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Tadjudin Sunny v Bank Of America, National Association

Judgment Cited authorities 29 Cited in Precedent Map Related
Vincent
Judgment Date20 May 2016
Year2016
Judgement NumberCACV12/2015
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV12/2015 TADJUDIN SUNNY v. BANK OF AMERICA, NATIONAL ASSOCIATION

CACV 12/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 12 OF 2015

(ON APPEAL FROM HCA NO. 322 OF 2008)

________________________

BETWEEN
TADJUDIN SUNNY Plaintiff
And
BANK OF AMERICA, NATIONAL ASSOCIATION Defendant

________________________


Before: Hon Kwan JA, Barma JA and Chow J in Court
Date of Hearing: 26 and 27 January 2016
Date of Judgment: 20 May 2016

________________________

J U D G M E N T

________________________

Hon Kwan JA, Barma JA and Chow J:

A. INTRODUCTION

1. On 24 December 2014, To J handed down his judgment after a trial lasting for 20 days in January and February 2014 in an action for breach of a contract of employment. He gave judgment for the plaintiff, Ms Sunny Tadjudin, in the sum of HK$3,900,000 (equivalent to US$500,000) as damages for loss of bonus for 2007, but dismissed her claims for underpayment of her bonuses for the years of 2005 and 2006. The plaintiff was awarded 85% of the costs against the defendant, the Bank of America, National Association (“the Bank”).

2. After considering the written submissions of the parties, the judge handed down his decision on interest on the judgment sum on 2 June 2015 ([2015] 3 HKLRD 331). He awarded pre-judgment interest on HK$3,900,000 at 2.85% per annum from 1 March 2008 until the date of judgment and thereafter at judgment rate until payment, with costs of the application to the plaintiff.

3. The Bank appealed against the award of HK$3,900,000, contending that the judge was wrong to find that the plaintiff’s employment was terminated with the intention to avoid her being eligible for the discretionary bonus of 2007. Further, the judge was wrong in law to hold that there was an implied term in the contract of employment that the Bank “shall not exercise its right to terminate the Plaintiff’s employment by giving one month’s notice or by paying one month’s salary in lieu of notice in order to avoid her being eligible for the performance incentive programme” (“the implied anti-avoidance term”). The Bank also challenged the quantum of damages.

4. The plaintiff cross-appealed against the dismissal of her claims for underpayment of the discretionary bonuses for the years of 2005 and 2006, contending that the judge should have found that the Bank’s administration of its performance incentive programme and performance evaluation for those two years were irrational, perverse and in bad faith such that no reasonable employer could have arrived at such amounts for the bonuses paid[1]. She challenged the quantum of damages assessed for the loss of bonus for 2007. She also appealed against the pre-judgment interest rate, contending that the judge should have awarded 8% per annum, being 3% over prime rate.

5. Thus, the holdings of the judge on every material issue are the subject of challenge in this appeal. Other than the issue on whether there should be the implied anti-avoidance term, the main challenges are to the findings of fact of the trial judge.

B. THE JUDGMENT BELOW

B1. The background facts

6. The non-controversial and relevant facts for the purpose of the appeal and cross-appeal may be stated as follows. They are all taken from the judgment.

7. The plaintiff joined the Bank on 5 June 2000 as an analyst at the level of vice president in the Distressed Debt Trading Group, which was subsequently re-named as the International Special Situations Group (“ISSG”). Clause 3 of her letter of employment provided that either party may terminate the employment by one month’s notice in writing or payment of one month’s salary in lieu of notice. Clause 1 provided that she was eligible to be considered for a bonus under the Bank’s performance incentive programme, subject to her being employed by the Bank at the time of payment of bonuses. The plaintiff had received very substantial bonuses from 2000 to 2006. Her employment was terminated by the Bank on 28 August 2007 by giving her a month’s salary in lieu of notice, without any bonus for 2007.

8. The annual bonus formed a very substantial part of the plaintiff’s remuneration package. Her bonus for 2001 was more than double her annual basic salary. Her bonuses for 2002 to 2006 were between two to three times her annual salaries. As stated by the judge, the base salary in her remuneration package was the ‘sauce’, whereas the performance bonus was the ‘meat’[2].

