Basanta-Henry, Audrey and Others v National Commercial Bank Jamaica Ltd

• Jurisdiction: Jamaica
• Judge: ANDERSON, J:
• Judgment Date: 20 December 2004
• Judgment citation (vLex): [2004] 12 JJC 2007
• Court: Supreme Court (Jamaica)
• Date: 20 December 2004

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

SUIT NO. C.L. 2002/B-132

BETWEEN

AUDREY BASANTA-HENRY

1 ^ST PLAINTIFF

AND

JOSEPH SHOUCAIR

2 ^ND PLAINTIFF

AND

HERMA McRAE

3 ^RD PLAINTIFF

AND

SHEILA GREEN

4 ^TH PLAINTIFF

AND

IAN WATSON

5 ^TH PLAINTIFF

AND

NORIENE SPENCE

6 ^TH PLAINTIFF

AND

SHEILA SHERIFF

7 ^TH PLAINTIFF

AND

ANDRAL SHERLEY

8 ^TH PLAINTIFF

AND

THEODORE GOLDING

9 ^TH PLAINTIFF

AND

NORMAN MARSH

10 ^TH PLAINTIFF

AND

NATIONAL COMMERICAL BANK JAMAICA LIMITED

DEFENDANT

BANKING LAW - Undertaking - Bank's undertaking not to re-negotiate upward or otherwise increase any salary or emolument package - Whether there was breach of fiduciary duty - Release from undertaking - Whether agreement was complete - Condition precedent

ANDERSON, J

1 This action arises out of a dispute between the Claimants who were at all material times members of a group referred to as the "Senior Managers Group" (the "Group" or "SMG") within the defendant company, on the one hand, and the company ("NCB"), on the other. According to the witness statement of the 9 ^th Claimant, Theodore Golding, these members of the Group, all senior employees of the defendant bank at the material time, occupied senior positions in the Bank classified as E3, E4, SM1 and SM2 in descending order of seniority. There are no material differences in the facts alleged by the claimants and the defendant and the essential issue to be determined in the case is one of law. That issue is whether in the factual circumstances largely agreed between the parties, there had arisen on or about 17 ^th September, 2001, a binding and enforceable agreement pursuant to which the claimants became entitled to receive, and the defendant liable to pay, certain sums to each claimant as set out in the claimants' statement of claim.

2 In the 1990's, NCB was one of the largest commercial banks operating in Jamaica and like other banks and financial institutions, it was then (as now) subject to the control and regulation of the Bank of Jamaica (B.O.J). Like many other financial institutions at that time, it suffered from the crisis which, it is widely now acknowledged, afflicted the financial sector in the mid to late 1990's, leading to what is often referred to, as the financial sector "collapse". On May 10, 1999, the then Chairman of the defendant bank, the Hon. Oliver F. Clarke O.J., wrote to the Governor of the Bank of Jamaica, the letter which stands at the centre of this matter. In that letter, the bank purported to give certain "undertakings" to the B.O.J. For the purposes of this action, the relevant undertaking was contained in paragraph 6 and is in the following terms:

"Subject to 13 below, the bank will not re-negotiate upward or otherwise increase any salary or emolument package of any director and/or senior manager of the bank of the rank of senior branch manager or upwards. Furthermore, the bank will not enter into any contract or agreement or revise upwards any existing contract or agreement for the payment of any service rendered by any director and/or party connected to the bank except where such services are rendered in a professional capacity at arms Length and at competitive and fair rates."

3 For completeness, I also set out paragraph 13, which was referenced in paragraph 6, below.

The Bank undertakes to strengthen its team of management personnel by the enlisting of persons with appropriate expertise covering the areas of credit, finance, information technology and internal auditing.

We bring to the BOJ's attention, the fact that NCB operates a staff training facility, which places emphasis on all aspects of credit. Based on our current programme, all Lending Managers will have received instruction in the Financial Analysis Management Authoring System (FAMAS) Course by 1999 June. Additionally, the Staff Training Centre will continue to run specialized credit courses utilizing the services of overseas instructors, including Mr. Keith Chetley (formerly of the Manchester Business School, now a consultant at the Chartered Institute of Bankers (UK)) and Robert Morris Associates. The latter are well known in the American banking fraternity for their Uniform Credit Analysis Programme

4 The issues to be determined require the court to provide answers to the following questions:

• 1) Was there at any time a concluded valid and enforceable agreement between the Defendant Bank and the Claimants?

