Leiman, Ricardo and another v Noble Resources Ltd and another

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 28 May 2020
• Neutral Citation: [2020] SGCA 52
• Year: 2020
• Date: 28 May 2020
• Published date: 02 June 2020
• Hearing Date: 20 January 2020
• Subject Matter: Damages,Employees' duties,Conspiracy,Unlawful interference,Liquidated damages or penalty,Employment Law,Rules of construction,Tort,Employers' duties,Good faith and fidelity,Contractual terms,Inducement of breach of contract,Contract,Implied terms
• Plaintiff Counsel: Maniam Andre Francis SC, Sim Mei Ling, Quek Yi Zhi Joel and Jeremy Tan (WongPartnership LLP)
• Defendant Counsel: Davinder Singh SC, Jaikanth Shankar, Tan Ruo Yu, Srruthi Ilankathir, Yee Guang Yi, Darren Low and Terence De Silva (Davinder Singh Chambers LLC) (instructed), Pereira Kenneth Jerald and Bay Choon Sing Jeremy (Aldgate Chambers LLC),The second respondent absent.
• Court: Court of Appeal (Singapore)
• Citation: [2020] SGCA 52
• Docket Number: Civil Appeal No 153 of 2018

Sundaresh Menon CJ (delivering the judgment of the court): Introduction

This appeal arises out of Suit No 393 of 2012 (“Suit 393”), an action commenced by Mr Ricardo Leiman (“Mr Leiman”) and Rothschild Trust Guernsey Limited (“Rothschild Trust”) against Mr Leiman’s former employer, Noble Resources Ltd (“NRL”), and its parent company, Noble Group Ltd (“NGL”). Suit 393 primarily concerned Mr Leiman’s post-resignation entitlements under an agreement that he entered into with NRL to deal with the terms of his departure from the Noble group of companies (“Noble”). The appellants claimed, among other things, that the respondents wrongfully denied Mr Leiman his entitlements under the agreement, based on a determination by NGL’s Remuneration and Options Committee (“R&O Committee”) that he had acted to Noble’s detriment. The appellants challenged both the substance of that determination and the process by which it had been made.

The High Court judge (“the Judge”) who heard the matter dismissed the appellants’ claims: see Leiman, Ricardo and another v Noble Resources Ltd and another [2018] SGHC 166 (the “Judgment”). He reviewed the R&O Committee’s exercise of its discretion not to award Mr Leiman his entitlements and found that this discretion had been correctly exercised because Mr Leiman had breached his contractual non-competition and confidentiality obligations. He also rejected the appellants’ argument that Mr Leiman was entitled to but had not been accorded due process by the Committee. However, notwithstanding his finding that Mr Leiman had breached some of his contractual obligations as well as his duty of fidelity, the Judge dismissed NRL’s counterclaim against Mr Leiman because, in his view, there was no basis for NRL to recover the payments it had made to Mr Leiman under the relevant contracts between the parties.

This appeal raises issues pertaining to the proper construction of contracts in the context of terms that vest decision-making powers in a contractually designated entity and the extent to which a court may review the exercise of those powers when a decision made by that entity is challenged. We will address these and some other points in this judgment.

The material facts

Most of the relevant facts have been set out at [3] to [50] of the Judgment. We therefore recount the facts only to the extent necessary.

The parties

The respondents, NRL and NGL, are part of Noble, a global supply chain manager of energy, gas and power products, metals and minerals. The first respondent, NRL, is a Hong Kong incorporated company and a principal subsidiary of the second respondent, NGL, a Bermuda incorporated company listed in Singapore. NGL is currently subject to a winding-up order in Bermuda, and it was not present at the hearing of this appeal.

The first appellant, Mr Leiman, is a Dutch national. He was employed by NRL on 31 March 2006 as the Chief Operating Officer of NGL. The terms of his employment are set out in an employment agreement dated 6 December 2005 between him and NRL (the “Employment Agreement”). He was promoted and appointed the Chief Executive Officer (“CEO”) of NGL on 1 January 2010, and was also appointed an Executive Director of NGL from 1 April 2009 to 1 December 2011.

Mr Leiman was awarded NGL share options and shares and paid discretionary annual bonuses during his employment by Noble. He assigned his shares and share options to the Adelaide Trust, a trust that he established. The second appellant, Rothschild Trust, administers the Adelaide Trust as trustee.

Although Mr Leiman was formally employed by NRL, which was the Noble entity that employed Hong Kong-based staff, he was responsible for Noble’s global operations. The award of his benefits under the Employment Agreement was, for all practical purposes, determined by NGL’s R&O Committee. At the material time from November 2011 to May 2012, the R&O Committee comprised Mr Richard Samuel Elman (“Mr Elman”), Mr Edward Walter Rubin (“Mr Rubin”) and Mr Robert Chan Tze Leung (“Mr Chan”). Mr Elman was the Chairman of NGL, and Mr Rubin and Mr Chan were independent directors of NGL at the time. The R&O Committee was also assisted by Mr Jeffrey Mark Alam (“Mr Alam”), NGL’s Group General Counsel and a director of NRL, who oversaw the legal affairs of Noble. Mr Leiman also sat on the R&O Committee prior to his resignation.

