IT IS unlikely that the beneficiaries of the AIB bonuses will be able to force the bank to pay them now.
The change in the status of AIB due to the massive injection of public money laid the basis for a critical examination of the bonus contract by Minister for Finance Brian Lenihan.
The “supervening event” to which he refers in his letter to the bank’s chairman is “the financial difficulties of the bank”. Put bluntly, the bank could not, out of its own resources, pay the bonuses supposedly earned in 2008 and could only stay in business at all with State support. This changed the context in which the bonuses were payable.
According to legal sources, contracts contain both express and implied terms. It is not unreasonable to consider that it was an implied term of the contract to pay the bonuses that the bank be able to pay them out of its own resources. If it could not, that implied term no longer exists and the contract becomes unenforceable.
“If the State did not bail out the banks, these people would not only not be getting bonuses, they would not be getting salaries,” according to one legal source.
The sources also stressed that the State was entitled to place conditions on the money it paid to keep the bank afloat and to specify what that money was and was not spent on.
In addition, under public law the Minister has the power to act in the public interest and he can never lose that right by reason of a contract. This operates in all dealings between individuals and State institutions.
While at the outset the bonuses were payable under private law, that is, under a contract between a private employer and a number of individuals, when the bank became dependent on public money it moved into the arena of public law, according to this source.
There have already been a number of cases in the courts where various groups of public employees sought to insist that their contracts were sacrosanct and should be upheld, but the courts have held that the public interest trumps such contracts.
If the public interest requires that contracts should not be observed they will not be.
If the individuals who have contracts for the AIB bonuses seek to have the courts enforce them, not only will they have to be publicly identified, but they will face courts who have already ruled on the overriding importance of the public interest in the context of the current financial difficulties of the State.