A senior executive with Dublin stockbroking firm J & E Davy has told the High Court that the payment of bonuses to certain staff members is discretionary.

Payment of part of such bonuses is also deferred to "encourage loyalty" and give employees "an incentive", Kyran McLaughlin said.

Mr McLaughlin, deputy chairman, said Davy's policy in relation to the payment of bonuses was "the normal practice in the industry".

He was giving evidence in an action by former Davy equity dealer Eamon Finnegan over its failure to pay him €260,000 in unpaid bonuses allegedly due.

Mr Finnegan claims the company was not entitled to defer bonus payments to him on condition that he remained in its employment.

From 1995 until January 1998, he claims his arrangement with Davy was that he would be informed at the end of the year what his bonus would be and that bonus would be paid the following month, or at a time suitable to him.

He claims that situation was unilaterally changed by Davy from 1998 when he was told the bonus would be paid in instalments and was conditional on his remaining with Davy.

He remained with Davy until September 2000 by which time, he claims, he was owed some €260,000 in unpaid bonuses which sums, he alleged, had been agreed with the company. The company had refused to pay those sums.

Yesterday, Mr McLaughlin told Bill Shipsey SC, for Davy, that then-owner Bank of Ireland insisted that Davy defer, for either a one- or two-year period, part of any bonus which exceeded 100 per cent of salary.

The bank had insisted during the early 1990s on this policy in relation to how the bonus pool operated, he said. This policy applied to a small number of people in Davy and it was the practice not to pay the deferred amount if an employee moved to a rival company.

He said he had no recollection of Mr Finnegan raising objections about this matter when he spoke to him after he completed his first year as an equity dealer with Davy. Mr McLaughlin said he had explained to Mr Finnegan then that part of his bonus for the year 1997 would be deferred.

In cross-examination, Mr McLoughlin agreed with Hugh O'Neill SC, for Mr Finnegan, that it was less advantageous for employees to have part of the bonus deferred.

"Everybody would like to get their money up front," he said. However, interest was paid on the deferred amount and he did not feel that employees were being penalised.

The case before Mr Justice Thomas Smyth resumes next year.