9. One of the expressed purposes of the performance incentive programme was to compete for business and talent. The programme included the following salient features: the Bank was committed to a ‘pay for performance’ environment in which an employee’s performance was a key consideration in determining his remuneration package; it rewarded the highest performers with the greatest rewards through basic salary, incentives, equity and rewards and recognition; managers should aggressively compensate high performing employees; the focus was on the results the employee achieved against his specific goals; pay was related directly to performance and awards were highly differentiated based on performance; total compensation was market-informed and driven by the final results of the Bank and the line of business as well as the employee’s performance results. There was an undisputed correlation between the size of the bonus and profit contributed by the employee.

10. The programme was administered through a continuous performance evaluation. Evaluations were done twice a year, once in mid-year and once at year end. Evaluation began with the employee submitting a performance and development plan to his manager. Performance was assessed on two criteria: (a) results measured against the plan, in other words the employee’s contribution to profit – the “What”; and (b) conduct, attitude, leadership qualities and teamwork – the “How”. Each criterion was rated on a three-point scale: “Exceeds”, “Meets” and “Does Not Meet”. An employee awarded a “Does Not Meet” for his “What” and “How” was unlikely to receive any salary increase, bonus or equity. The Bank practised a policy in which 20% of the staff in a team would be given an “Exceeds” rating, 70% would be given a “Meets” rating, and no more than 10% would be given a “Does Not Meet” rating (“the 20/70/10 policy”). Management would strictly limit “Exceeds” rating to 20%, it would not however strictly force managers to rate 10% of his staff as “Does Not Meet”.

11. Whilst the eligibility to be considered under the programme was contractual, the bonus to be paid under the programme was not. There was no expressed formula on which the bonus was to be assessed. Even in respect of an employee’s contribution to profit, that contribution was the result of multiple touches and what weight to be given to each factor was solely a matter for the employer. There was no dispute whether to award a bonus and the amount to be awarded was discretionary. But that did not mean the discretion of the Bank was unfettered. The judge held that the discretion had to be exercised in accordance with the principles set out in the programme, and it was not to be exercised in an irrational, perverse or arbitrary manner that was not bona fide[3]. To impugn that discretion, it would not be sufficient for the employee to establish that the employer had acted unreasonably. It has to be shown that no reasonable employer in the same field would have exercised his discretion in that way or that the employer has acted irrationally. In support of this, the judge cited Keen v Commerzbank AG [2007] ICR 623 at §59; Clark v Nomura International Plc [2000] IRLR 766 at §40; and CCSU v Minister for the Civil Service [1985] 1 AC 374 at 410. The burden of showing irrationality is very high[4]. These holdings are not challenged on appeal.

12. The plaintiff initially worked under Peter Young until 2004 when Ken Schneier took over the Hong Kong Desk of ISSG. John Liptak joined the Hong Kong Desk at the level of principal in 2001 and was appointed the Head of the Hong Kong Desk in 2005. John Liptak took a different approach from that of Ken Schneier. He insisted that an analyst’s contacts belonged to the employer and adopted the policy that an analyst who sourced a deal would not necessarily be assigned the deal, and assignment should be made by the Head of Desk on the basis of ability and availability. Since 2005, the plaintiff’s relations with John Liptak became very rough. The discord arose out of her belief that John Liptak took away her deals and contacts and she expressed reluctance to loop him in for her projects. John Liptak criticised the plaintiff for lack of teamwork and being protective of her contacts, while the plaintiff was troubled that by sharing her contacts her contribution would not be adequately acknowledged.

13. For 2005, the plaintiff received a “Meets” rating for “What” and “How”. She was awarded a bonus of US$615,000. For 2006, she received a “Meets” rating for “What” and “Does Not Meet” for “How”. ISSG had a bad year in 2006. The Hong Kong Desk ended with a loss of US$1.36 million. However, the plaintiff had a shining performance and made a profit of US$7.23 million. John Liptak, who incurred personal loss and loss for the entire Desk, was awarded a bonus of US$1 million but the plaintiff was only awarded US$550,000 for her shining performance. She alleged that her bonuses for those two years were irrationally low and claimed damages for the perverse, irrational and mala fide evaluations. Her claims were made on these bases: in transferring the distress debt assets of Asia Pulp and Paper Group in Indonesia (“APP”) from John Liptak’s portfolio to her, John Liptak and Ken Schneier intended to dump the loss in those assets on her...

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