintiff by the Defendant was consonant with the Defendant’s own contentions regarding the meaning of the word “guaranteed”. What is one to make of the words “agreed by Allianz … in a sense guaranteed by Allianz”? In contrast to the Defendant’s precise submissions on the meaning of the term in its closing submissions, the question posed on its behalf at trial did not sufficiently elaborate upon its meaning, leaving there doubt about what was being referred to in cross-examination. In any case, it is reasonably clear to me that the 3 Plaintiff understood Allianz to have merely approved of the minimum bonus pool, rather than having guaranteed it.

  78. [52] Finally, the Defendant relied on the following exchange involving the 7 Plaintiff:

  79. [53] Again, it is not clear that the 7 Plaintiff had conceded to the Defendant’s argument. Rather, it appears from the transcript that he was acknowledging that there was no explicit statement in the 18 August Announcement to the effect that the entirety of the bonus pool would be paid out. Finally, even if the employees may have understood that Allianz had agreed to or even guaranteed the bonus, that alone does not preclude their understanding that there was a separate guarantee coming from their employer to them.

  80. [54] I turn now to the Defendant’s contention that the minimum bonus pool was conditional on a revenue target of €2,327.5 billion being met. This argument was introduced on the first day of trial via an amendment to the Defence. Mr Tan argued forcefully that this issue had not been raised in the UK proceedings and that the addition to the Defence was an afterthought and without basis. The matter nevertheless has to be considered on the merits.

  81. [55] As a starting point, I note that nothing in the 11 August 2008 email or the contemporaneous notes taken at the Business Update indicated that the minimum bonus pool was conditional on certain revenue targets being met. The €2,327.5 billion figure was not even recorded in Ms Beeson’s or Ms Bryant’s notes. It was mentioned in the 11 August 2008 email solely with reference to additional incentive payments of €0.40 to the minimum bonus pool for every Euro earned above that figure. As stated in the email, it was the incentive pool and not the minimum bonus pool that was “pegged” to revenues.

  82. [56] Some doubt may be introduced by the slides used at the Management Board meeting on 12 August 2008. However, these slides were merely a presentation aid to facilitate Dr Jentzsch’s communication with the Board. It is not as reliable an indication of what he would and did say at the 18 August Announcement as the script in the email he sent the day before. Moreover, it is not even clear that the words used in the slides “This base case cash pool is set off of the base revenues of €2.327bn” suggest that bonus pool was conditional on such revenues being achieved. Dr Jentzsch testified that the revenue number was used to determine the size of the minimum bonus pool and the baseline for the incentive pool. He disagreed that the minimum bonus pool would not be applicable if the revenue number was not met.

  83. [57] For the reasons set out above, I am therefore unable to find that Dr Jentzsch had said at the Town Hall that the minimum bonus pool was conditional on a revenue target of €2,327.5 billion being met.

  84. [58] I note that it would have been odd in the circumstances for DKIB to have structured its retention system in the all or nothing fashion contended for by the Defendant (ie, should target revenues be met, a sizable minimum bonus pool of €400 million would be guaranteed, failing which the employees would have no assurance of any sort). The purpose of the scheme was unlikely to be achieved if DKIB’s employees took the view that the revenue targets were difficult to meet. If, as the Defendant said, a minimum bonus pool were not to be guaranteed, it is more likely that DKIB would have introduced a graduated bonus system instead.

  85. [59] As for the third issue of whether DKIB was entitled to determine an individual’s bonus award according to its financial performance as well as the individual’s performance, this was really a moot point as far as the minimum bonus pool was concerned. This is because if DKIB was contractually bound to pay out the minimum bonus pool unconditionally, then this could not be conditioned upon its financial performance.

  86. [60] As an aside, it is striking that the Defendant was unable to produce any witnesses to support its contentions regarding the contents of the 18 August Announcement. There were in excess of 2,000 DKIB employees at the material time and most, if not all, of them would have been anxious to watch the Business Update given the uncertain period that Dresdner Bank was going through, and many of them did. Some of the Plaintiffs also testified that the management had taken efforts to ensure that the Business Update was watched by as many employees as possible. In contrast, although their recollections had been rendered imperfect by the passage of time, the evidence of Dr Jentzsch and all of the Plaintiffs was unwavering on their understanding of the essential message of the 18 August Announcement: if the employees remained in DKIB’s employment until the bonuses were paid out, they would share in the minimum bonus pool.

