POST VANESSA JANE v. NOMURA INTERNATIONAL (HONG KONG) LTD.

HCA 7259/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7259 OF 1997

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J U D G M E N T

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1. The plaintiff, Mrs. Vanessa Jane Post, has brought this action against her former employer, Nomura International (Hong Kong) Ltd. for unpaid bonus in respect of the period from 1 April 1995 to 31 March 1996. She started proceedings against the defendant in the Labour Tribunal on 13 March 1997. On 18 June 1997, a Presiding Officer of the Labour Tribunal transferred the claim to the High Court because of complex issues of fact and law involved in the proceedings.

2. The claim for unpaid bonus was put on two bases. The first was based on a calculation in accordance with a formula under the Incentive Bonus Scheme ("the IBS") introduced by the defendant in 1995 or 1996 but with adjustments thereto excluding certain items of costs to work out the cost base of the plaintiff's team for the purpose of calculating the profit or loss of the team. The plaintiff alleged that she was entitled to bonus under the IBS or some other form of performance related bonus plan as a matter of construction of the contract contained in the offer letter of the defendant dated 21 January 1994 ("the Offer Letter") when she accepted the offer of employment. Alternatively, she was so entitled by virtue of a collateral agreement in the verbal representations made to her when she was recruited and her reliance thereon in accepting the offer of employment. The plaintiff alleged that she was entitled to exclude certain items of costs from her cost base and make adjustments to the formula under the IBS because of various verbal promises or agreements by the head of her department. I shall refer to this basis of claim as "the contractual bonus". The claim for contractual bonus was in the sum of HK$2,444,967.00. The second and alternative basis was a claim for a discretionary bonus in that the plaintiff was contractually entitled to a discretionary bonus and the defendant was obliged to exercise its discretion rationally, properly and in good faith and not to treat the plaintiff arbitrarily, capriciously or inequitably in matters relating to the bonus. I shall refer to this basis of claim as "the discretionary bonus". The claim for discretionary bonus was for damages to be assessed. The range of damages claimed was between HK$2,444,967.00 and HK$837,450.00, the latter figure being three months' salary including housing allowance.

3. In respect of the claim for the contractual bonus, the defence was that the plaintiff was not entitled to bonus under the IBS whether as adjusted or not because the terms of the defendant's Staff Handbook were incorporated in the Offer Letter as the terms of employment of the plaintiff and by virtue of the provisions in the Staff Handbook, an employee would only be entitled to a discretionary bonus except where there was a formalised, performance-related bonus plan individually agreed between the defendant and that employee. It was not in dispute that the plaintiff did not finalise and agree the IBS with the defendant. Further, the alleged collateral agreement on recruitment and the various verbal promises or agreements by the plaintiff's head of department were all denied. As for the discretionary bonus, the defendant alleged that it had exercised its discretion not to pay a bonus to the plaintiff properly and in a rational manner in view of the defendant's performance and the plaintiff's performance and contribution.

4. The background and undisputed facts may be given as follows.

5. The defendant is a company incorporated in Hong Kong and is part of the Nomura group engaged in the business of securities dealing and merchant banking. The plaintiff started her employment with the defendant on 18 April 1994. Her employment was terminated by payment of three months' salary in lieu of notice on 6 June 1996. Her title was initially senior vice president of the Asian equity department and this was later changed to executive director of that department. The team headed by the plaintiff was known as Equity Derivative Products 2 or EDP2.

6. The plaintiff began her career in the trading of securities and warrants in the early 1980s. She joined Baring Securities in 1985. She rose rapidly in her field and headed a team of traders by the early 1990s. In 1992, she came to work in Hong Kong for Baring Securities. In June 1993, she joined Smith New Court Far East Ltd. ("Smith New Court") as director of the derivative group. She had established a team working under her and key members of her team were Stephen Wilson, Nicholas Brown and Peter Norton.

7. Michael Brookes, who was then the head of the personnel department of the defendant, recruited the plaintiff in late 1993 and early 1994. When Mr. Brookes recruited the plaintiff, it was discussed between them that the members of her team should also be approached so that they could move to work for the defendant as a team. The plaintiff and her team in Smith New Court decided to take up the offer of Mr. Brookes. Upon their joining the defendant, they were to be paid a sign-on bonus to compensate for their loss of bonus from Smith New Court, being HK$1 million in the case of the plaintiff, and HK$500,000.00 each for the three members of her team. In addition, they were to be paid a guaranteed minimum bonus in December 1994 or April 1995, depending on whether the defendant was to change the normal bonus payment date, HK$3 million in the case of the plaintiff and HK$1.5 million each in the case of the team members. As for their entitlement to bonus thereafter, this formed the subject of the present dispute. Apart from construing the terms in the Offer Letter, I would need to resolve disputes of fact as to the alleged representations made by Mr. Brookes on recruitment.

8. Initially, the plaintiff's team carried out proprietary trading for the defendant in securities and derivative products on a "cash trading" basis. The team was given the defendant's own capital with which to trade. The proprietary trading activity involved the team taking directional market risks and unhedged credit risks within the defendant's established risk limits. Within the established risk limits, the plaintiff had very wide freedom over the work she did, the costs she incurred, and the staff she hired. The profit or loss made by the plaintiff's team in the proprietary trading activity was the key measure of her performance.

9. In about late 1994 or early1995, the plaintiff's team took up market making activity in addition to proprietary trading at the request of Shigeru Fujinuma, the head of the Asian equity department. The market maker would quote a bid and ask price on a financial product and a profit is to be made from the bid-ask spread. For the sake of creating transactions and bringing liquidity to the market, a loss would be made sometimes. As a result of taking up the market making activity, the plaintiff hired additional staff, some of whom were based in London and Stephen Wilson was seconded to Nomura International Plc ("Nomura London") to head the plaintiff's market making team in London. It was the plaintiff's case that when she agreed to take up market making, she had a verbal agreement with Mr. Fujinuma that when calculations were to be made for bonus, the profits and losses from the market making activity would not be included in the revenue of proprietary trading and the costs of the market making group would be excluded from the cost base of the plaintiff's team. For the market making activity, the payment of bonus would be entirely at the defendant's discretion. The defendant denied that there was any such agreement to exclude the profits, losses and costs of the market making activity generally for calculating the bonus pool of the plaintiff's team save for two small exceptions with regard to some Asian companies' convertible bonds arranged by the Nomura group and a stock issue global deposit receipt for the defendant's customer, Acer.

