Cowie v Berger International Pte Ltd

• Jurisdiction: Singapore
• Judge: Warren Khoo L H J
• Judgment Date: 15 March 1999
• Neutral Citation: [1999] SGHC 62
• Docket Number: Suit No 482 of 1997
• Date: 15 March 1999
• Published date: 19 September 2003
• Year: 1999
• Plaintiff Counsel: Chong Boon Leong and Low Suk Ling (Rajah & Tann)
• Citation: [1999] SGHC 62
• Defendant Counsel: Wong Meng Meng, Judy Lee and Low Willin (Wong Partnership)
• Court: High Court (Singapore)
• Subject Matter: Whether an employee's grave misconduct can justify instant dismissal,Breach,Employer wanting early termination of employment contract,Contract,Discharge,Employment contract,Employee sending letter computing compensation for premature termination,Employer alleging misdeeds by employee,Effect of such letter

Judgment:

WARREN LH KHOO J

This is a claim by the plaintiff for damages for wrongful dismissal by the defendants from his position as the managing director of the defendants.

2.Until the termination of his employment in February 1997, the plaintiff had spent more than 20 years of his working life with the Berger group of companies, whose main line of business was in the research, development, manufacture and sale of paints and surface coatings. The Berger group and their products enjoyed prominence in many parts of the world, particularly in many former British territories. The group, indeed, was originally owned by British interests.

3.The plaintiff started his career with the group in 1974. After various postings, on the technical side, in the group`s companies in East and South Africa, he was in 1984 promoted to the post of managing director in Malta. He became more involved in the business and commercial aspects of the business. In 1987, he became the managing director of Berger Paints Singapore Pte Ltd (`Berger Singapore`). Singapore was then viewed as an important location for the group`s plans to expand its presence in South East Asia and the Far East. In addition to his basic responsibilities of managing Berger Singapore, the plaintiff was in charge of implementing these expansion plans.

4.In 1988, Berger subsidiaries in the Far East, the Middle East and Africa were taken over by UB International UK (`UBI`), whose shareholders were mainly Indian nationals. As managing director of Berger Singapore, the plaintiff came under the new management. The plaintiff reported directly to the Chairman, Mr Vijay Mallya, in respect of the affairs of Berger Singapore. He worked well with Mallya and with UBI generally. In 1991, UBI restructured the management of the Berger companies it had acquired. The plaintiff became responsible for the management of the subsidiaries and associate companies in Singapore, Hong Kong, the Philippines, Malta, the United Arab Emirates and Bahrain. In 1992, the concept of injecting all the Berger companies into a holding company based in Singapore was considered and approved by UBI. The plaintiff was given the responsibility of implementing the plans to turn the holding company into a public listed company on the main board of the Singapore stock exchange. The public listing exercise was completed in April 1994. Berger International Ltd (`BIL`) came into being. The plaintiff became the group managing director of BIL, responsible for the performance of all its subsidiaries and associated companies. He was also appointed to the board of all the subsidiaries and associated companies of BIL. The public listing was without doubt a signal achievement for the group, and for the plaintiff.

5.As part of the public listing exercise, the merchant bankers advised that the plaintiff`s employment be formalised in a written employment agreement. As a result, on 30 March 1994, one was entered into between the plaintiff and the defendants. This provided for an employment term of three years from 1 January 1994 to 31 December 1996. The plaintiff, a UK citizen, was here on a work permit. It was due to expire in January 1996. In conjunction with his application to renew the work permit, he wrote to Mr Mallya proposing that his employment contract be extended for a further three years. Mr Mallya agreed, and it was extended accordingly to 31 December 1999.

6.BIL`s main shareholder was Mr Mallya. He was the chairman. To increase the transparency of the company as a public listed company, two independent directors were appointed. One was Mr Steven Tan, and the other, Mr Frank Yung. The three of them, Mallya, Tan and Yung, were the non-executive directors. Mr Nedungali, UBI`s group financial controller, was also a non-executive director vis--vis BIL. The non-executive directors had no responsibility for the day-to-day affairs of BIL. The plaintiff and two others, ie Mr Chong and Mr Chapman, were the so-called executive directors. That is to say, they were senior employees with executive responsibility who also sat on the board. Mr Chong was the group finance director and company secretary. Mr Chapman was the technical director. These three and Mr Mallya were the original team, with Mallya as the leader. Mr Tan and Mr Yung were appointed, as I said, only on the public listing of the company in 1994. Mr Mallya, Mr Tan and Mr Yung together then formed what was called the remuneration committee, whose functions involved matters pertaining to salary reviews and other employment benefits especially of senior executives. That at least was the theory.