  87. [61] Accordingly, I find that Dr Jentzsch, during the 18 August Announcement, informed DKIB’s employees that:

  88. (a) there would be a minimum bonus pool of €400 million for 2008;

  89. (b) it was guaranteed in the sense that it was not contingent on any conditions being met, including the attainment of revenues of €2,327.5 million;

  90. (c) there was potential for the size of the pool to be increased if certain targets were exceeded; and

  91. (d) the announcement did not give rise to individual guarantees and the pool would continue to be allocated to those who remained in employment on a discretionary basis by reference to individual performance.

  92. The elements of a contract

  93. [62] I now turn to the question of whether a valid contract was concluded between the parties.

  94. (1) Acceptance

  95. [63] It is undisputed in this case that none of the Plaintiffs communicated their acceptance of the 18 August Announcement to Dresdner Bank. The requirement of acceptance is integral to the formation of a contract, and the general rule is that an acceptance has no effect until it is communicated to the offeror. However, there are exceptions to this rule. It is noted in Treitel: The Law of Contract (Edwin Peel, Sweet & Maxwell, 13th Ed, 2011) (“Treitel”) that (paras 2-027 and 2-028):

  96. [64] A waiver of the requirement of acceptance is often part and parcel of a unilateral offer. In the seminal case regarding unilateral contracts, Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, it was observed that “as notification is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself”.

  97. [65] In my judgment, these propositions are applicable to the present facts. There is no indication that Dr Jentzsch asked employees to indicate their acceptance of the minimum bonus pool or incentive targets, and I am of the view that the fact that no responses were required of the Plaintiffs or any of DKIB’s employees points to an implied waiver by the Defendant of the requirement for acceptance to be communicated. It is telling that there is no evidence that any of DKIB’s employees had approached the HR department or management to register their acceptance. Having said that, I recognise that this observation hinges on the assumption that there was an intention to enter into legal relations (on which see [73]–[81] below). Were there no such intention, the lack of a required response would be more consistent with the fact that the supposed offer was not intended to be binding.

  98. [66] The 18 August Announcement was also a classic case of a unilateral contract. It was a promise on the part of DKIB to do something (ie, pay the relevant employees their bonuses from a minimum bonus pool (for the mechanics of this, see [82]–[94] below on the element of certainty)) in return for the Plaintiffs’ continued employment and performance at DKIB. The Plaintiffs were not bound to continue their employment, and could resign at any time, subject to the giving of between one and three months’ notice. However, should they commence performance (or, more accurately, continue in their employment and forbear from resigning), Dresdner Bank would come under an obligation not to revoke the offer: Dickson Trading (S) Pte Ltd v Transmarco Ltd [1987] SLR(R) 674 at [39].

  99. [67] Accordingly, I find that the element of acceptance is waived.

  100. [68] For completeness, I will briefly address the Plaintiffs’ alternative argument that the 18 August Announcement was an offer that could be accepted by conduct. I am of the view that this argument is unsustainable on the facts of the case because the Plaintiffs’ conduct was to continue with their employment. Although Dresdner Bank was facing problems retaining staff in view of its impending purchase, in the absence of more specific knowledge that the Plaintiffs had other opportunities elsewhere, Dresdner Bank would not have been able to infer acceptance from their omission to resign. The position might be different had evidence been led to show that such opportunities did in fact exist and Dresdner Bank was aware of them. While the 10 Plaintiff gave evidence that he postponed his employment with a rival bank because of the announcement, he did not stand in a different position from his fellow Plaintiffs as such information would not have been known to Dresdner Bank.