10. In the first half of 1995, the defendant circulated a draft of the IBS for discussion with the business heads of various departments. Mr. Fujinuma gave a copy to the plaintiff for her comments. She set out her comments in writing to Mr. Fujinuma. She was of the view that the definition of "direct cost" should not cover allocated costs as there was no control by a business group over allocated costs and in summary she found that "the most outlandish proposal" she had ever seen and there was nothing about it she found acceptable. The plaintiff alleged that she had subsequent discussions with Mr. Fujinuma regarding the draft IBS and the differences were narrowed but she still thought that the defendant's definition for "direct costs" was unreasonable, in particular settlement and research costs.

11. In the latter part of September 1995, the plaintiff went on maternity leave and she returned to part-time work in November 1995 and full time work in January 1996. The IBS was finalised and agreed with a number of business units but not the EDP2. It was the plaintiff's case that it was not indicated to her by any one from the defendant that she was expected to accept or reject the IBS. She alleged that in about September 1995 and before she went on maternity leave, Mr. Fujinuma had verbally agreed with her that he would use the discretionary element of the bonus, which was to apply to the plaintiff's team in respect of the market making activity, to make up the difference between a bonus based on the direct costs excluding the items that the plaintiff found unacceptable and a bonus based on the direct costs as defined in the IBS.

12. In early 1996, there were proposals to merge the plaintiff's team in Hong Kong and London with the derivative trading departments in Nomura London. This was because EDP2 could no longer carry on proprietary trading in the name of the defendant. As an authorised institution under the Banking Ordinance, the defendant could invest not more than 25% of its net capital in the securities of other companies at any time. As EDP2 had issued a number of covered warrants in 1995 and 1996, these issues required substantial cover in the form of the defendant holding the relevant shares and the need to provide such cover had restricted the capital available to carry out proprietary trading. Whilst the proposals for merger were being finalised, on 9 May 1996, Mr. Wilson received a letter from Nomura London informing him that the defendant had decided not to award him a discretionary bonus. On 10 May 1996, the plaintiff received the defendant's letter regarding her remuneration package effective from 1 April 1996 with no mention of any bonus award. Those of the defendant's staff who were awarded bonuses for 1995 received the letters of notification from the defendant on the same date. On 31 May 1996, the plaintiff and Mr. Wilson received formal offers of employment from Nomura London at a lower salary with a discretionary bonus. Both turned down the offer. They were given letters terminating their employment with payment in lieu of notice dated 6 June 1996. The plaintiff was not paid any bonus for 1995/96. Mr. Wilson subsequently received an ex gratia payment of about HK$431,000.00.

Assessment of the witnesses

13. A very important part of the plaintiff's case was what Mr. Brookes and Mr. Fujinuma were alleged to have said to her at various times as these verbal statements formed the basis of her case of a collateral agreement and the subsequent agreements that she was entitled to exclude certain items of costs from her cost base in the bonus formula. I bear in mind that the onus is on the plaintiff to establish such verbal agreements to the required standard. It is important that I should examine the plaintiff's evidence with care and that I must be satisfied on the balance of probabilities that she had given a truthful and accurate account of what the defendant's officers had allegedly told her. In assessing the reliability of the plaintiff as a witness, it is pertinent to bear in mind that she is an intelligent and articulate person and a professional of a senior position with considerable ability. I should mention that no other witness was called by the plaintiff.

14. The plaintiff's case on contractual bonus was not always as straightforward and as neatly summarised at the beginning of this judgment. It went through a number of changes from the way it was presented in the Labour Tribunal, the amendments made to her pleadings in the High Court, and the particulars she gave in respect of her pleadings. I will refer to some of the changes and inconsistencies later on when I deal with specific findings of fact. Mr. Paul Carolan, who appeared for the plaintiff, accepted that there were inconsistencies in the manner the plaintiff presented her case in the Labour Tribunal. He sought to explain this by submitting that the inconsistencies should be understood in the context that the plaintiff was then over-simplifying her case so as to persuade the Labour Tribunal to accept it and not have it transferred to the High Court. The plaintiff herself had not given this as an explanation when she was questioned about the inconsistencies in cross-examination. The plaintiff might well be anxious to persuade the Tribunal to retain her case but I do not think she would have over-simplified her case at the expense of distorting the factual basis on which her claim was founded. Furthermore, the plaintiff had taken legal advice at various stages, in April 1996 before her employment was terminated, in September 1996 before a letter of demand was sent to the defendant for unpaid bonus, and before she filed her claim in the Tribunal in March 1997. I regard the factual inconsistencies in the case as advanced by the plaintiff at different stages as significant factors affecting the reliability of her testimony.

15. The other general comment I wish to make regarding the plaintiff as a witness is that I am of the view that she had a tendency to overstate and embellish her case when she was giving evidence on the verbal discussions with the defendant's officers that took place some four to six years ago. She might honestly have believed that the evidence she gave to the court was her best recollection of the incidents but the different versions put forward by her or on her behalf at different times simply do not inspire confidence that her latest account was accurate or substantially accurate.

16. On the defendant's part, only Mr. Fujinuma was called as a witness. Mr. Fujinuma gave evidence in English with a Japanese interpreter next to him in case he needed help and he had turned to the interpreter occasionally for assistance. Although his command of English was adequate, Mr. Fujinuma was clearly at a disadvantage in not giving evidence in his native tongue. His comprehension of the questions put to him was not quick and counsel had conducted his cross-examination at a brisk and vigorous pace. He had apparent difficulty in understanding some of the expressions of counsel although these expressions were not uncommon. Last but not least, he could not always express himself adequately and go immediately to the heart of the matter but would appear to digress or prevaricate before he ventured his answer after forceful questioning of counsel. I do not think Mr. Fujinuma was an evasive witness. He did not make confident assertions in relating the incidents which had taken place several years ago. He was careful in confining himself to matters he appeared to be certain about. On the whole, I regard him as a more satisfactory witness when compared to the plaintiff.

The representations made on recruitment

17. Mr. Brookes was not called by the defendant to testify but his witness statement was admitted into the evidence without opposition, as was the case of all those who had given witness statements for the parties and were not resident in Hong Kong. Mr. Brookes left the defendant's employment in May 1996 and he is no longer under the employ of any entity within the Nomura group. It was not in dispute that Mr. Brookes had discussed with the plaintiff at the time of recruitment a formula based bonus scheme that the defendant had not yet put in place. The plaintiff's evidence in chief was that Mr. Brookes had told her that the bonus scheme would be implemented and the proposal he would put forward would be a pay-out of 20 to 25% of revenue after direct costs. Mr. Wilson's evidence was to similar effect regarding the alleged representation. Mr. Brookes' evidence was that there was an agreement in principle that such a bonus scheme would be attempted to be implemented subject to the agreement of the plaintiff's department and although he did mention to the plaintiff 20% as an appropriate proportion of net profit which would be used as the basis for determining a performance based bonus plan, he had told her that this was subject to further negotiation and adjustment for different business areas.

