Marken Limited (Singapore Branch) v Scott Ohanesian

• Jurisdiction: Singapore
• Judge: Foo Chee Hock JC
• Judgment Date: 20 October 2017
• Neutral Citation: [2017] SGHC 227
• Plaintiff Counsel: Celeste Ang, Sheik Umar, Lavania Rengarajoo and Omar Muzhaffar (Wong & Leow LLC)
• Docket Number: Suit No 478 of 2015
• Date: 20 October 2017
• Hearing Date: 26 September 2017,23 August 2017,11 August 2017,10 August 2017,31 July 2017,01 August 2017,04 August 2017,02 August 2017,03 August 2017
• Subject Matter: Contract,Termination without notice,Parol evidence rule,Rules of construction,Breach,Employment Law,Contractual terms,Contract of Service
• Published date: 13 July 2018
• Defendant Counsel: Chew Kei-Jin and Stephanie Tan (Ascendant Legal LLC)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 227
• Year: 2017

Foo Chee Hock JC:

The defendant, Scott Ohanesian (“Scott”) was a “star employee”¹ of Marken LLP (a US entity) and the plaintiff, Marken Limited (Singapore Branch) (“Marken Singapore”), the Singapore branch office of Marken Limited (a UK-incorporated company) (“Marken UK”). At the material time, Scott was employed under an employment agreement entered into between Marken Singapore and Scott in July 2012 (“the Employment Agreement”).² He held the position of Vice-President, Commercial Operations, Asia Pacific Region (“VP APAC”). His direct superior was Ariette van Strien (“Ariette”), the Chief Commercial Officer of the Marken group, which comprised Marken Singapore, Marken LLP as well as Marken UK.³ The Marken group provided logistics services to pharmaceutical and life sciences companies worldwide.⁴

The dispute centred on a purported breach of the Employment Agreement. Marken Singapore alleged that Scott had prematurely terminated his employment.⁵ The effective date stipulated on the Employment Agreement was 1 June 2012 (even though it was only signed on 19 and 20 July 2012).⁶ In addition, Marken Singapore and Scott signed a subsequent agreement dated 5 November 2012 (“the Amendment Agreement”) on or about 27 November 2012. The effect of this Amendment Agreement – specifically, whether it amended the effective date of the Employment Agreement – was a critical point on which both parties took diametrically opposed positions.

Another key aspect of the Employment Agreement was its provision for an “international assignment” to Singapore (“International Assignment”). Under clause 1 of the Employment Agreement, the International Assignment was to last for a period of two years.⁷ Many of the clauses in the Employment Agreement catered for an overseas stint. For instance, there were provisions for relocation and set-up allowance (clause 7), flights home (clause 9), and travel allowance (clause 5).⁸ Reference was also made to payment in Singapore dollars (clauses 3, 4, 5 and 8), public holidays in Singapore (clauses 2 and 11), insurance covering healthcare and dental treatment in Singapore (clause 13) and Singapore legislation (clause 25).⁹ I will revisit the significance of some of these below.

Marken Singapore’s case, in a nutshell, was that Scott had breached the Employment Agreement by prematurely terminating the agreement without first giving the requisite six months’ notice.¹⁰ For Scott’s purported breach of the Employment Agreement, Marken Singapore claimed for loss of profits of approximately US$1,643,014 and/or damages arising from Marken Singapore’s “deprivation of the opportunity to negotiate payment in exchange for releasing Scott from his notice period”.¹¹ On a broader level, there were two parts to the present case – first, the question of breach; and second, if breach was established, the question of remedies. I will deal with them in turn.

It would be helpful to set out a few background facts at the outset. The following provisions within the Employment Agreement were relevant:

This Employment Agreement (“Agreement”) is effective June 1, 2012, and supersedes any previous employment agreement with any entity within the Marken Group …

…

1. Definition of appointment

…

Your appointment with Marken commenced on March 7, 2011 and will count as continuous service. Your transfer to the Singapore office will commence on Jun 1, 2012 and your international assignment will be for a period of two (2) years. It is understood, however, that you may be required to work at other Marken locations overseas during this international assignment.

…

25. End of International Assignment

At the end of the international assignment, the Company will discuss career opportunities with you. The company will pay for your repatriation to the US or relocation to another location and cover relocation fees up to USD $10,000. If you are to remain in Singapore, the Company will transfer you to a standard Singaporean employment contract. All options will be discussed with you at the end of your assignment.

The Amendment Agreement dated 5 November 2012 was intended to amend the Employment Agreement, the question being whether it amended the effective date of the Employment Agreement (see [2] above).¹² The relevant portions of it were as follows:

This letter amends the terms of your employment contract and forms an integral part thereof. The amendments are as follows:

Effective Date

The effective date of the agreement is November 1, 2012.