  101. (2) Consideration

  102. [69] I turn now to the consideration. Although the doctrine of consideration has been heavily criticised, it remains a standard requirement for the formation of a valid contract: see Gay Choon Ing v Loh Sze Ti Terence Peter and another appeal [2009] 2 SLR(R) 332 (“Gay Choon Ing”) at [64]. The traditional definition of consideration is the benefit-detriment analysis set out in the Currie and others v Misa (1875) LR 10 Exch 153 (affirmed in Manuel Misa v Raikes Currie, G Grenfell Glyn, and Others (1876) 1 App Cas 554) (at 162):

  103. [70] Applied to the present case, the consideration sought in the 18 August Announcement was the Plaintiffs’ continued employment and forbearance from resigning. Each of the Plaintiffs remained in employment past Letter Day to the end of 2008. Accordingly, I find that the requirement of consideration was satisfied in the form of forbearance on the part of the Plaintiffs. I note that any inconsistency between this analysis and my finding on acceptance by conduct is more apparent than real as the concepts of consideration and communication of acceptance are distinct.

  104. [71] The requirement of consideration is also satisfied on the more modern analysis set out in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (“Williams”). The facts and holdings of that case are summarised in the Court of Appeal decision in Sea-Land Service Inc v Cheong Fook Chee Vincent [1994] 3 SLR(R) 250 as follows (at [9] and [10]):

  105. [72] Williams represented an extension of the doctrine of consideration as it recognised the concept of factual or practical benefit to the promisor and held that this constituted sufficient consideration. Williams was a case in which the plaintiff was under an existing contractual obligation to perform the subcontract works. The otherwise gratuitous promise of additional payments by the defendants in exchange for the plaintiff doing what he was already obliged to do was given contractual effect by the practical benefit that the defendants gained in avoiding time penalties with their employer. This analysis applies with greater force in the present case since the Plaintiffs were not obliged to continue in their employment in the first place. By remaining employed, the Plaintiffs conferred on Dresdner Bank a practical benefit in the form of employee stability and the ability to continue operating as a going concern during a period of uncertainty, which was what the bank sought to achieve by introducing the minimum bonus pool.

  106. [73] The intention to create legal relations has come to be seen as the very marrow of contractual relationships: see Chwee Kin Keong and others v Digilandmall.com Pte Ltd [2004] 2 SLR(R) 594 at [139]. This must be correct as a matter of principle, for although the other elements of a valid contract are indicia of a contractual relationship, the intention to be legally bound is definitive of such a relationship.

  107. [74] I note as a preliminary matter that the Plaintiffs assert that the onus is on the Defendant to prove that there was no intention to create legal relations. The Plaintiffs relied on the cases of Edwards v Skyways Ltd [1964] 1 WLR 349 and Mamidoil-Jetoil Greek Petroleum Company SA and another v Okta Crude Oil Refinery AD [2003] 1 Lloyd’s Rep 1 (“Mamidoil”). I do not regard either of these cases as standing for that proposition. In the first case, Megaw J was merely saying 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. It goes without saying that in many situations, the context alone would have given rise to a strong inference of an intention to be bound. Mamidoil was simply a case in which a party had previously taken the position that a contract was binding, only to change its position subsequently. In any event, the position under Singapore law is uncontroversial: an intention to create legal relations is sine qua non for a valid contract to arise. The burden of proof therefore lies on the Plaintiffs, for their case would fail if no evidence were given on either side: s 104 Evidence Act (Cap 97, 1997 Rev Ed).

  108. [75] In my judgment, an inference of an intention to be bound can be drawn from the subject matter of the announcement in this case: the remuneration of an employee by the employer. Assurances would be unlikely to be lightly made regarding such an important matter. This is reinforced by the circumstances that the parties found themselves in in August 2008. Dresdner Bank was looking for a buyer of its investment bank business, but the value of that business would have been dramatically reduced if it could not be sold as a going concern. Given the exodus of staff that Mr Listorti warned of, that was a very real risk. In this connection, it bears mention that Ms Lee had testified that 17 out of DB Singapore’s 120 employees resigned in 2008. This was an attrition rate of about 14%, and most of the resignations took place in the first half of 2008, before the 18 August Announcement. From the perspective of the Plaintiffs and the rest of DKIB’s employees, all that was left for them at the bank was the prospect of a few remaining monthly pay checks and the possibility of receiving a discretionary bonus, which was likely to have been much smaller than usual because of the travails the sector was going through. They would have had every reason to seek employment elsewhere. That being the case, there would have been no particular benefit to making one of the usual updates on the accruals to the pool. Something more concrete would have been necessary to incentivise employees to remain. I accept the Plaintiffs’ assertion that it was difficult to see how the 18 August Announcement could have had the intended effect if it were not intended to be legally binding.