• 2) If there was such, was there any factor that vitiated that agreement?

• 3) If the answer to the first question is positive, and to the second question negative, when did such agreement arise and when did it take effect?

• 4) Was there any action by the claimants or any of them which was in breach of any fiduciary duty owed to the defendant, and which breach gave to the defendant a right to recover damages?

5 First, however, it is necessary to review what was the evidence presented to the Court.

6 The Evidence

7 Much of the history of the events which form the backdrop to this action is recounted in the witness statement of the 9 ^th Claimant, Theodore Golding, a retired Senior General Manager of the defendant company. According to that witness statement, Mr. Golding served the bank for forty (40) years, many of those in senior positions, until his retirement in March 2002. It would not be unreasonable to infer that this experience gave him a unique perspective on matters related to the bank's processes and activities. He asserts that the Senior Managers' Group ("the Group") comprised about 22 senior managers and he served as a member of the "Emoluments Review Committee" ("ERC") of the group prior to 1996, at which time that group became dormant for about 4 years. He was the Chairman of the ERC from its revival around January 2000 until the time of his retirement in March 2002. He avers further that while up to the bank's financial year ending 30 ^th September 1996, the group benefited from increases in salaries and other benefits which were negotiated by the ERC, for the year ending September 30, 1997 all categories of staff of the bank agreed, in the words of the statement, "to forego salary increases owing to the adverse financial position of the bank".

8 The ERC was revived after a meeting on January 2, 2000, between members of the Group and Dunbar McFarlane, then Deputy Chairman of the Bank and Group Managing Director, at which the Group members protested the lack of any salary increases from the financial year ended September 30, 1997. Other categories of staff represented by the Staff Association had continued to benefit from salary increases in each year. The salaries of members of the Senior Manager's Group remained frozen for the years 1997 –98 and 1998–99. Following up on the suggestion purportedly made by Mr. McFarlane, the group submitted a claim by way of a memorandum to the Bank on January 12, 2000. No immediate response was forthcoming from the Bank. A meeting was held with the Chairman, Mr. Clarke and Mr. McFarlane on March 27 ^th at which the Chairman allegedly advised that he could not support the claim which had been submitted. A further meeting was held on April 3, 2000 at which the chairman expressed concern at Mrs. Henry (Claimant #1) being a negotiator for the Senior Managers' Group in talks with the bank while also representing the bank in talks with the Bank of Jamaica, concerning a Performance Incentive/Variable Pay Scheme for senior employees. According to the agreed documents the Chairman at that meeting, indicated that "some consideration would be given to increasing basic pay".

9 According to Mr. Golding's evidence, in June 2000, members of the group became members of the Bustamante Industrial Trade Union. The defendant challenged the right of some members of the group to become members of the union. When the matter was referred to the Industrial Dispute Tribunal (IDT) the IDT ruled against the defendant that all employees in the relevant categories should be included on the list for purposes of carrying out a representational rights poll. The defendant then sought an Order for Certiorari to quash the IDT award. However, the group mindful of the need to avoid litigation and in the interests of settling the dispute, held discussions with the Bank and on the 21 ^st June 2001 arrived at certain understandings.

10 As a consequence of these understandings, the defendant agreed not to pursue its action for Certiorari; the Group decided not to pursue its attempts as being represented by the BITU, and the BITU for its part, agreed not to pursue claims on behalf of the Managers in respect of emoluments for the period October 1999 to September 2001. The meeting of June 21, 2001 also agreed that the defendant would re-instate the Salaries Committee of the Board "with a view to expediting a review of the emoluments of the Group". Mr. Golding's witness statement, interestingly, has this to say, and for reasons to which I will advert later, I consider it to be important. "Mr. McFarlane stipulated that the BITU should confirm that it would not pursue further claims pending this review, and this was done". In apparent fulfillment of its part of the understandings, the BITU sent a letter to the defendant, at the request of Mr. McFarlane, in the following terms:

"The Bustamante Industrial Trade Union is advised by its members in the Senior Management Category comprising SM1, SM2, E3 and E4 employees, that discussions were taking place between themselves and your bank in respect of their outstanding emoluments.

We are further informed that these discussions will be speedily concluded and that the BITU will be advised of the results of the talks".

11 In September 2001, the Group prepared and on September 14, 2001, presented to the Bank through its...