18. Under cross-examination, the plaintiff accepted that Mr. Brookes had not said that such a scheme would involve a payment to the plaintiff of 20% of the net profit of her team but only that such a scheme should involve such a payment. She acknowledged that what Mr. Brookes had told her was that the defendant intended to put together an agreed bonus plan and if it did then she would participate. Mr. Brookes' evidence was that as many details of the formalised bonus scheme had yet to be worked out, he did not agree a scheme with the plaintiff which would be applicable to her and instead he agreed to provide her a sign-on bonus of HK$1 million to compensate her for the loss of bonus with Smith New Court and a guaranteed bonus of HK$3 million for her first year of employment in case the proposed formalised scheme would not be put in place in time. The plaintiff agreed with this aspect of Mr. Brookes' evidence. She was fully aware that a scheme had first to be proposed and then negotiated and agreed upon as there were all sorts of ideas and proposals. Although she had no doubt in her own mind that a formalised scheme would apply to her, she accepted in cross-examination that was not what Mr. Brookes had actually told her. She also accepted that the letter of her solicitors to the defendant dated 20 December 1996 demanding payment of bonus had distorted what Mr. Brookes had said.

19. I find that what Mr. Brookes had told the plaintiff in respect of a formula based bonus scheme was merely in the nature of proposals which might or might not materialise and that it fell short of a concrete representation that could form the basis of a collateral agreement. The plaintiff has failed to establish on the evidence that the verbal statements of Mr. Brookes concerning a bonus of 20% net profit of the plaintiff's team were sufficiently certain and unambiguous to constitute a contractual promise. In agreeing to accept the defendant's job offer in such circumstances, the plaintiff had in effect taken a chance that an acceptable bonus would be worked out some time in the future after she had taken on the job.

Was the Staff Handbook part of the contract

20. The Staff Handbook had contained inter alia this provision under the section headed "Basic Conditions":

"Discretionary Bonus

The Company's performance, together with your own performance and contribution, will be used as a basis for determining eligibility for, and the amount of, any incentive bonus. The amount of any bonus payable shall be at the complete discretion of the Company except where there is a minimum amount guaranteed resulting from the operation of a formalized, performance-related bonus plan individually agreed between the Company and the member of staff." (emphasis supplied)

21. It may be convenient also to set out the relevant parts of the Offer Letter to the plaintiff dated 21 January 1994 which were as follows:

"Your basic salary will be HK$2.63 million per annum on a 13-month basis which will be reviewed on 1st January of each year. You will be entitled to receive, in December 1994 or April 1995, depending upon whether we change the normal bonus payment date, a guaranteed minimum bonus of HK$3.00 million. You will also participate in our performance-related bonus plan which aims to reward individual contribution as well as encouraging team effort.

In order to compensate for a loss of bonus from your present employer, we will make a lump sum payment of HK$1.0 million to you upon joining our Company. You will participate in our private medical insurance, provident fund, life assurance and long-term disability insurance schemes which are detailed in our new staff handbook available in early 1994.

The initial 12 months of employment will constitute a 1 year fixed-term contract and the Company may terminate the contract of employment, during this period, only in the event of dishonesty, serious misconduct, or neglect of duty."

22. Upon receipt of the Offer Letter, the plaintiff wrote to Mr. Brookes on 25 January 1994 seeking clarification on eight points and of the matters she raised, she asked whether it would be possible to have a copy of the Staff Handbook as soon as possible as it had been referred to several times. She did not raise any question about the performance-related bonus plan.

23. Mr. Brookes replied by letter dated 26 January 1994 to each of the eight points. Regarding the Staff Handbook, he stated that it would be ready in February 1994 and a copy would be sent to the plaintiff "which will form part of [the plaintiff's] employment contract".

24. It was not in dispute that the plaintiff signed the Offer Letter after she had received Mr. Brookes' reply.

25. The plaintiff's case in the High Court was that the Staff Handbook did not form part of her contract. Her evidence in chief was that she did not remember ever receiving a copy of the Staff Handbook. This is a marked change from the way she presented her case in the Labour Tribunal. In the written statement of her case and her verbal submissions to the Tribunal, the plaintiff had accepted that the Staff Handbook was part of her contract and she specifically relied on the exception provided in the Handbook that there was a formalised, performance-related bonus plan individually agreed between the defendant and herself. In her affirmation filed in the Tribunal in 1997, the plaintiff stated that a week or so after she joined the defendant, in April 1994, she was given the Staff Handbook. The plaintiff was unable to give a satisfactory explanation in this court why she had a totally different recollection about receiving the Handbook. It was disingenuous of her to say at the trial in 2001 that she could not remember ever receiving the Handbook when she had stated in an affirmation in 1997 that she had received it in April 1994. I find that the plaintiff did receive the Handbook in April 1994 shortly after she had started working for the defendant.

26. I turn to consider the question if the Handbook did form part of the contract. This document was expressly incorporated as part of the contract. It was expressly referred to in the Offer Letter although it was in connection with insurance and provident fund and not bonus. Then in the letter of Mr. Brookes dated 26 January 1994, it was made very clear that the new Handbook would form part of the plaintiff's employment contract without any qualification. This was accepted by the plaintiff when she signed the Offer Letter. Notwithstanding this, it was argued for the plaintiff that the Handbook should not form part of her contract. Two points were made by Mr. Carolan.

27. Firstly, it was submitted that the Handbook was not in existence at the time the contract was made and the purpose of certainty in contractual obligations would be defeated if parties were liable on terms they did not know about by reason of the non-existence of the relevant document. I was referred to the case of Gilligan v. AHK Air Hong Kong Ltd. [1989] 2 HKC 189 at 199 to 200 in which the court considered whether the memorandum of general terms and conditions of service, which was not in existence at the time of contract, would have applied to the contract of employment as the memorandum was expressly stated to form part of the contract in the letter of appointment. Mr. Carolan submitted that it was held in that case that it was not possible for the parties to intend to be bound by a document that they both knew did not exist. I do not think the ruling in that case went as far as that. What was said by Deputy Judge Saied in that case was as follows:

"It is without doubt that both sides entered into the contract knowing full well that there was no such document in existence in January 1987 and the language used in the instrument of appointment being clear cannot be taken to mean that the plaintiff had undertaken to be bound by the terms of the [memorandum] as and when it was enforced in the future." (at 200D)

28. I do not think the learned judge was putting forward an immutable proposition that it would be impossible for the parties to a contract to agree to be bound by a document that both knew had not come into existence at the time of contract. In the latter part of his statement, the judge had recognised that if the language of the contract had been clear, it could have been possible for one party to undertake to be bound by the terms of a document as and when it came into existence. In the present case, by the letter of Mr. Brookes dated 26 January 1994, the plaintiff was told that the new Staff Handbook would be ready in February 1994 and a copy would be sent to her as it would form part of her employment contract. In accepting the defendant's offer of employment on the basis of the clarification provided in Mr. Brookes' letter, the plaintiff had by conduct agreed to be bound by the terms in the Staff Handbook as part of the terms of her contract once the Handbook had come into existence. The facts in the present case are distinguishable from Gilligan in which the parties had recognised that the terms of the memorandum had to be worked on and agreed upon.