  109. [76] The Defendant asserted that there was no intention to create legal relations in the making of the 18 August Announcement. Instead, it was merely an expression of Dresdner Bank’s plan to create a €400 million bonus pool at the time the announcement was made. This was a management decision which could be reviewed or revised as circumstances unfolded in 2008. The Defendant relied on the fact that it was an established practice for employees to be informed of bonus accruals for the year at Business Updates. As noted above at [6], such announcements were not inviolable and accruals were open to change as the year progressed. All that was different in 2008 was that the management announced their decision on the bonus pool a few months ahead of the usual schedule. It did not waive its usual right to revise the pool. In my view, this understates what was announced on 18 August 2008. One does not generally use words such as “minimum” and “guaranteed” to convey a provisional decision. Moreover, given my findings at [44] and [61] above as to what was said by Dr Jentzsch, and how, in the circumstances, the employees were likely to have understood the message, the tenor of the announcement clearly took on a different tone.

  110. [77] The Defendant also said that the usual practice for changing the terms of an employee’s terms of employment was to individually communicate any such variation in writing to the employee with the involvement of the HR Department. The fact that a Business Update was used instead suggested that there was no intention to make a binding commitment. The Defendant’s HR executive, Ms Lee, testified that “[a]lthough the procedure for amending terms in the Handbook, or the manner in which such amendments were communicated to the employees, were not stipulated in the Handbook itself, such changes were always communicated in writing by the HR Department”. However, Ms Lee was only able to point to two occasions on which variations were made in writing by the HR Department and they concerned leave entitlements. Ms Lee acknowledged that she knew of no written restriction of binding commitments being made by senior management.

  111. [78] The Defendant also asserted that Business Updates were informal forums for the exchange of information and updating employees about DKIB’s current view as to the performance of its business. However, this assertion is contradicted by the slides used at the Management Board meeting on 12 August 2008, which stated “In order to stabilise the DKIB business it is essential and necessary to formally communicate the pool that has been secured for the staff base” [emphasis added]. Underlying the Defendant’s argument is an invitation to join the Defendant in incredulity at the fact that a bank would choose to bind itself other than with a written agreement. It is often the case that contracting parties in a business context will choose to reduce their agreements to writing and this will naturally be one of the factors to be considered in ascertaining contractual intentions. However, the court would be astute to avoid in effect elevating writing into yet another element of a valid contract. To do so would be to turn a matter of evidence into one of law and potentially subvert the objective intentions of parties. The 18 August Announcement should also not be viewed in isolation as a regular Business Update. Dr Jentzsch took some pains to ensure that as many people as possible watched the update. The Plaintiffs gave evidence that the Business Update was widely publicised in advance and that employees were encouraged to watch it. Those with subordinates were instructed to encourage them to watch the Business Update as well. Following the business update, and as he had indicated he would do in his email of 11 August 2008, Dr Jentzsch mobilised his subordinates to ensure that everyone was apprised of the minimum bonus pool:

  112. [79] The Defendant pointed out that if all but one of DKIB’s employees left DKIB, that employee would receive the full €400 million bonus pool. Dresdner Bank could not have intended to commit itself to such an absurd result. In my view, such an eventuality is extremely unlikely to have arisen. There is accordingly nothing absurd about the minimum bonus pool. On the contrary, the monetary incentive to remain would increase as more employees left, perfectly fulfilling the intention of Dresdner Bank at the time.

  113. [80] Finally, the Defendant said that the fact that the 8 Plaintiff, Anshul Sidher, attempted to negotiate guaranteed bonuses for himself and his team indicated that he did not think that the 18 August Announcement was binding. I am unable to draw that conclusion from Mr Sidher’s conduct. It was perfectly logical for Mr Sidher to have wanted to go one up on his colleagues and to assure his subordinates of a guaranteed individual bonus instead of a discretionary one from a guaranteed pool.

  114. [81] Accordingly, I find that the parties did intend to be bound by the 18 August Announcement.