3. Basic Pay and Cost of Living Allowance (COLA)

The midpoint exchange rate used will change to November 1, 2012.

…

4. Cost of Living Allowance

The midpoint exchange rate used will change to November 1, 2012.

…

23. Tax equalisation

Your tax residency for the purposes of equalisation will be ...........

Please sign below to confirm your acceptance of the above changes to your employment contract of June 1, 2012.

It was undisputed that Scott left Marken Singapore’s employ on 1 June 2014.¹³ The question to be determined, therefore, was whether Scott was entitled to terminate his employment under the Employment Agreement on that date. The parties had different views of what the Employment Agreement entailed. Marken Singapore mounted two alternative arguments. First, the Employment Agreement contemplated that the International Assignment was a separate and standalone “component” of the Employment Agreement.¹⁴ Hence, while the International Assignment would last for two years, Scott’s employment was to last for an indefinite period – until and unless the option to terminate by giving six months’ notice was exercised.¹⁵ Second, even if the Employment Agreement and the International Assignment were one and the same, the Amendment Agreement would have amended their effective dates to 1 November 2012.¹⁶

Scott’s position, however, was that the “purpose of the Employment Agreement was for the international assignment and nothing else”;¹⁷ further, Scott’s role as VP APAC was Scott’s International Assignment.¹⁸ The effective date of the Employment Agreement as well as the date on which Scott began his International Assignment and role as VP APAC was 1 June 2012.¹⁹ As for the Amendment Agreement, Scott’s primary position was that it only sought to set out the effective date for the clauses mentioned within the Amendment Agreement itself (clauses 3, 4 and 23) and did not amend the effective date of the Employment Agreement.²⁰

Ultimately, the issues raised had to be determined through an exercise of contractual interpretation informed by the relevant factual matrix as found by the court. In my judgment, Scott’s position was the correct one. The effective date of the Employment Agreement was 1 June 2012, and the employment term was to last for two years therefrom. This effective date was not amended by the Amendment Agreement. I now set out my reasons for finding that Scott had not breached the Employment Agreement.

The principles of contractual interpretation were recently set out by the Court of Appeal in Yap Son On v Ding Pei Zhen [2017] 1 SLR 219 (“Yap Son On”) and Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd (formerly known as Soup Restaurant (Causeway Point) Pte Ltd) [2015] 5 SLR 1187 (“Y.E.S. F&B Group”). In essence, a two-step contextual approach was to be employed (see Yap Son On at [28]):

The contextual approach to contractual interpretation in Singapore requires the court to proceed in two broad steps … (a) The first step requires consideration of whether the extrinsic evidence sought to be adduced in aid of interpretation is admissible. This is a matter governed by the procedural rules of the law of evidence, which governs what and how facts may be proved. (b) The second step is the task of interpretation itself, which involves ascertaining the meaning of expressions used in a contract, taking into account the admissible evidence. The rules which govern this process may be found in the substantive law of contract.

Under the first step, it was settled law that even where there was no ambiguity, extrinsic evidence of circumstances surrounding a contract would be admissible to interpret it (and not contradict, vary, add to or subtract from its terms) pursuant to s 94(f) of the Evidence Act (Cap 97, 1997 Rev Ed) (“the Evidence Act”). This general permissive approach was subject to the following restrictions (see Yap Son On at [41]–[42]): The requirement that the nature and effect of the extrinsic evidence must be pleaded with sufficient specificity; The requirement that the extrinsic evidence sought to be admitted must be (i) relevant; (ii) reasonably available to all the contracting parties; and (iii) relate to a clear or obvious context (the criteria set out in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 (“Zurich Insurance”) (“Zurich criteria”)); Sections 95 and 96 of the Evidence Act, which were absolute bars to evidence falling within these provisions; and The bar against the admissibility of parol evidence of the drafters’ subjective intentions at the time of the conclusion of the contract unless there was latent ambiguity.

Besides these restrictions, the issue of pre-contractual negotiations merited further elaboration. The blanket prohibition on such evidence had been removed in Zurich Insurance (see Zurich Insurance at [132(d)]), but the Zurich criteria would have to be fulfilled before such evidence could be admitted (see Xia Zhengyan v Geng Changqing [2015] 3 SLR 732 (“Xia Zhengyan”) at [63]–[69]; HSBC Trustee (Singapore) Ltd v Lucky Realty Co Pte Ltd [2015] 3 SLR 885 at [50]). It should also be pointed out that the Court of Appeal had commented in Xia Zhengyan that the contours of this rule of admissibility remained an “open question” and that limits...