29. The second point taken by Mr. Carolan was that the wording of the Handbook did not contemplate it was to be part of an employment contract. He pointed to a part of the Handbook which stated as follows:

"Introduction This handbook has been compiled to help members of Nomura International (Asia & Oceania) become acquainted with Company policies and procedures. It is intended to be a reference guide furnishing basic information and should be read in conjunction with your Contract of Employment. If you need further clarification or advice on any matter please do not hesitate to contact the Personnel Department."

30. It was submitted that from the wording of the above, the Handbook was not a contractual document but a reference guide and it could not be used to supplement the contract of employment by adding new contractual terms. In my view, the Handbook should be looked at in its entirety. The part quoted by Mr. Carolan was found in the introduction section. This was followed by a contents page in which the substance of the Handbook was given under eight broad headings, one of them being "Basic Conditions" in which the provisions relating to bonus were found. Going through the substance of the contents with detailed and specific provisions on a variety of matters, I do not think the wording of the Handbook was such that it could not be regarded as a document containing contractual provisions insofar as these provisions related to the rights and obligations of an employee under a contract of employment. I do not think it matters that some parts of the Handbook could be intended as guidance such as the latter part dealing with training and career development, compliance, health and safety, grievances, and disciplinary procedures.

31. I find that the provision in the Staff Handbook under the heading "Discretionary Bonus" that I have quoted earlier did form part of the plaintiff's employment contract. The effect of this is that the plaintiff would only be entitled to a discretionary bonus as the plaintiff was not within the exception provided in the Handbook, namely, that there was a formalised, performance related bonus plan individually agreed between herself and the defendant.

32. I should mention that the defendant has a fall-back position in case I should find that the provision in the Handbook headed "Discretionary Bonus" did not form part of the plaintiff's contract. I will deal with this briefly. It was submitted by Mr. Robert Whitehead, SC that as the plaintiff had accepted in evidence that no bonus plan was in existence when she accepted the job offer, that she would only be entitled to a bonus once such a plan was implemented, that it was the common understanding of herself and Mr. Brookes the bonus plan had first to be negotiated and then agreed upon, and that the IBS introduced by the defendant was never agreed upon for her department, it would not have been necessary for the defendant to rely on the express provision in the Handbook that a formalised plan had to be individually agreed upon for there to be entitlement to a bonus under such a plan. I agree with this submission and I also find in favour of the defendant on this basis. It is clear from the evidence that the key terms of the IBS relating to the definition of costs were not agreed upon and how costs were defined would be crucial to a formula based bonus as one could not calculate profit for the bonus pool without first agreeing costs.

33. The fact that there was no meeting of minds between the parties on the bonus plan is demonstrated by the apparent confusion in which the plaintiff has pleaded her entitlement to be paid under "the bonus plan" or the IBS. In the further and better particulars of the Statement of Claim, it was stated that the IBS and "the bonus plan" were two different plans and "the bonus plan" was identified as that pleaded in paragraphs 3.4 (i.e. the Offer Letter) and 4 (i.e. the collateral agreement) of the Statement of Claim. However, in the Reply, it was stated that the IBS represented the defendant's proposal by which the defendant's obligation to provide "the bonus plan" as pleaded in paragraphs 3.4 and 4 of the Statement of Claim might be fulfilled. I am simply unable to find on the evidence that there was any agreement in respect of a formula based plan that would have applied to the plaintiff whether it be "the bonus plan" as pleaded in paragraphs 3.4 and 4 of the Statement of Claim or the IBS.

34. To overcome this evidence against the plaintiff, Mr. Carolan has sought to argue that as a matter of construction of the Offer Letter, the plaintiff was entitled to bonus under a formula based plan. I will now turn to this topic.

Construction of the Offer Letter

35. At the forefront of Mr. Carolan's argument is that the statement in the Offer Letter that the plaintiff "will also participate in [the defendant's] performance-related bonus plan" was not uncertain and not merely an agreement to negotiate so that it was capable of constituting a contractual promise. Hence, the defendant was obliged to provide a performance related bonus plan to the plaintiff.

36. In construing this statement in the Offer Letter, the court should have regard to the factual matrix of the contract. As stated by Lord Wilberforce in Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 WLR 989 at 996, "In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating." In the present case, Mr. Brookes and the plaintiff had a number of discussions on a formula based bonus plan which was not in existence before the plaintiff accepted the job offer. Both recognised there were many details to be worked out, and various alternatives were discussed between them. Things were still very much in the air at that time. It was their common understanding that a plan would be proposed and negotiated in due course. Looking at the Offer Letter in the context of this factual background known to the parties at the time of contract, I am quite unable to see that how the statement could be construed as a contractual obligation to provide a bonus plan to the plaintiff even though the plan provided by the defendant was unacceptable to the plaintiff. In my judgment, what the statement in the Offer Letter meant was that the plaintiff was to participate in a formula based plan in the event that such a plan was to be agreed upon.

37. I was referred by Mr. Carolan to two cases, Clark v. BET plc & Anr. [1997] IRLR 348 and Robertson & Anr. v. British Gas Corporation [1983] IRLR 302 but I do not think these decisions would advance his case in any way. In the former case, the contract provided that the employee "will participate in a bonus arrangement providing a maximum of 60% basic salary in any year." It was held that this provision conferred a right on the employee to participate in a bonus scheme with a maximum bonus of 60% of salary and a corresponding obligation on the employer to provide such a scheme. Unlike the present case, the relevant provision in Clark was sufficiently certain to be enforceable as a contractual obligation. In the latter case, the employer's letter provided that "incentive bonus scheme conditions will apply". At the time of the letter, there was an incentive bonus scheme in existence as the result of a collective agreement between the management and the trade unions. It was held that the contract did not contemplate the absence of any bonus at all and the employment contract could not be varied by the employer's unilateral variation or abrogation or withdrawal from the collective agreement. These facts are very different from the present case where no bonus plan was agreed upon at the time of the contract.