  115. (4) Certainty

  116. [82] Before a contract can be said to have been concluded, the terms of the contemplated contract must be both certain and complete; however, possible gaps may be filled by a previous course of dealing between the parties or by a trade practice or where a definite formula exists: Gay Choon Ing at [50]. In WN Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 (“Hillas”), Lord Wright observed (at 514):

  117. [83] The Defendant noted that the 18 August Announcement did not give rise to individual guarantees. The fact that the actual amount of bonus for each employee was still subject to a discretionary appraisal process meant that the individual employee was still faced with the same uncertainty as to his individual entitlement as in previous years. However, I am of the view that the dictates of certainty do not require an employee to know the precise amount that he would be paid. To hold otherwise would negate the contractual value of just about every agreement to follow a process or engage in a broad endeavour rather than to secure a specific outcome.

  118. [84] In my judgment, the observations made in Gay Choon Ing and Hillas are directly applicable to the present case. The Plaintiffs’ employer had undertaken to them to pay their bonuses out of a guaranteed minimum pool of €400 million. Although the 18 August Announcement did not specify the quantum of the bonus each employee would obtain, nor the process through which this would be ascertained, the past conduct of the bank (set out at [5]–[8] above) would have provided ample details to fill such gaps. This answers many of the objections raised by the Defendant.

  119. [85] First, the Defendant said that there was some uncertainty among the Plaintiffs about whether the actual amount of individual bonuses would be determined by individual or team performance. The following examples were cited by way of illustration:

  120. [86] There is, to my mind, no uncertainty suggested by any of these statements. It appears to me that the Plaintiffs were merely referring to their understanding of the manner in which individual bonuses were allocated in the past. As explained above at [7], each employee would have to negotiate a share of the bonus pool with his immediate superior, having regard to his individual performance. The superior would in turn have to negotiate for a share of the bonus pool to be allocated to his team as a whole, having regard to the team’s performance. It follows that the bonus awarded to each employee would be dependent on both the performance of the employee in question as well as his team.

  121. [87] Second, the Defendant contended that there was uncertainty as to the types of payments that the bonus pool could be used to fund. Could it be used for guaranteed bonuses, severance payments, tariff payments and other liabilities of Dresdner Bank? As a starting point, it is important to bear in mind that the pool of money in question was a bonus pool. This fixed the limit of the types of payments that could be made from it. Moreover, the reference to the bonus pool being 75% of the previous year’s bonus pool is pertinent. For this comparison to make any sense, the bonuses to be paid out of the bonus pool would have to be the same as those paid out of the relevant comparator sum the previous year. Details of the previous year’s practice may not have been known to all of the employees listening to the 18 August Announcement, but it would have been a simple matter to find out. The Defendant remarked that €150 million of the bonus pool had been committed as individual guarantees. However, it is my view that the only material difference between a guaranteed individual bonus and a regular discretionary one is the date on which the Bank’s discretion is exercised. I am unable to see why this should give rise to any issues as to the certainty surrounding the bonus pool. If, having regard to the bonuses paid out in the previous year, it were the case that guaranteed bonuses should not have been paid out of the bonus pool, this would amount to a breach on the part of the Defendant rather than a factor undermining the certainty of the 18 August Announcement.

  122. [88] Third, the Defendant argued that it was not clear whom the bonus pool applied to. Did it apply to front office employees, or did it extend to middle and back office employees as well? The Defendant relied upon emails and a Business Update following the announcement to show that there was some confusion about whether the back office was to be secured by the bonus pool. Again, the 75% comparator would have provided the basis on which such doubts could be resolved. It need not have been made explicitly clear at the 18 August Announcement; even if those hearing the announcement were not entirely sure what the correct position was, they could have found out.

  123. [89] Moreover, the fact that third parties to the announcement may not have been certain about its purport or may have harboured some hope of sharing in the pool does not detract from the certainty as between Dresdner Bank and the Plaintiffs. On this score, the evidence was clear: Dr Jentzsch was the CEO of DKIB and his announcement was directed to all staff who ultimately reported to him. This removed the need to distinguish between front office and other staff since these were terms that were not necessarily precise. The Defendant’s attempt to cast doubt on which of these groups of employees would benefit was therefore irrelevant.

  124. [90] Fourth, the Defendant said that it was unclear whether the entire €400 million had to be paid out. In my view, it would have been in the contemplation of all involved that the usual practice would be followed. Since Dr Jentzsch was in the habit of retaining 3-5% of the bonus pool every year as a contingency fund, this would have also been the case with the minimum bonus pool.

