Case Update: Daniel John Brader and others v Commerzbank AG [2013] SGHC 284 – collateral contract, discretionary bonus, employment

Daniel John Brader and others v Commerzbank AG [2013] SGHC 284

Significance: Court held that an announcement made to employees at a Townhall meeting regarding bonus payments was held to be a sufficiently certain binding unilateral contract collateral to their employment contracts.

The announcement constituted an offer to pay the employees bonuses from a declared minimum bonus pool. The offer was a unilateral one and so no acceptance by the employees was needed. The employees provided consideration in the form of forbearance from resigning, and this was beneficial to the bank because it helped maintain the company’s stability during a period of financial uncertainty. An intention by the defendant to create legal relations could be inferred from the subject matter of the announcement, i.e. the employer’s remuneration of its employees. Gaps in the contract terms could be filled by past practices of allocating discretionary bonuses.

While the court accepted that there was an implied term of mutual trust and confidence in the employees’ respective employment contracts in respect of the employer’s discretion as to paying bonuses, the court found that the implied term was not breached on the facts. An implied term of mutual trust and confidence posits that the parties have an obligation to “not, without reasonable and proper cause, conduct itself it a manner calculated to destroy or seriously damage the relationship of confidence and trust between employer and employee”. At the material time, the bank’s financial situation could not justify a payout of sizeable bonuses.

As a Singapore employment and contract lawyer, this is an interesting case with wide-ranging consequences.

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