Background to the dispute The terms on which NGL shares and share options were granted to Mr Leiman

The NGL share options that are the subject of the present appeal were issued to Mr Leiman pursuant to the Noble Group Share Option Scheme 2004 (“the Share Option Rules”). 44,818,182 share options had yet to be exercised at the time Mr Leiman resigned. These share options were assigned to and held by the Adelaide Trust on the following terms:

Number of share options	Date of grant	Date on which share options vested or were to have vested
3,709,094	19 March 2007	22 December 2007
5,563,636	22 December 2008
5,563,636	22 December 2009
18,545,454	22 December 2010
3,709,090	18 July 2008	22 December 2010
7,727,272	2 April 2009	2 April 2012

Under cl 8.3(a) of the Share Option Rules, any unexercised share options held by Mr Leiman would lapse if he ceased to be employed by NRL. Clause 8.3(a) states: 8.3 … [A]n Option shall, to the extent unexercised, immediately lapse without any claim against [NGL]:- (a) … upon that Grantee … ceasing to be in the full-time employment or in full time [sic] executive function … with the relevant Eligible Company [meaning NGL or any of its subsidiaries or associated companies], unless the [R&O] Committee, in its sole discretion, determines otherwise; …

However, as noted earlier, the parties entered into an agreement in anticipation of Mr Leiman’s resignation from NRL. We will turn to this shortly to consider its significance in the light of the other agreements that Mr Leiman was party to, and that also made provision for the vesting, divesting or exercise of his employment-related benefits.

Mr Leiman was also issued NGL shares pursuant to Noble’s Annual Incentive Plan (revised 10 September 2008) (“AIP”). The AIP is an incentive remuneration programme under which common stock is issued to Noble employees, but held by a discretionary trust established by NGL for a stipulated period (“the Restricted Period”), during which time it cannot be transferred or assigned except in the event of the employee’s death. Of the shares awarded to Mr Leiman under the AIP, those that are in issue in this appeal consist of: (a) 17,276,013 shares which had already been allotted at the material time, and which Mr Leiman had in turn assigned to the Adelaide Trust; and (b) 5,652,421 shares which were awarded by way of a letter dated 4 May 2011 (“the 4 May 2011 letter”), and whose allotment was pending shareholder approval. The dates on which these shares were awarded to Mr Leiman and the dates on which the trading restrictions on them were to have been lifted are as follows: In respect of the 17,276,013 shares:

Number of shares	Date of award	Date on which trading restrictions were to have been lifted
11,098,782	31 March 2009	31 March 2012
1,544,307	15 April 2010	15 April 2012
4,632,924	15 April 2013

In respect of the 5,652,421 shares:

Number of shares	Date of award	Date on which trading restrictions were to have been lifted
1,413,105	4 May 2011	6 April 2013
4,239,316	6 April 2014

Unlike share options issued under the Share Option Rules, which would generally lapse upon the employee concerned ceasing to be in Noble’s employment, an employee who had been awarded shares under the AIP would generally retain the right to have them distributed to him after the trading restrictions were lifted, even if this was after he had left Noble. Such an employee would also be able to trade them. The exceptions were if his employment had been terminated for cause, if he had engaged in activity inimical or contrary to NGL’s interests, or if he, within six months of his resignation, entered into competition with NGL. The relevant paragraphs of the AIP state:

If during the Restricted Period an employee ceases to be an employee of the Company [meaning NGL] the following will apply: 1. if during the Restricted Period the employee’s employment ceases as a result of genuine retirement, ill health, disability or death, the employee shall retain the right to the common stock held for the employee’s account by the discretionary trust and [the common stock] shall be distributed to the employee or his/her estate/beneficiaries/legal representatives, as the case may be, in accordance with the terms under which such common stock was issued. … 3. during the Restricted Period, the change of status of an employee from that of an employee of the Company to that of a consultant, agent or advisor will not be considered as a cessation of employment for [the] purposes of this AIP, provided such change of status is made with the prior written approval of the Group [CEO]. 4. if during the Restricted [Period] the employee’s employment ceases for cause, the common stock held for the employee’s account by the discretionary trust shall be forfeited. 5. if during the Restricted Period, the employee acts [in a way] or engages in activity or conduct which is inimical or contrary to or against the interests of the Company, including without limitation: (i) conduct for which criminal or civil penalties are sought against the employee and/or the Company by the Company or third-parties. (ii) violation of the Company’s policies. (iii) unauthorized disclosure or misuse of confidential information or material concerning the Company, its activities, employees, plans or business. (iv) any other conduct or act reasonably...