  125. [91] Fifth, the Defendant argued that there was uncertainty as to how long employees would have to remain before they were eligible to receive their bonuses. Did they have to stay until the end of the year, until the bonuses were actually paid out or until the takeover by the Defendant was complete? But this was provided for in the Employee Handbook and there was no evidence that anyone had assumed that the usual rule would not apply:

  126. [92] It may have been more useful for Dresdner Bank’s purposes to make the relevant date the date of takeover by the Defendant. However, given that this was to take place at the beginning of 2009, the usual approach would have served well enough. In any event, this does not detract from the certainty of the 18 August Announcement.

  127. [93] Finally, the Defendant said that it was not clear how the stretch targets were to operate as the Plaintiffs had different impressions on how revenue of €2,327.5 million was to be calculated. It is relevant that the notes taken by Ms Beeson and Ms Bryant were the least illuminating on this point. However, this does not detract from the overall clarity of the representations regarding the minimum bonus pool. The Plaintiffs were not alleging that the total bonuses declared as at Letter Day fell short of what was promised because the relevant incentive payments were omitted. In any event, just because the Plaintiffs were subjectively unclear on the computation method does not render the entire scheme uncertain. They were simply content to rely on whatever method DKIB had selected for computing the incentive pool. What was relevant for their purposes was that each of them was a revenue generator and that their efforts would contribute to increasing the sum of bonuses payable.

  128. [94] A theme underlying the Defendant’s objections on the issue of certainty was the fact that the Plaintiffs did not personally know how bonuses were allocated. In my judgment, this criticism is not sustainable. An individual does not need to know precisely how his counterparty will satisfy his obligations in order for him to have a contractual right. Accordingly, I find that the 18 August Announcement was sufficiently certain to be enforced.

  129. Authority

  130. [95] Whatever the contents of the 18 August Announcement may be, the Defendant also disputed that Dr Jentzsch had the authority to bind Dresdner Bank to a contract with its employees. However, I am of the view that there was ample evidence that Dr Jentzsch was authorised to make the 18 August Announcement. He had been tasked by Mr Diekmann and Dr Walter to put together a retention package which would ensure the stability of DKIB and to assemble a team to do so. A draft bonus proposal was worked on in June and July 2008, during which time Dr Jentzsch had meetings with senior figures in Allianz and Dresdner Bank. A final plan with the following three elements was formulated by the end of July or early August 2008: (1) a minimum guaranteed retention bonus pool of €400 million would be set aside to be paid to all employees who stayed until the end of the year (this sum represented 75% of the total of the previous year’s bonuses), (2) an additional performance-related bonus pool would be set aside if certain parameters were met and (3) there would be individual guarantees for approximately 70 critical members of staff.

  131. [96] Dr Jentzsch obtained the approval of both the Dresdner Bank and Allianz Compensation Committees and then sent the email of 11 August 2008 to senior figures in Allianz and Dresdner Bank setting out in some detail the retention package he was going to announce (see [30] above). He then presented the retention package to the Management Board of Dresdner Bank the next day (see [32]–[33] above). The minutes taken of the meeting of the Management Board stated:

  132. [97] Dr Jentzsch recounted the meeting as follows:

  133. [98] It is telling that the Defendant did not call any witness to rebut Dr Jentzsch’s recollection of the meeting. The fact that the 18 August Announcement was never contradicted is also strong evidence that Dr Jentzsch had acted within his authority. In fact, as observed at [41] above, he went on, again on behalf of DKIB, to inform Allianz a month later that “[a] Guaranteed Minimum Bonus Pool of €400mn irrespective of performance has been agreed and communicated to staff in early August”. Accordingly, I find that Dr Jentzsch was expressly authorised to make the 18 August Announcement, which was intended to be legally binding by Dresdner Bank.

