Jurisdiction - Singapore
News
Singapore – Court Of Appeal Rules On Damages For Constructive Dismissal Claims.

26 August, 2014

 

Legal News & Analysis – Asia Pacific – Singapore – Labour & Employment

 

In the recent case of Wee Kim San Lawrence Bernard v Robinson & Co (Singapore) Pte Ltd [2014] SGCA 43, the Singapore Court of Appeal had to consider whether an employee who claimed damages for constructive dismissal and in the alternative a breach of the implied term of mutual trust and confidence could seek damages over and above the contractually stipulated two months’ salary in lieu of notice. It is significant to note that the facts relied on for the alternative claim were the facts relied on for the constructive dismissal claim.

 
The Court held that in circumstances where the employee was not alleging an independent breach of the term of mutual trust and confidence or that he had suffered other damage (e.g., mental or emotional distress or the impairment of future employment prospects), his damages in respect of his termination would be confined to the salary he would have earned had the employment contract not been breached. In this case, this amounted to two months’ salary in lieu of notice as stipulated in the employee’s employment contract. The Court also made it clear that the mere fact a claim was founded on a breach of the implied term of mutual trust and confidence did not mean that the ordinary measure of damages for the breach of an employment contract did not apply.

 
This article takes a look at the Court’s decision.

 
Facts

 
The plaintiff had been an employee of the defendant. He alleged that as he was homosexual, he had been subjected to persecution or unreasonable bias by the defendant or its officers, and had had no choice under these conditions but to tender his resignation (i.e., he alleged that he was constructively dismissed).

 

The plaintiff’s employment contract with the defendant provided that written notice of termination from either party would be two calendar months or two calendar months’ salary in lieu of such notice without assigning any reasons whatsoever. When the plaintiff tendered his resignation, he had asked for and obtained four months’ salary in lieu of notice together with cash for his unconsumed annual leave.

 
In the alternative, he alleged that the alleged conduct by the defendant or its officers had amounted to a breach of the implied term of mutual trust and confidence, and in so doing had repudiated the employment contract.

 

The Defendant’s Striking Out Application

 

The defendant applied to strike out the claim on the grounds that it disclosed no reasonable cause of action. It asserted that, even if the plaintiff had been constructively dismissed, according to the employment contract and case law, he was only entitled to two months’ salary (leaving aside the question of mitigation) as the defendant was in any event entitled to terminate his employment by paying him two months’ salary. As the plaintiff had received four months’ salary in lieu of notice, he had no further claim to damages from the defendant.

 

However, the plaintiff argued that this was not a simple case of wrongful dismissal. Instead, he argued that he had been constructively dismissed and that the defendant had, by its actions, breached the implied term of mutual trust and confidence. He further argued that, in a case where the implied term of mutual trust and confidence had been breached, the ordinary measure of damages did not apply.

 
Legal Background

 

The general rule under Singapore law is that where an employee has been wrongfully dismissed, the ordinary measure of damages is the amount which the employee would have received under the employment contract had the employer lawfully terminated the contract by giving the required notice or paying salary in lieu of notice, subject to mitigation.

 

As noted by the Court of Appeal in this case, “constructive dismissal” refers to the situation where the employer’s repudiatory breach entitles the employee to treat himself as discharged from the employment contract; although it is the employee himself who terminates the contract, he is considered as having been “constructively” dismissed by the employer. It is as though the employer had effectively terminated the contract by manifesting an intention no longer to be bound by the contract, which position is then accepted by the employee.

 

Under the law, it is an implied term of every employment contract that the parties owe each other mutual trust and confidence. As far as the employer is concerned, this term obliges the employer to not, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of mutual trust and confidence between employer and employee.

 

A breach of the implied term of mutual trust and confidence by the employer would constitute a breach of a fundamental term of the contract of employment, and an employee who accepts this breach as a repudiation of the contract would be treated as though he has been “constructively” dismissed by the employer. A breach of this implied term can also give rise to other consequences.

 
Decision

 

The Court of Appeal dismissed the plaintiff’s appeal, holding that the claim had been properly struck out. It noted that the prior cases showed that where an employer had breached the implied term of mutual trust and confidence, an employee might be able claim for losses that are over and above the ordinary measure. However, this did not mean that the ordinary measure of damages did not apply.

 

In the prior cases, claims had been allowed for the loss of future employment prospects or for other types of injury such as mental or emotional distress. However, the employees in those cases had been able to show that the consequences of the breach of the implied term were something other than the premature termination of the employment contract. Conversely, where the only consequence of the breach was the premature termination of the employment contract, as was the case here, the measure of damages would be the same as that for any other case of premature termination of employment, whether this was by way of outright wrongful dismissal or by way of constructive dismissal.

 

The Court also noted that to accept the proposition that damages for constructive dismissal in the present circumstances should be assessed on the basis that the employment relationship would have continued indefinitely would be incompatible with the principle that there is no right to specific performance of an employment contract, i.e., no right to require an employer to continue the employment relationship indefinitely. This was the implicit premise underlying the contention that the employee is entitled to have his damages assessed on the basis that his employment would have continued indefinitely.

 

Finally, the Court noted that in the United Kingdom, the English House of Lords (as it then was) had held that the implied term of mutual trust and confidence did not apply in wrongful dismissal cases, such that a claim for other damages arising therefrom could not be made where the basis of the action was wrongful dismissal. Accordingly, under English law, claims for damages based on breaches of the implied term of mutual trust and confidence could only be brought if the cause of action in question accrued before and existed independently of the cause of action for wrongful dismissal. However, the Court declined to rule on whether the same rule would apply in Singapore as this was not necessary for deciding the appeal before it.

 
Our Comments / Analysis

 

An employee may assert that his employment contract has been prematurely terminated on the basis of a breach of an implied term of mutual trust and confidence. Unlike English law, the Singapore courts have not decided that this implied term does not apply in wrongful dismissal cases. Indeed, this principle has been accepted by the Singapore High Court in past cases (e.g., Wong Leong Wei Edward v Acclaim Insurance [2010] SGHC 352).

 
It would be prudent for an employer who wishes to terminate the employment of an employee, even when the termination is in accordance with the contractual term, to ensure that the decision to terminate is not made in bad faith, or without reasonable and proper cause.

 

We further highlight that in the Tripartite Guidelines on Fair Employment Practices (“Guidelines”), it is advocated that termination of employment only be done on documented poor performance or misconduct. The Guidelines further recommend that an enquiry be conducted to allow the employee to present his case before any decision is made with regard to dismissing the employee. The Guidelines however are not legally binding, but companies are recommended to comply with the same as the Tripartite Alliance for Fair Employment Practices and the Ministry of Manpower will make reference to the Guidelines in promoting fair and responsible employment practices.

 

wongpartnershiplogo

 

For further information, please contact:

 

Jenny Tsin, Partner, WongPartnership

jenny.tsin@wongpartnership.com

 

Vivien Yui, Partner, WongPartnership

vivien.yui@wongpartnership.com

 

WongPartnership Labour & Employment Practice Profile in Singapore

 

Homegrown Labour & Employment Law Firms in Singapore

 

International (with Local Law Capabilities) Labour & Employment Law Firms in Singapore

 

Comments are closed.