SAIS Ltd and another v Hardman, Michael Jon and another

JudgeWoo Bih Li JAD
Judgment Date20 September 2022
Neutral Citation[2022] SGHC(A) 32
Citation[2022] SGHC(A) 32
Docket NumberCivil Appeal No 27 of 2022
Published date23 September 2022
Plaintiff CounselLeong Li Shiong and Goh Peizhi Adeline (Withers KhattarWong LLP)
Defendant CounselSamuel Richard Sharpe (Sharpe & Jagger LLC)
Subject MatterContract,Contractual terms,Express terms,Breach,Remedies,Damages
Hearing Date19 August 2022
CourtHigh Court Appellate Division (Singapore)
Woo Bih Li JAD (delivering the judgment of the court): Introduction

This appeal arises from a decision of the Judge of the General Division of the High Court (the “Judge”) in Hardman, Michael Jon and another v SAIS Ltd and another [2022] SGHC 38 (the “Judgment”). In summary, it involves contractual claims for damages resulting from the non-delivery of shares of a company previously listed on the Toronto Stock Exchange Venture Exchange (the “TSX-V”). These shares were granted as part of an employee share incentive scheme in which the respondents were participants. The first appellant, SAIS Limited (previously known as “Sarment Holdings Ltd”), was the company whose shares were being granted and the holding company of the second appellant, Kaddra Pte Ltd (previously known as “Sarment (S) Pte Ltd”), which was – at the material time – the respondents’ employer.

Given the appellants’ change in name, to avoid confusion, we will refer to them throughout this judgment as “A1” and “A2”, that is, the “first appellant” and the “second appellant” respectively.

The facts General background

On 28 and 10 August 2017, the respondents, respectively, commenced their employments with a company called Sarment Pte Ltd (“SPL”). SPL is not a party to these proceedings; it is, however, a subsidiary of A1. “Sarment” was a group of companies in the business of wine – selling, event planning, tasting, and so on. Although the respondents’ employment contracts were with SPL, their appointments at that point in time were in relation to the group’s businesses. The first respondent, Michael Jon Hardman (“Mr Hardman”), was the group’s Chief Marketing Officer. The title of the second respondent, Nicolas Jack Leon Finck (“Mr Finck”), was “Head of Partnership”.

In December 2017, A2 was incorporated to be the group’s arm for the development of e-commerce applications; as stated, A2 was also a subsidiary of A1. A2 is a party to these proceedings but SPL is not because, sometime in July 2019, both Mr Hardman and Mr Finck’s contracts of employment with SPL were terminated, and they each entered into new employment contracts with A2 to fulfil different roles. Mr Hardman became A2’s Chief Creative Officer and Mr Finck became the General Manager in A2 for a project called “Keyyes”, a subscription-based application which aimed to provide concierge services for luxury goods, amongst other services.

Before Mr Hardman and Mr Finck first joined SPL, they were told by the Sarment group’s Chief Executive Officer, one Mr Chiarugi, that there were plans for A1 to be listed and, pertinently, that employees might be granted shares in the then-listed A1. This plan came to fruition on 21 August 2018 when A1 was listed on the TSX-V. Shortly before its listing, A1 introduced a scheme it called the “Sarment Holding Limited Restricted Share Unit Plan” (the “RSU Plan”). This was an employee share incentive scheme, and there is no dispute that the respondents were placed on this scheme. On 21 September 2018, Mr Finck received a letter informing him that he would be granted 38,260 restricted share units (“units”) (the “21 September 2018 Grant”). This letter annexed an agreement form which incorporated the general terms of the RSU Plan. Mr Finck signed the form on 28 February 2019. On 29 March 2019, Mr Hardman, who had been informed earlier that he would be granted 199,619 units, signed a similar form (the “29 March 2019 Grant”).

Events leading up to the suit below

Around the time Mr Hardman and Mr Finck signed the agreement forms to accept their respective grants, the Sarment group’s business was starting to suffer. The Keyyes project was unsuccessful and the group had also lost several distribution contracts. As a result, on 29 May 2019, the senior management of A1 announced that it had been considering selling the group’s wine and spirits distribution business that was housed in one of its subsidiaries, Sarment Wines & Spirits Holding Pte Ltd (“Sarment Wines”).

