Ex-dealer for Davy wins case on delayed bonuses

A former equity dealer with Davy Stockbrokers who claimed that the firm owed him some €260,000 in unpaid deferred bonuses has won his High Court action.

As a result of Mr Justice Smyth's reserved judgment yesterday in favour of Eamon Finnegan, J&E Davy will now have to enter talks with Mr Finnegan to determine the total amount due to him in deferred bonus payments, plus interest.

It is believed that similar cases are pending against the firm.

In his judgment, Mr Justice Thomas Smyth found the real purpose of the scheme within Davy of deferred bonus payments was to create a financial restraint on an employee going to another stockbroking firm.

He rejected arguments that the deferred scheme was necessary to protect a genuine proprietary interest of the firm and ruled that it was a contract in restraint on trade. The deferred bonus payment condition was onerous and operated as a form of forfeit if an employee went to work for a competitor, he said.

The firm had denied that the money was due to Mr Finnegan. It pleaded that the payment of bonuses was entirely discretionary and argued that it was entitled to alter any terms and conditions relating to the payment of bonuses.

Mr Finnegan worked with Davy for 10 years until 2000 and received bonus payments ranging from £3,000 in his first year to £30,000 in 1994. In 1995, he was promoted to the equity desk, and at the end of that year he received a bonus of £25,000 and his salary was increased.

Mr Finnegan claimed that, from 1995 until January 1998, his arrangement with Davy was that he would be informed at the end of the year what his bonus would be. That bonus would be paid the following month or at a time suitable to him, he said.

However, he claimed, that situation was unilaterally changed by Davy from 1998, when he was told that the bonus would be paid in instalments and was conditional on his remaining with Davy.

He remained with Davy until September 2000, by which time, he claimed, he was owed some €260,000 in unpaid bonuses that had been agreed with the company. However, the company had refused to pay those sums.

In his judgment, Mr Justice Smyth said that, as a result of the company's actions, Mr Finnegan did not have the use of his own money, which he had earned, whether he wanted to make purchases, investments or pay off debts.

Mr Finnegan had no control of the money he earned. He had had to tolerate the situation, but he did not accept it.

Davy had argued that the purpose of the spreading of the bonus payments was to generate loyalty, but the judge found that the global quantum value of the bonus payments had nothing to do with loyalty.

When the then head of equities, Kyran McLaughlin, had in 1997 doubled Mr Finnegan's bonus to £100,000 after the stockbroker complained about a proposed £50,000 bonus, this was a mathematical sum and had nothing to with future loyalty to Davy, the judge held.

Mr Justice Smyth said he understood the notion of incentives and that a bonus paid in full would be an incentive to performance. Mr Finnegan could have had a legitimate expectation that a bonus would come to him, the amount of which was certainly discretionary.

As a matter of principle, he could have expected payment of a bonus, with the amount depending on the trading of the firm and on his own performance.

The judge said he was satisfied that in 1997, 1998 and 1999 Mr Finnegan had not consented to terms of employment involving a deferred bonus system. Mr Finnegan had faced a "Hobson's choice". The deferred payment scheme had been introduced without notice to Mr Finnegan and amounted to a contract in restraint of trade, the judge said.

No genuine proprietary interest of the firm or the public required that condition.