The subsequent agreements with Mr. Fujinuma

38. The plaintiff also relied on the two verbal agreements she had allegedly made with Mr. Fujinuma in about 1995 to found her claim for the contractual bonus as set out in the earlier part of this judgment. It is pertinent to note that she had put forward different versions with regard to the second agreement.

39. In the plaintiff's affirmation in the Labour Tribunal in 1997, she stated that "sometime in the 2nd quarter of 1995 [she] had a meeting with Mr. Fujinuma and [she] told him that the cost definition in the [IBS] was unacceptable. He promised verbally to make sure that the bonus payable to [her] would more accurately reflect the terms and cost definitions indicated by Mr. Brookes, by using his discretion to pay a bonus that would be greater than the pay-out provided for in the performance related plan." A similar allegation was pleaded in paragraph 9.2 of the Statement of Claim except that the date of Mr. Fujinuma's verbal promise was changed to "late 1995.'

40. In the plaintiff's witness statement in 1999 and the Amended Statement of Claim, the verbal promise allegedly made by Mr. Fujinuma was stated somewhat differently and the date was altered as well. Paragraph 9.2A of the amended pleading read as follows:

"On or about 13 September 1995 Mr. Fujinuma ...informed the Plaintiff ...that the Defendant's management would not agree to delete a number of cost items contained in the bonus formula to which the Plaintiff objected (being depreciation, research, system charge, utensils, registration and licensing and others). Mr. Fujinuma said he realised this would mean the bonus payment would be lower than the industry norm. Mr. Fujinuma therefore assured the Plaintiff that he would use the discretionary element of the bonus (which was to apply to the Plaintiff's team in respect of its market making function) to make up the difference between a bonus based on the direct costs excluding the aforesaid items and the costs as defined in the IBS." (emphasis supplied)

41. In the plaintiff's supplementary statement, she repeated the version in the amended pleading that Mr. Fujinuma's promise was to ensure that the shortfall in the IBS would be made up to a level it would have been had the IBS not contained elements of costs objected to by her. She gave the added detail that the discretionary element in conjunction with the contractual bonus under the IBS would total 20% of profits less direct costs as viewed by her to be appropriate.

42. Thus, the alleged promise of Mr. Fujinuma has become more elaborate with time. The plaintiff agreed under cross-examination that she had put forward different versions of the promise of Mr. Fujinuma. I do not accept her explanation that the different recollection she had in 1999 was to clarify the exact details of what she had recalled in 1997 regarding the verbal promise in 1995. She could not say why she had not put forward an accurate version in 1997. I cannot be satisfied on the evidence that Mr. Fujinuma had made the verbal assurance to her as alleged that would have given her an entitlement to the contractual bonus as claimed. I accept Mr. Fujinuma's evidence that he had merely told the plaintiff that he did not find the IBS acceptable and that in considering whether she should have a discretionary bonus he would exercise his discretion reasonably.

43. As to the first alleged agreement with Mr. Fujinuma, I also prefer his evidence on this notwithstanding he was mistaken as to the time when he had requested the plaintiff to do market making for the global deposit receipt of Acer. I do not think he was shaken in cross-examination despite the persistent and vigorous questioning on this topic. I accept his evidence that the reason why plaintiff had wanted to do market making was because it would make her better able to generate profit for proprietary trading. She was not, however, interested in doing market making in respect of some of the issues arranged by the defendant and for which the defendant had a "moral obligation" to do market making to provide liquidity. I find that it was only in relation to the two instances that Mr. Fujinuma had asked the plaintiff to take up market making, i.e. for some Asian companies' convertible bonds arranged by the defendant and the global deposit receipt of Acer, that he had agreed with the plaintiff that the profit or loss would be booked separately from the other books managed by the plaintiff's team when bonus was to be considered. I am unable to accept the plaintiff's evidence that Mr. Fujinuma had made a commitment to her that she would be considered for a discretionary bonus for all the market making activities in addition to the formula based bonus plan when the IBS was still under discussion and it was uncertain if the bonus plan would be agreed upon and applied to the plaintiff. I reject the plaintiff's evidence there was an agreement with Mr. Fujinuma that the bonus pool for proprietary trading was to be kept separate from the bonus pool for market making in that the costs of all the market making activities were to be excluded from the cost base of the plaintiff's team in applying a formula based bonus and that the profit or loss from all the market making activities was to be treated separately from the revenue in proprietary trading when there was much uncertainty if the IBS was to be agreed for the plaintiff's department let alone that the IBS was to be applied only in respect of the proprietary trading activities as alleged by the plaintiff.

The entitlement to contractual bonus

44. As I have found against the plaintiff on the evidence and on the construction of the Offer Letter that there was no enforceable agreement between her and the defendant that she was to receive a formula based bonus, her claim for contractual bonus fails.

The claim for discretionary bonus

45. The plaintiff's alternative claim for discretionary bonus was put on the basis that it was an implied term of her contract that it was the presumed intention of Mr. Brookes and the plaintiff, applying the officious bystander test, that she was entitled to be considered for a discretionary bonus for 1995/96 in the event that she was not to participate in a formula based plan. The plaintiff chose not to rely on the express provision in the Staff Handbook as it was her case that the provisions there did not form part of her contract. In the event the court should find against her that the Handbook was incorporated as part of the contract, the plaintiff would rely on this as her fall-back position to found a claim for discretionary bonus.

46. I have reservations if there should be such an implied term. It is not however necessary to make a ruling as I have found that the express provision in the Handbook did form part of the plaintiff's contract and the defendant had a contractual obligation to consider the plaintiff for a discretionary bonus. The issue before me is whether in deciding not to pay the plaintiff a bonus for 1995/96, the defendant had exercised its discretion rationally, properly and in good faith.

