Lim Evan Sean v Mandiri Investment Management Pte Ltd

• Judge: Lim Mei Yee Elaine
• Judgment Date: 02 September 2021
• Neutral Citation: [2021] SGDC 188
• Citation: [2021] SGDC 188
• Court: District Court (Singapore)
• Published date: 09 September 2021
• Docket Number: District Court Suit No 760 of 2021 (Summonses No 2328, 2329 and 2568 of 2021)
• Plaintiff Counsel: Mr Nicholas Jeyaraj s/o Narayanan (Nicholas & Tan Partnership LLP)
• Defendant Counsel: Mr Ang Tze Phern, Ms Yap Pui Yee (Rajah & Tann Singapore LLP)
• Subject Matter: Civil Procedure,Summary judgment,Striking out,Employment Law,Garden leave,Whether employer entitled to place employee on garden leave in the absence of an express contractual term permitting it to do so,Whether a right to work should be implied into the employment contract,Constructive dismissal,Whether employee entitled to claim an additional month of salary beyond the term of his employment contract and reimbursement for his income taxes
• Hearing Date: 19 August 2021

Deputy Registrar Lim Mei Yee Elaine:

‘Garden leave’ is a colloquial term used to describe an employer’s insistence that its employee does not work for the period of such leave, while it continues to pay the employee’s remuneration. It is often utilised for the duration of an employee’s notice period after he has resigned or, in some cases, had his employment terminated.

The present applications raise the interesting issue of whether an employer can be guilty of wrongful dismissal for placing its employee on garden leave in the absence of an express provision in the employment contract permitting it to do so (which I will refer to as a ‘garden leave clause’). As this issue has not been considered in any reported decision of the Singapore courts, I set out the full grounds of my decision to clarify the applicable legal principles on this subject.

Background Facts The parties

The plaintiff is the former Chief Executive Officer (“CEO”) of the defendant, a fund management firm based in Singapore. The defendant is a subsidiary of PT Mandiri Manajamen Investasi (“PT Mandiri”), which is a fund house in Indonesia and part of the Bank Mandiri group.

The relevant contracts

By a written agreement dated 26 August 2013 between the parties (the “Initial Contract”), the plaintiff was employed as the CEO of the defendant from 1 November 2013 for a term of three years, at a monthly salary of S$22,000 and a monthly incentive of 5% of the management fees received by the defendant.¹

Under Clause 10 of the Initial Contract, the plaintiff was required to do the following:² The candidate is asked for actively involved in developing and implementing strategies in many areas with company and its group, including but not limited to be part of business development in Private Banking and fund management businesses. Follow up discussions with management of Mandiri Investasi and with officer from Private Banking Department and/or Wealth Management Group will be set up for this purpose.

It was undisputed that the plaintiff’s responsibilities as CEO included: managing the defendant’s operations; overseeing the development and growth of the defendant’s fund management business; developing and implementing the defendant’s business strategies; marketing the defendant’s funds to clients and customers; and establishing and expanding the defendant’s distribution list by dealing primarily with the private bankers, market heads, distributors of private banks as well as high net worth individuals,

but that the plaintiff was not in charge of the actual management of funds, which was handled by the defendant’s operations team on the ground.³

By a written agreement dated 31 August 2016 between the parties (the “Extended Contract”), the plaintiff’s employment as CEO was extended, on new terms, for two years commencing on 1 November 2016, at a monthly salary of S$24,000 and the same monthly incentive of 5% of the management fees received by the defendant.⁴

Clause 3 of the Extended Contract provided that:⁵ the contract was “subject to renegotiate terms at the end of contract period”; and either party may terminate the plaintiff’s employment with the defendant by giving three months’ notice. Where the termination is initiated by the defendant, the defendant shall bear the plaintiff’s Singapore taxes.

In the course of the Extended Contract, the plaintiff’s monthly salary was increased twice: first to S$24,720 from March 2017, and subsequently to S$25,585.20 from May 2018.⁶

There was no express term in the Initial Contract or the Extended Contract permitting the defendant to place the plaintiff on garden leave.

Key events leading to the present dispute

About two months before the expiry of the Extended Contract, on or about 6 August 2018, PT Mandiri, on behalf of the defendant, issued a letter to the plaintiff titled “End of Contract Notification”. The following are the material portions of the End of Contract Notification:⁷ “… we would like to inform that your employment as Chief Executive Officer of Mandiri Investment Management Pte. Ltd. will end on October 31, 2018 and will not be renewed. Your last working day will be on August 31, 2018, as the period from September 1, 2018 until October 31, 2018 will be your Garden Leave. During this period, you are not allowed to join/represent other companies. We kindly request you to prepare a proper handover of all tasks, documents, Company assets, etc. in order to ensure a smooth transition with the Mandiri Investment Management Pte. Ltd. Management.” [my emphasis]

