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London - Two former Investec traders on Wednesday lost a three-year, £6m battle over disputed bonuses in a case described by a London High Court judge as "fanciful" and "wholly incredible".
The latest bank bonus battle comes as governments and regulators attempt to rein in lofty levels of compensation blamed for creating a culture of excessive risk in an industry that sowed the seeds of the 2007-08 financial crisis.
Andrew Brogden and Robert Reid, the former head and deputy head of the bank's structured equity derivatives desk, alleged Investec failed to honour an unwritten bonus agreement for 2010/2011 after they agreed to join the bank in 2007.
Investec dismissed suggestions it had orally agreed to pay bonuses according to an "economic value added" formula, which ignored actual profit and loss and referred instead to theoretical savings made by the bank, calculated by reference to rates in the bond market.
"I regard their claim that an oral agreement was made to use the 'institutional market rate' in calculating their bonuses as wholly incredible," Judge George Leggatt said, dismissing all the claims against the bank.
He noted that both men struck him as decent and highly talented individuals, who genuinely believed they had developed a retail structured product business which generated economic value for the bank to which they were entitled to a share.
But he said the court could only judge what was fair in terms of contract.
Brogden and Reid, who had claimed more than £6m in bonuses despite their business having made losses, were ordered to pay Investec's costs of more than £1.5m.
"This was a baseless claim, and an unwarranted attack on our institution, our culture and values," said David Van Der Walt, CEO of Investec in London.
"It is unfortunate that these claims were ever issued, but we move on from here vindicated in our approach."
The bank said it paid bonuses of £150 000 to Brogden and £100 000 to Reid in June 2011, which the two men accepted. Both men left the bank a month later and launched their case shortly afterwards, an Investec spokesperson said.
Lawyers have said that a legal victory scored in 2012 by more than 100 London-based bankers against Commerzbank , after Germany's second-largest lender slashed their bonuses in the wake of huge investment bank losses, could spur other aggrieved staff to sue firms in payout disputes.
But Judge Leggatt said on Wednesday that although he did not think Brogden and Reid's evidence was invented or dishonest, he had been persuaded that no oral accord had been made during their pre-contractural discussions with Van Der Walt.
"Not only did they seem to me to be sincere and straightforward individuals, but the account they gave does not have the hallmarks of deliberate concoction. It much more likely has its origin in something actually said, however great the distortion in the claimants' recollections," he said.
Lawyers for Brogden and Reid were not immediately available for comment.