47. There was no dispute as to the law. Both sides have referred me to the decision of Burton J. in Clark v. Nomura International plc [2000] IRLR 766, which has been applied in a recent decision of Deputy Judge Woolley in Joanne Kay Wood v. Jardine Fleming Holdings Ltd., HCA No. 12524 of 1998, 16 February 2001. The plaintiff in Clark was a proprietary trader of Nomura London and the latter was obliged to award a bonus by reference to an assessment of Mr. Clark's individual performance. Nomura London exercised its discretion not to award a bonus despite substantial profits in excess of ￡6 million earned by Mr. Clark for the company. In deciding that Nomura London was in breach of its contractual obligation, Burton J. had this to say about the exercise of the discretion:

"Quite apart from the additional contractual straitjacket for the discretion in this case, the employer's discretion is in any event, as a result of the authorities, not unfettered, as both sides have accepted to be the law in this case. Even a simple discretion whether to award a bonus must not be exercised capriciously (United Bank Ltd. v. Akhtar [1989] IRLR 507 EAT, Clark v. BET plc [1997] IRLR 348 and Midland Bank plc v. McCann 5/6/1998 unreported EAT) or without reasonable or sufficient grounds (White v. Reflecting Roadstuds Ltd. [1991] IRLR 331 EAT, and McClory v. Post Office [1993] IRLR 159). I do not consider that either of these definitions of the obligation are entirely apt, when considering whether an employer was in breach of contract in having exercised a discretion which on the face of the contract is unfettered or absolute, or indeed even one which is contractually fettered such as the one here considered. Capriciousness, it seems to me, is not very easy to define: and I have been referred to Harper v. National Coal Board [1980] IRLR 260 and Cheall v, APEX [1982] IRLR 362. It can carry with it aspects of arbitrariness or domineeringness, or whimsicality and abstractedness. On the other hand the concept of 'without reasonable or sufficient grounds' seems to me to be too low a test. I do not consider it is right that there be simply a contractual obligation on an employer to act reasonably in the exercise of his discretion, which would suggest that the court can simply substitute its own view for that of the employer. My conclusion is that the right test is one of irrationality or perversity (of which caprice or capriciousness would be a good example) i.e. no reasonable employer would have exercised his discretion in this way... Such test of perversity or irrationality is not only one which is simple, or at any rate simpler, to understand and apply, but it is a familiar one, being that regularly applied in the Crown Office or, as it is soon to be, the Administrative Court. In reaching its conclusion, what the court does is thus not to substitute its own view, but to ask the question whether any reasonable employer could have come to such a conclusion. Of course, if and when the court concludes that the employer was in breach of contract, then it will be necessary to reach a conclusion, on the balance of probabilities, as to what would have occurred had the employer complied with its contractual obligations, or ... assess without unrealistic assumptions, what position the employee would have been in had the employer performed its obligation. That will involve the court in assessing the employee's bonus, on the basis of the evidence before it, and thus to that extent putting itself in the position of the employer; but it will only do it if it is first satisfied, on the higher test, not that the employer acted unreasonably, but that no reasonable employer would have reached the conclusion it did acting in accordance with its contractual obligations, and the assessment of the bonus then of course is by way of an award of damages." (at 774-5; emphasis supplied)

48. On the test of irrationality, I was also referred by Mr. Whitehead to the statement of Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service [1985] 1 AC 374 at 410:

"By 'irrationality' I mean what can now be succinctly referred to as 'Wednesbury unreasonableness' (Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 KB 223). It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it."

49. According to the provision in the Staff Handbook, three matters were relevant to the exercise of the defendant's discretion whether to award a bonus - the defendant's performance, the plaintiff's contribution, and the performance of the plaintiff. In respect of the plaintiff's performance, the most important factor was whether her team had made a profit or loss in the period under consideration.

50. It was not in dispute that the defendant's financial results for the year from April 1995 to March 1996 were "significantly negative". The profit and loss account for the year ended 31 March 1996 showed a loss of HK$50,304,000.00.

51. As for the plaintiff's contribution, she had listed a number of matters as her contribution in one of her witness statements and supplemented by her oral evidence to say that she should merit consideration for a bonus over and above her salary. She mentioned that she was offered a more senior position by Nomura London with wider responsibilities in May 1996, this could hardly be regarded as a contribution. She relied on the fact that she was in effect given raises in her pay by the defendant agreeing to pay a housing allowance during her employment. That being the case, she had already been rewarded by receiving housing allowance and this should not be regarded as a factor to justify a bonus over and above her salary. The plaintiff also stated that she had spent 10 to 20% of her time travelling round south-east Asia with the various corporate finance departments of the defendant to help to put together a presentation and pricing for new initial public offers when this was not part of proprietary trading for which she was employed by the defendant. Further, she was given an excellent appraisal by Mr. Fujinuma in 1994 and 1995. The defendant's position with regard to these matters was that as the plaintiff was a top employee and she was expected to achieve a top performance, there was no special or exceptional contribution on her part to merit a bonus award. I am unable to say that in considering the plaintiff's contribution, the defendant's decision not to award a bonus to the plaintiff was perverse or irrational, adopting the approach in Nomura v. Clark.

52. Before I turn to the last matter being the performance of the plaintiff's team in terms of the profit or loss made by the team, it would be convenient to deal with two other matters raised by the plaintiff to attack the defendant's position that it had exercised its discretion properly and not irrationally.

Bonuses paid to other employees

53. The plaintiff relied on the fact that a number of employees in her department and other departments were paid bonuses to say that the decision not to pay her a bonus was inequitable and therefore arbitrary and perverse. The circumstances in which these employees received their bonuses and the amounts of the bonuses received were as follows:

(1) Junior employees in the plaintiff's team engaged in market making

54. The junior members of the plaintiff's team based in London doing market making and working under the supervision of Mr. Wilson received bonuses equivalent to about three months' salary, same as the average bonus for local staff of Nomura London for 1995/96. Junior staff in Hong Kong doing market making, with the exception of Mark Edwards whose employment was due to be terminated, also received bonuses equivalent to three or four months' salary. According to Mr. Fujinuma, he decided to award bonuses to such staff because the plaintiff requested him to award some form of bonus to them so that the market making activities in London should not cease. Mr. Fujinuma agreed with her suggestion with a view to retaining some of the staff for investment banking purposes. Another reason was because the plaintiff told him the staff were young people and he was moved by the way she sought to have some bonus paid to members of her team. The plaintiff denied that she had made such a request to Mr. Fujinuma but accepted that it would have been natural to her to talk to him about this as she had cared about her team members. I accept Mr. Fujinuma's evidence on this and his evidence that he had decided to pay a small bonus of HK$50,000.00 to Vivian Lee, an administrative staff in the plaintiff's team, also at the request of the plaintiff. I do not think the plaintiff's position was comparable to such staff.

(2) Mr. Wilson

55. Mr. Wilson was informed by the defendant that he was not to receive a discretionary bonus but got an ex gratia payment of about HK$431,000.00 when his employment was terminated after he had turned down the job offer of Nomura London. I do not think this was sufficient to indicate that the defendant's decision to give no bonus to the plaintiff must have been perverse. The nature of Mr. Wilson's duties was different from the nature of the plaintiff's work.