Following a request by the plaintiff for the defendant to bear his Singapore income taxes, PT Mandari, on behalf of the defendant, issued an email to the plaintiff on 24 August 2018.⁸ In that email, the defendant: attached a letter dated 16 August 2018 to the plaintiff, in which it refused to accede to the plaintiff’s request. The defendant’s refusal was on the ground that the plaintiff’s employment had not been terminated upon the defendant’s initiation, but rather would cease upon the expiry of the term of the Extended Contract; and asked the plaintiff to sign an agreement dated 24 August 2018 between the parties titled “NON-COMPETE AND NON-SOLICITATION AGREEMENT” (the “NCNS Agreement”).

The plaintiff did not sign the NCNS Agreement. Instead, the parties exchanged various emails from 29 August 2018 to 13 September 2018 on the issue of whether the plaintiff’s employment under the Extended Contract had been prematurely terminated by the defendant and consequently, whether the defendant had to bear the plaintiff’s Singapore income taxes.⁹

In his emails to PT Mandiri on 29 August 2018 and 10 September 2018, the plaintiff took the position that: renegotiation of his employment should have been discussed on or after the expiry of the Extended Contract on 31 October 2018; and by issuing the End of Contract Notification to him on 6 August 2018, the defendant had prematurely terminated his employment, thus obliging the defendant to bear his Singapore income taxes.

In its replies to the plaintiff on 31 August 2018 and 13 September 2018, PT Mandiri maintained that the defendant was not liable to bear the plaintiff’s Singapore income taxes because his employment would cease naturally at the expiry of the Extended Contract.

The plaintiff’s claim in this Suit

On 6 April 2021, the plaintiff commenced the present Suit against the defendant for wrongful termination. Among other things, the plaintiff alleged that: The plaintiff was entitled to three months’ notice of termination under Clause 3 of the Extended Contract.¹⁰ By issuing the End of Contract Notification on 6 August 2018 which stated that the plaintiff’s last working day was 31 August 2018, the defendant had wrongfully terminated the plaintiff’s employment on 31 August 2018 in breach of Clause 3. The plaintiff had accepted the repudiation by his email to PT Mandiri on 10 September 2018.¹¹ The defendant had also breached Clause 3 by refusing to pay the plaintiff’s Singapore income taxes for the year of assessment 2019.¹²

In consequence, the plaintiff claimed the following sums from the defendant: S$25,585.20, being the balance one-month salary in lieu of notice, ie. three months of salary less the defendant’s payment of his September and October 2018 salaries; and S$54,838.52, being his Singapore income taxes for the year of assessment 2019.

The pleaded defences

The defendant pleaded that it had correctly issued the End of Contract Notification to the plaintiff. The plaintiff’s employment had therefore simply ceased once the Extended Contract expired, and was not prematurely terminated in breach of Clause 3 of the Extended Contract.¹³

Consequently, the defendant’s obligation under Clause 3 to pay the plaintiff’s Singapore taxes was not triggered, and the plaintiff was not entitled to a balance one-month salary in lieu of notice. In this regard, the plaintiff had been paid his salary in full for the entire duration of the Extended Contract.¹⁴

The present applications

Shortly after the close of pleadings, the defendant filed the following two applications: DC/SUM 2328/2021 (“SUM 2328”), in which it sought: a summary determination under Order 14 rule 12 of the following question of construction – whether on a true construction of the Extended Contract and the End of Contract Notification, the plaintiff’s employment was not terminated by the defendant, but rather ceased upon the expiry of the term of the Extended Contract on 31 October 2018; and dismissal of the plaintiff’s claim in the event that the Court determined the aforesaid question of construction in the defendant’s favour; DC/SUM 2329/2021 (“SUM 2329”), in which it sought the striking out of the plaintiff’s claim under Order 18 rule 19 on the ground that it disclosed no reasonable cause of action, was frivolous or vexatious, and was an abuse of process.

The plaintiff filed a cross application in DC/SUM 2568/2021 (“SUM 2568”) seeking: a summary determination under Order 14 rule 12 of the following question of construction – whether on a true construction of the Extended Contract and the End of Contract Notification, the plaintiff’s employment was prematurely terminated by the defendant in breach of Clause 3 of the Extended Contract; and summary judgment of the plaintiff’s claim in the event that the Court determines the aforesaid question of construction in his favour.

The law governing applications for summary determinations and striking out applications

The legal principles governing applications for summary determinations under Order 14 rule 12 and striking out applications under Order 18 rule 19 are trite.

In Samsonite IP Holdings Sarl v An Sheng Trading Pte Ltd [2017] 4 SLR 99,¹⁵ the Singapore High Court summarised the principles governing applications for summary determinations at [40]–[42]...