Sea-Land Service Inc v Cheong Fook Chee Vincent

• Judge: Karthigesu JA
• Judgment Date: 16 August 1994
• Neutral Citation: [1994] SGCA 103
• Citation: [1994] SGCA 103
• Defendant Counsel: Abdul Rashid Ghani and Terence Lim (Khattar Wong & Pnrs)
• Published date: 19 September 2003
• Plaintiff Counsel: Chua Lee Ming (Lee & Lee)
• Date: 01 September 1994
• Docket Number: Civil Appeal No 156 of 1993
• Court: Court of Appeal (Singapore)
• Subject Matter: Redundancy payments,Whether employer bound to give the enhanced severance pay,Sufficiency of consideration,Whether employer bound to give enhanced severance pay,Employment Law,Employment contract with redundancy provisions,Termination of employee's services under enhanced redundancy program,Consideration,Whether supported by consideration,"Eligible",Benefits,Contract,Termination of employee's services under enhanced redundancy programme,Variation of contract by company's representations of redundancy scheme,Words and Phrases,Variation to include enhanced severance pay,Whether employee provided consideration for the variation by accepting the termination

This was an appeal against the judgment of Kan Ting Chiu J (reported as Cheong Fook Chee v Sea-Land Service Inc [1994] 2 SLR 340 ), which declared that the appellants were bound to pay the respondent an enhanced severance pay of $14,340 in addition to his normal severance pay.

The appellants were the employers of the respondent. Under art 3.12 of the appellants` Employee Rules and Benefits Handbook (the handbook), the respondent was entitled to a severance pay of half a month`s pay for each year of service in the event he was made redundant. During a restructuring exercise in 1989, the chairman and chief executive officer of the appellants, by a letter dated 11 December 1989, informed the employees of the appellants that those affected by a redundancy exercise which was pending would be eligible to participate in an enhanced severance program.

On 1 November 1991, the respondent received a letter from the appellants informing him that his employment would be terminated on 30 November 1991. At the same time, he was informed in a notice entitled `Final Payment of Salary` that he was to receive severance pay of $23,900 and an enhanced severance pay of $14,340. In addition, he received a document entitled `Enhanced Redundancy Program Singapore` which gave notice of a pending redundancy exercise and which provided that an affected employee would be eligible to receive:

(a) half month`s pay for each year`s service (severance pay); and

(b) another half month`s pay for each year`s service up to a maximum of six months` pay (enhanced severance pay).

When the respondent collected his final payment of salary, however, he received another letter from the appellants dated 13 December 1991 informing him that the `Final Payment of Salary` which he had received earlier had been calculated wrongly. He was informed that he was not entitled to the enhanced severance pay of $14,340, but was only entitled to the amount payable under art 3.12(B) of the handbook. In place of the enhanced severance pay, there was an ex gratia allowance of $4,780 which was equivalent to two months` pay. The respondent accepted the payment under protest and took out these proceedings for a declaration that he was entitled to the enhanced severance pay.

The proceedings in the High Court were heard before Kan Ting Chiu J, who granted the declaration sought by the respondent. He found that there was an enforceable agreement made between the two parties under which the respondent was to be paid the enhanced severance pay. On the issue of consideration for the agreement, the learned judge found that there was consideration for the enhanced benefits when ` the respondent accepted the termination of his employment under the program in the expectation of receiving the enhanced severance benefits `.

The appeal came up for hearing before us. We allowed the appeal with costs, and now give our reasons. The main issue on appeal was whether the agreement to pay the respondent the enhanced severance pay was contractually unenforceable for lack of consideration. If there was no consideration, the respondent would not be entitled to the declaration sought as it would only be a gratuitous promise by the appellants. Since the money had not been paid out to the respondent, the `gift` was not perfected and the respondent would not be able to sue for it.

It was common ground that, if there was consideration for the agreement to pay the enhanced benefits, it could only have arisen in three possible forms: first, by the respondent performing his existing contractual duties under the employment contract when he continued to work for the appellants after he received the termination notice; secondly, by the respondent forbearing to sue the appellants for breach of the employment contract as the termination of the respondent`s employment was allegedly not in accordance with the employment contract; and, thirdly, by the respondent accepting the termination of his employment in the expectation of receiving the enhanced benefits. It was, however, the appellants` case that the third possibility was, in substance, similar to the second one.

Before us, counsel for the appellants submitted that the respondent had not continued to work for the one month after receiving the notice of termination in order to be entitled to the enhanced severance pay, but had done so in order to be entitled to one month`s pay of his normal salary. That being so, the performance by the respondent of his existing contractual duties owed to the appellants could not be valid consideration. He cited Re Birkbeck Permanent Benefit Building Society and Sanderson v Workington Borough Council . On the other hand, counsel for the respondent submitted that, if the appellants had obtained a practical or factual benefit from the respondent`s performance of his existing contractual duties, that would amount to valid consideration. For this proposition, he relied on Williams v Roffey Bros & Nicholls (Contractors) Ltd and Asia Polyurethane Mfg Pte Ltd v Woon Sow Liong .

The material facts of Williams v Roffey Brothers were as follows. The defendants were the main contractors for a building contract. The plaintiff entered into a sub-contract with the defendants for carpentry work. The plaintiff got into financial difficulties because the agreed price for the sub-contract was too low for him to operate satisfactorily and at a profit. As the main contract contained a time penalty clause and the defendants were worried that the plaintiff might not be able to complete the sub-contract on time, they made an oral agreement to pay the plaintiff an additional sum to fulfil his obligations under the sub-contract. Eventually, the plaintiff was able to substantially complete the carpentry work. However, the defendants failed to honour their oral promise. The plaintiff then sued the defendants for the additional sum promised. One of the main issues before the court was whether there was consideration for the agreement as the plaintiff`s promise under the agreement was...