(3) Stanley To and his team

56. Mr. To, the managing director of the debt capital markets group (also known as the fixed income trading division) and three associate directors, each received a bonus of about HK$2.6 million. Their bonus was paid in accordance with the IBS as they had agreed to accept a formula based bonus in September 1995. They could not be regarded as comparable to the plaintiff.

(4) Joss Trout and his team

57. Mr. Trout was the executive director of the investment banking division. He received a bonus of about HK$3.8 million in May 1996. This was a guaranteed bonus under Mr. Trout' s employment contract. Richard Clayton, an associate director of the same division, received a discretionary bonus of HK$480,000.00 "in recognition of his performance" on top of his guaranteed bonus under his contract of HK$500,000.00. According to Mr. Clayton, the investment banking division had negative financial results for the year ended March 1996 but the staff in that division received discretionary bonuses where individual performance justified an award. The investment banking division performed a very different function and I do not think the different treatment of the plaintiff with regard to bonus could be attacked as irrational by comparing the defendant's treatment of members of the investment banking division.

(5) Richard Pearce

58. Mr. Pearce was the managing director of the equity division and he headed the plaintiff's department, the Asian equity department, with Mr. Fujinuma. He joined the defendant in October 1994. In the 1996 discretionary bonus recommendation form, it was proposed not to give him a bonus in 1996. In an undated letter of the president of the defendant to Mr. Pearce, it was stated that he was to be provided with a guaranteed bonus to be effected in March 1996 in the amount of HK$300,000.00. I do not think the plaintiff's position was comparable to his.

59. I reject the submission that the exercise of the defendant' s discretion not to pay any bonus to the plaintiff was arbitrary on account of the fact that other employees were paid bonuses.

If there was proper assessment of figures

60. The other point taken by the plaintiff was that in the exercise of the discretion, the defendant had not actually made any or any proper assessment of the figures to ascertain if there was a profit or loss for the plaintiff's team. It was suggested that the defendant's allegation that the plaintiff's team had made a loss was not in the mind of Mr. Fujinuma and hence not relied on by him when he decided not to recommend a bonus for the plaintiff. In support of this, Mr. Carolan pointed to the fact that the defendant had not made this allegation in presenting its defence in the Labour Tribunal and the allegation had only appeared for the first time in Mr. Fujinuma's witness statement in January 1999.

61. It must be remembered that the figures were always there. There was no suggestion that the accounting records of the defendant were put together for the purpose of resisting the plaintiff's claim. Revenue breakdowns were prepared on a daily basis by front-accounting staff and monthly management accounts were created as well. There was also evidence from the staff of the defendant's controllers department, Ko Iwata and David Yau, that in early 1996, Mr. Fujinuma had requested the expense figures for the plaintiff's team and a revenue breakdown of the plaintiff's team from January 1995 to March 1996.What was alleged was that there was no assessment of the available financial data when the defendant was called on to exercise its discretion because the defendant had not alleged in the Labour Tribunal that the plaintiff's team had made a loss to justify its discretion not to award a bonus. I have considered Mr. Fujinuma's evidence when he was cross-examined on this. Mr. Fujinuma had merely stated in his affirmation in the Labour Tribunal that the defendant had decided not to award a bonus in the exercise of its discretion and he was of the opinion that it was reasonable and proper. He did not explain in his affirmation the basis of that decision although it was mentioned in the statement of defence in the Labour Tribunal that the plaintiff's financial performance was to be taken into account in the exercise of the discretion. He was not requested by the in-house lawyer to give a detailed analysis of his decision at that time. I do not think Mr. Fujinuma had been untruthful in his evidence that he had considered the financial data he requested from the controllers department and that he had arrived at the view that the plaintiff's team had suffered a loss when he recommended no bonus to the plaintiff.

The assessment of profit or loss

62. The great dispute between the parties was whether certain elements should be taken into account in working out the cost base of the plaintiff's team and the period over which the figures for revenue and costs should be looked at. The plaintiff's contention was that her team had made a profit of about US$3.1 million by excluding the element of indirect costs which were not to be included under the IBS and by excluding the costs relating to the market making activities. The defendant, by including those two elements in the computation, arrived at the opposite conclusion of a substantial loss of about US$3.2 million for the plaintiff's team.

63. Before I go into the figures, I would like to make these general observations.

64. Firstly, it must be borne in mind that as there was no agreed formula between the parties resulting in the application of the IBS to the plaintiff, the defendant had a discretion as to what elements were to be included in the cost base for the purpose of working out the profit or loss made by the plaintiff's team. Adopting the approach in Nomura v. Clark, so long as the costs sought to be included by the defendant were not perverse in that no reasonable employer would have exercised his discretion in that manner, the court should not substitute its views for the defendant's management as to what elements of cost should or should not be included.

65. Secondly, I do not think it relevant that in including certain elements of cost for calculating the profit or loss of the plaintiff's team, the defendant had departed from the IBS formula which was not agreed upon between the parties. That the plaintiff might well regard it as unfair that she should be worse off in not agreeing the IBS and leaving bonus to the defendant's discretion was beside the point. The question was not one of fairness to the plaintiff but whether the exercise of discretion was irrational.

The bonus period

66. The issue here was whether the bonus period should run from January 1995 to March 1996, a period of fifteen months as contended by the defendant, or whether it should run from April 1995 to March 1996, a period of twelve months as contended by the plaintiff. Whether the period of the first three months of 1995 was included would make a significant difference as the plaintiff's team had incurred total direct and indirect costs for these three months in the sum of about US$1.5 million and that resulted in a net loss for that period of about US$1.8 million.

67. The plaintiff's case was that under her contract she was entitled to receive a guaranteed bonus of HK$3 million for her first year of employment (i.e. from April 1994 to March 1995) so her new bonus period should be considered from April 1995 and not January 1995. The defendant's case was that there was a difference between the defendant's accounting period and the bonus payment period. The defendant's accounting period was always from April to March the following year whereas the bonus payment period was from January to December. The defendant had wanted to bring the bonus payment period in line with its accounting period. Hence, in the Offer Letter, it was stated that the guaranteed bonus was to be paid to the plaintiff in December 1994 or April 1995, depending on whether the defendant was to change the normal bonus payment date. That change was not implemented in 1995 and it was only carried out in 1996. Hence, the bonus period should run from January 1995 to March 1996.