  134. [99] I note that it may be possible to argue that Dr Jentzsch was not expressly given authority to use the word “guaranteed” to describe the bonus pool. However, the scheme he was authorised to announce was in fact a guaranteed one. In any event, Dr Jentzsch also had ostensible authority to make the 18 August Announcement. He was of great seniority within Dresdner Bank, the CEO of DKIB and the person to whom the Plaintiffs and other employees of DKIB ultimately reported. It would not have occurred to any employee in their position to question Dr Jentzsch on his authority. The Defendant cannot rely on any supposed misunderstanding or miscommunication on the part of Dr Jentzsch to excuse itself from the legal effect of the 18 August Announcement. In any event, Dresdner Bank had at no point attempted to correct what Dr Jentzsch had said. On 21 October 2008, Mr Hindle, DKIB’s Head of HR, made reference to the 18 August Announcement in an email to DKIB employees, remarking that the “bonus pool for the Front Office has already been communicated by Stefan Jentzsch in his updates”.

  135. Conclusion on the claim in contract

  136. [100] It follows from the foregoing discussion that the Plaintiffs have proven that a binding contract between them and Dresdner Bank arose from the 18 August Announcement pursuant to which Dresdner Bank would pay all or substantially all of the €400 million in the pool to its DKIB employees, including the Plaintiffs, as bonuses. It has not been disputed that the provisional bonuses declared in respect of each of the Plaintiffs and the other employees on Letter Day would have been the amounts paid had the Defendants complied with the terms of the 18 August Announcement. At any rate, neither party asserted that the procedure behind the 19 December Letter was unrepresentative of the usual approach taken to determine the bonus to be paid out to each employee or that this exercise was not undertaken on the premise of a €400 million bonus pool. Accordingly, I find that the Plaintiffs are entitled to payment of the balance 90% of the bonuses announced on 19 December 2008 that had not been paid out in February 2009 as damages for breach of contract.

  137. [101] In so holding, I should not be understood to be agreeing with the Plaintiffs’ contention that their entitlement to their bonuses crystallised on Letter Day with the issuance of the 19 December Letter. There are several difficulties with this argument that I will note, without venturing an opinion on how they may be resolved. First, what constraints are there on when Dresdner Bank must exercise its discretion to determine bonuses? Second, what is to be made of the fact that the 19 December Letter was expressly stated to be a provisional bonus award and contained the MAC clause? It is not necessary for me to address these issues because I am satisfied that the sums declared in the 19 December Letter would have been the bonuses paid out in February 2009 had the Defendant complied with its contractual obligations under the 18 August Announcement.

  138. Postscript on discretionary bonuses

  139. [102] One of the main contentions advanced by the Plaintiffs was that, even in the absence of the 18 August Announcement, the variable bonus clause in their contracts of employment granted them a contractual entitlement to a discretionary performance-based bonus each year. This was a legally enforceable entitlement even though the amount of the award had to be determined by an exercise of discretion on the part of Dresdner Bank. They asserted that Dresdner Bank had to act in a bona fide and rational manner, taking into account proper factors. They relied on Clark v Nomura International plc [2000] IRLR 766 (“Clark”), a decision of the Queen’s Bench Division of the High Court of England and Wales. The plaintiff, Mr Clark, was a proprietary trader for Nomura. The latter was obliged to award a discretionary bonus by reference to an assessment of his performance. Nomura exercised its discretion not to award a bonus despite the fact that he had earned substantial profits in excess of £6 million. In deciding that Nomura was in breach of its contractual obligations, Burton J made the following observations (at [40]):

  140. [103] On this understanding, the Plaintiffs argued that an employer had to ensure that its discretion to declare bonuses was not exercised in so unreasonable a fashion that no reasonable employer would have done the same. The employee thus had the benefit of a contractual obligation, if not a bonus as such. In Cantor Fitzgerald International v Horkulak [2004] IRLR 942 (“Horkulak”), the Court of Appeal of England and Wales held (at [46]):

  141. [104] In Horkulak, the employer’s obligations in determining bonuses were justified by the circumstances of the employment relationship, viz, the competitive environment, bonus culture and ostensible objective of the discretionary bonuses to incentivise good performance and retain employees. The Plaintiffs said that these circumstances also applied to the present case and that their contractual entitlement to a discretionary bonus came into even sharper focus with the 18 August Announcement of the minimum bonus pool.