7. The Ariza take-over

Barely two years after the public listing, negotiations were on foot for the acquisition by a Malaysian group, Ariza Holdings Ltd, for a controlling stake in BIL. These negotiations culminated in an acquisition in October 1996 of some 57% of BIL shares by Ariza. Unlike the public listing exercise, the plaintiff was not involved in the takeover negotiations. As part of the takeover process, six Ariza nominees were appointed directors of BIL. These included Albert Cheok, Mohamed Kamal and Dato Haji Abdul Ghani. These three persons were the main shareholders in Ariza, each holding about one-third of the equity. They also became substantial shareholders of BIL on the takeover. In addition, Dato Senawi was appointed director and chairman. Miss Josephine Sivaretnam, who had been involved, with Mr Albert Cheok, in the takeover negotiations with UBI, was also appointed a director. It does not appear from the documents that either Dato Senawi or Josephine Sivaretnam had any shares in Ariza or BIL. Mr Mallya and Mr Nedungali, as to be expected, ceased to be directors. Mr Steven Tan and Mr Yung remained as independent directors. The plaintiff and the other executive directors retained their respective positions.

8.However, trouble between the plaintiff and the new bosses started almost from day one. There were rumblings about the plaintiff being not co-operative enough with the new board in regard to specific matters concerning expansion of the business into Malaysia. There was the incident of the plaintiff querying the propriety of a proposal by the new directors to extend a letter of credit facility of RM1.5m to finance a transaction between BIL and a related company of Ariza. This, and other things as well, were not taken kindly by the new directors. At a board meeting in December 1996, the chairman, Dato Senawi, tried to paper over the differences by appealing for greater co-operation between the executive and non-executive directors. But the gulf remained. On 20 January 1997, the plaintiff met Dato Senawi and Mr Cheok. Dato Senawi, while assuring the plaintiff that Ariza had no problem with his professional competence, said that there were `cultural differences` between the two sides. It was suggested to him that he should consider an early departure from BIL. The plaintiff pointed out that his contract had another two years to run. Dato Senawi asked him for an estimate of the amount of compensation for an early departure. The plaintiff said it might be about S$1.5m, but he would give a more detailed computation later.

9. The 22 January letter

On 22 January 1997, the plaintiff wrote to Dato Senawi. In it, he expressed his sadness at being asked to consider an early departure. He said that he would be only too happy to continue. `However, in view of the message that you and Albert [Cheok] have given me on 20 January 1997, it is with a heavy heart that I finally come to the conclusion that my time with BIL is coming to an end.` He concluded by saying that he was open to discussions with Dato Senawi and Cheok on the terms `under which I could leave BIL on an amicable basis` before the end of his contract. He said he had reviewed his entitlements from April 1997 to January 1999, and he set out his calculations ending with a grand total of $1.868m. On Dato Senawi`s request, the plaintiff explained by a subsequent letter the basis of his computations. On 28 January, he was invited to attend a meeting with Senawi and Cheok to discuss the matter further. According to the plaintiff, Cheok got quite agitated at this meeting, and said that the plaintiff`s 22 January letter was a threat. Then on 17 February, Cheok requested an emergency board meeting to be convened to discuss the position of the plaintiff in BIL.

10.The special board meeting was convened on 21 February, with the plaintiff`s position in BIL as the sole item of the agenda. Solicitors for BIL were present. Acting on their advice, the board told the plaintiff, much to his surprise, that the board accepted his letter as a `letter of resignation` or `a letter offering his resignation` with effect from 28 February. He was to take immediate leave. However, the board also authorised the chairman to discuss with the plaintiff the value of the compensation to be paid to him. The plaintiff was not allowed to have his solicitors with him. But he told the directors that the letter was not, and was never intended to be, a letter of resignation. He also told them that if they proceeded to `accept` his resignation it would be a repudiation of his employment agreement and he reserved all his rights in that respect.

11.Mr Vincent Cheok (I do not know if he is related to Albert Cheok) was at this board meeting appointed acting managing director with immediate effect. On the same day, Dato Senawi gave a formal reply to the plaintiff`s letter of 22 January. He repeated the position adopted by the board of directors, ie that the plaintiff`s letter was a letter of resignation, or an offer to resign, and that the board had accepted it as such.

12.On 24 February, when the plaintiff went to his office, he found Mr Vincent Cheok already installed there. Mr Cheok told him he was now the acting managing director of BIL. Mr Cheok also told him to move out of his office straightaway. The plaintiff did...