68. The defendant had produced contemporaneous documents in support of its case. Apart from the Offer Letter, there was a staff circular from the personnel department to all staff dated 5 December 1995 making an announcement that "the upcoming salary and discretionary bonus review dates will be rescheduled to April 1, 1996" although the plaintiff did not remember receiving the circular. There was also a memo from the personnel department to all division heads dated 28 March 1996 in which it was stated that the salary and bonus review "will cover 15 months starting from January 1, 1995 to March 31, 1996." Reliance was also placed on the fact that the plaintiff had received her guaranteed bonus in January 1995, at the same time as all the other staff had received their bonuses, and not in April 1995.

69. I do not think Mr. Fujinuma was shaken in cross-examination on this notwithstanding he had appeared somewhat confused when he was questioned about the use of the expression "the year of employment 1 April 1995 - 31 March 1996" in his affirmation in the Labour Tribunal. I would regard the contemporaneous documents as far more important. I find on the evidence that the bonus period should run from January 1995 to March 1996. I turn to consider the various elements taken into account by the defendant in arriving at a loss for the plaintiff's team during the fifteen-month period.

Indirect costs

70. There was no dispute as to the amount of the indirect costs and that they had been incurred. The amount over the fifteen-month period was about US$1.8 million whereas direct costs for Hong Kong (i.e. excluding the costs for London attributable to the market making activity) came up to about US$3.3 million. The dispute was whether the indirect costs should be included for the purpose of calculating the profit or loss of the plaintiff's team in deciding whether she should have a discretionary bonus. The point taken by the plaintiff was that in all the discussions on the IBS, the defendant had been working on the basis that indirect or allocated costs would not be taken into account in calculating the revenue of the plaintiff's team so such costs should not be taken into account in the award of a discretionary bonus.

71. The explanation given by Mr. Fujinuma for including indirect costs was that he regarded it proper to allocate administrative costs, such as legal or compliance costs to the plaintiff's team as they were required by her team to do business. According to him, the plaintiff's team was one of the heaviest users of the defendant's general facilities, such as its legal department, human resources, compliance, credit department, executions and back office. Further, he believed it was fair that such indirect costs should be shared among the relevant revenue generating teams otherwise no one would be responsible for them. Mr. Fujinuma pointed out that it had been the defendant's company policy for indirect costs to be shared among the revenue generating teams and at the beginning of each financial year, the defendant would decide on how indirect costs were to be divided among the teams and each team head was notified of the decision. The exact proportions to be borne by each team would vary from year to year so, for example, if one team had increased in numbers of staff, it would bear a greater proportion of the cost of the human resources department.

72. I am unable to say that the rationale of Mr. Fujinuma for including indirect costs was such that no sensible employer would have adopted. As I have stated earlier, I do not regard it as relevant that in the discussions for the IBS, indirect costs were to be excluded in the calculation of revenue. The defendant was free to depart from the IBS which had not been agreed upon. An example of this was that Mr. Fujinuma had excluded commissions paid in the calculation of the profit for the plaintiff's team notwithstanding this was included in the IBS.

Costs attributable to market making

73. The amount of the costs for the market making activity in London was not in dispute and the question was whether they should be included in the cost base of the plaintiff's team. The plaintiff's position was to divide the functions of her team between proprietary trading and market making and to exclude the costs of market making. Thus, she has sought to exclude all London costs, the costs of three staff in Hong Kong (Mark Edwards, Clare Brierley and Vivian Lee, amounting to about HK$11.8 million), 25% of Mr. Wilson's costs, and 75% of Peter Norton's costs. The total amount thus excluded by the plaintiff but included by the defendant came up to about US$2.1 million.

74. The plaintiff has made the deductions on the basis that Mr. Fujinuma had agreed with her that all the costs attributable to market making would be excluded. I have found against the plaintiff on the evidence that there was such an agreement as alleged. Treating this as a matter within the defendant's discretion if the costs in market making should be excluded from the cost base of the plaintiff's team, I am unable to say that Mr. Fujinuma's reasoning for including such costs was irrational or perverse. The market making function was part of the activities carried out by the plaintiff's team and her team had always been regarded as one unit by the defendant. Furthermore, the costs for market making had not been separated from the costs attributable to proprietary trading during the plaintiff's employment although the revenue from market making was treated separately from the revenue of proprietary trading. Mr. Fujinuma had maintained that it was not possible to work out exactly what portion of the total expenses of the plaintiff's team was attributable to proprietary trading and what portion to market making.

The entitlement to discretionary bonus

75. On the calculations of Mr. Fujinuma by taking a fifteen-month bonus period and including indirect costs and the costs for market making as the cost base, the plaintiff's team had made a significant loss. It is strictly not necessary for me to go into the figure for stamp duty in the sum of US$287,381.00 which the plaintiff contended should be added to the figure for revenue. The defendant's explanation for not doing so was that it did not appreciate it was entitled to rebates for stamp duty at first but once it had realised this, applications for rebates were made to the Inland Revenue Department and most of the rebates were received long after the plaintiff had left the defendant's employment. If it were necessary to do so, I would have found that the defendant's decision not to add back the rebates for stamp duty to the revenue of the plaintiff's team was not irrational.

76. As there was no profit generated by the plaintiff's team, it was not irrational or perverse for the defendant not to award a discretionary bonus to the plaintiff. I do not propose to make any finding on the quantum of the discretionary bonus that the court should award as damages to the plaintiff if I had been of the view that the decision not to award a bonus was perverse. I would only say that the exercise would be difficult given the disagreement between the parties as to the elements that should be taken into account in arriving at the cost base of the plaintiff's team even if I were to take the approach that the bonus would be 20% of the profit of the team. The present case is very different from Clark v. Nomura where the profit generated by Mr. Clark was not in dispute.

Conclusion and orders

77. For the above reasons, the plaintiff has failed to establish her claim for the contractual bonus and her alternative claim for the discretionary bonus. I give judgment in favour of the defendant with an order nisi that the plaintiff is to pay the defendant's costs of this action, with a certificate for two counsel, to be taxed if not agreed.

78. I had reserved costs on an application of the plaintiff for specific discovery taken out on 2 February 2001 and dealt with on 5 February 2001, the day before the trial had started. The defendant's solicitors had provided some of the documents sought by the plaintiff under cover of their letter dated 5 February 2001 and an order by consent was made whereby the defendant was to provide information or documents of some of the outstanding items and to file an affidavit disclosing whether it had in its possession, power or custody the plaintiff's performance appraisal in November 1995. Most of the documents sought related to the payment of bonuses to other employees and were relevant to an issue in dispute. In view of the lateness of that application which gave the defendant's solicitors little time to respond by making voluntary discovery, I think it would be appropriate in this instance to make an order nisi that the costs of that application be in the cause. It remains for me to thank the legal teams on both sides for their assistance to the court.