  142. [105] In contrast, the Defendant asserted that there was binding authority in Singapore to the contrary. It relied on the Court of Appeal decision in Latham Scott v Credit Suisse First Boston [2000] 2 SLR(R) 30, where the following observations were made (at [72]):

  143. [106] The Plaintiffs in turn distinguished this case on the basis that it concerned a claim for the loss of a chance to earn a discretionary bonus due to a wrongful termination of employment. It could therefore be said that the question the Court of Appeal was confronted with was whether the plaintiff had proven on a balance of probabilities that he would have been paid a bonus had his employment not been terminated. Notwithstanding the thorough submissions made on this point, it is in my view not necessary that a definitive pronouncement be made for the resolution of this case. The Plaintiffs’ submissions hinged upon the approach taken in Clark and Horkulak being the backdrop against which the 18 August Announcement was made, with the latter being merely a variation of the status quo. On this understanding, the minimum bonus pool crystallised one of the discretionary elements of their bonus entitlements. I have already expressed my view of the Plaintiffs’ variation argument above at [27]. In any event, it is my view that, rather than fixing one of the discretionary elements, the 18 August Announcement largely superseded whatever the existing contractual position might have been for that year. All that remained to be determined was what the appropriate awards should be as between employees. The 18 August Announcement sufficed to establish a free-standing contractual entitlement informed only by the existing practice by which bonuses were awarded. This issue has been determined on the basis of trite and well-established principles of contract law. I note that the question posed at the beginning of this judgment could have been very much more interesting than has turned out in this case. However, what duties, if any, an employer must satisfy in deciding whether to award discretionary bonuses and, if so, how much will have to be left for a more appropriate case.

  144. Terms Implied into the Contract of Employment

  145. [107] I will address the other claims advanced by the Plaintiffs for completeness. The Plaintiffs’ second claim was that the Defendant’s failure to pay the Plaintiffs their 2008 bonus in full in accordance with the 18 August Announcement was a breach of the Defendant’s duty to behave in a way that preserved the trust and confidence that an employee should have in his employer. The crux of this claim as set out in their pleadings was that the Defendant breached the implied term of trust and confidence by acting contrary to the 18 August Announcement. This was made apparent by the statement of claim:

  146. [108] However, I note that the Plaintiffs expanded their claim materially after the trial. Their closing submissions asserted:

  147. [109] The crux of this excerpt and the elaboration in the rest of the submissions is that Dresdner Bank had deliberately misled the Plaintiffs and other employees regarding the minimum bonus pool so as to secure stability for itself pending the transaction with the Defendant, all the while cynically intending to renege on its commitments once the transaction was completed and stability was no longer necessary. 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: Lee Chee Wei v Tan Hor Peow Victor and others and another appeal [2007] 3 SLR(R) 537 at [61]. It was not at all apparent from the statement of claim that the more sophisticated and expansive approach taken in the Plaintiffs’ closing submissions would be pursued and I am of the view that the Defendant would have wished to adduce other evidence to rebut this case. I further note that it is unlikely that this was an argument that the Plaintiffs only came upon as evidence was being led in the course of the trial. The same argument was advanced in the English proceedings with a favourable outcome for the plaintiffs there (see Attrill (HC) at [198]–[231]), and the High Court decision was released before the start of the trial. The Plaintiffs had ample opportunity to make this a part of their case at an earlier stage. Accordingly, I disregard the Plaintiffs’ arguments to the extent that they exceeded the comparatively narrow bounds of their pleadings.

  148. The implied term of trust and confidence

  149. [110] The most authoritative espousal of the implied term of trust and confidence is found in Malik v Bank of Credit and Commerce International SA (In Compulsory Liquidation) [1998] AC 20 (“Malik”). The principle approved therein is 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: per Lord Steyn at 45 and 46.

  150. [111] This principle has received approval in Singapore. In Wong Leong Wei Edward and another v Acclaim Insurance Brokers Pte Ltd and another suit [2010] SGHC 352, Chong J noted (at [51] and [52]):

  151. [112] In Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd [2013] 2 SLR 577 (“Luzhou Bio-Chem”), Loh J held (at [59] and [60]):

  152. [113] The Defendant asserted that the implied term of trust and confidence was not settled law in Singapore and that the issue had not been resolved conclusively in our courts. In my view, this submission is unsustainable. Loh J’s remarks quoted above were not obiter dicta but formed the basis of his finding of breach and his award of damages. It bears mention that the appeal against Loh J’s decision was heard and dismissed by the Court of Appeal on 23 September 2013.

  153. Findings on breach

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