On 29 July 2019, A1 announced that it had entered into a sale and purchase agreement with three of its shareholders for the sale of Sarment Wines. The consideration was US$20.5 million, which the three shareholders were to provide by assuming liability for that amount of the group’s debt. The three shareholders were El Greco International Investments SRI (“El Greco”), the Claude Dauphin Estate (“CDE”) and Mark Joseph Irwin (“Mr Irwin”). As part of this deal, Mr Irwin was to acquire a substantial portion of El Greco and CDE’s shares in A1, which would result in him having a 53.5% interest in A1. The sale of Sarment Wines and change in majority shareholding required approval at a general meeting. Thus, one was convened on 30 August 2019 and both the sale as well as Mr Irwin’s acquisition of a majority shareholding were approved. At this general meeting, the shareholders also approved a resolution to change A1’s name from “Sarment Holdings Ltd” to “SAIS Limited”.

On 13 September 2019, A1 obtained the TSX-V’s approval for the sale of Sarment Wines and, on the same day, it announced the closing of the sale. The change in majority shareholding, however, took another month to complete. It was only on 15 October 2019 that Mr Irwin obtained the shares he was supposed to from El Greco and CDE in connection with the sale of Sarment Wines. On 16 October 2019, A1 announced that Mr Irwin held 53.5% of its shares (see the Judgment at [24]).

Slightly before all of these major changes were finalised, Mr Finck was made redundant given the failure of the Keyyes project. On 5 September 2019, he was informed that his employment contract with A2 would be terminated with immediate effect. He was also told that he would receive his prorated salary for September 2019, pay in lieu of notice, as well as his outstanding bonus for 2018 over four months by way of instalments (see the Judgment at [25]).

Mr Finck was not happy with this arrangement, particularly, with the fact that his employment was being terminated shortly before he was scheduled to receive the benefit of the first tranche of one-third of the 38,260 units (ie, 12,753 units) he had been conferred by the 21 September 2018 Grant (see [19(a)] below). The same day, he informed Mr Hardman (to whom he reported in A2) and A1’s human resource manager, Ms Bong, of his unhappiness. Mr Finck asked for all his outstanding salary and bonus to be paid at once, and to be allowed to retain the benefit of those 12,753 units, in other words, to receive 12,753 shares in A1 pursuant to his 21 September 2018 Grant. His request was discussed by senior management and acceded to in a letter dated 6 September 2019 issued on the letterhead of A2 (“Mr Finck’s Termination Letter”). This letter also provided that his employment with A2 would come to an end with immediate effect. To-date, Mr Finck has not received the 12,753 shares relating to the 12,733 units promised by Mr Finck’s Termination Letter, and this fact is not disputed by the appellants (see the Judgment at [36] and [49]).

Shortly after Mr Finck was made redundant, Mr Hardman’s employment with A2 also came to an end. However, before Mr Hardman was made redundant, three important events took place. First, as stated at [8] above, the sale of Sarment Wines and Mr Irwin’s acquisition of 53.5% of A1’s shares were completed on 13 September and 15 October 2019 respectively. Second, on 4 October 2019, pursuant to the 29 March 2019 Grant, Mr Hardman received 66,540 shares in A1 (see the Judgment at [43]). This represented one-third of his total allocation under the 29 March 2019 Grant. Third, also in October 2019, Mr Chiarugi asked Mr Hardman if he would be amenable to accepting his bonus for 2018 in the form of bonus units instead of cash. Mr Hardman was told frankly that A2 was short on cash, and, on this basis, Mr Hardman agreed to the substitution. Thus, on 9 December 2019, Mr Hardman executed a further agreement with A1 (the “Bonus Units Agreement”) which granted him 72,590 units in lieu of his 2018 cash bonus (“the 72,950 bonus units”) (see the Judgment at [28]–[29]).

In January 2020, Mr Hardman was informed that he would be made redundant. He asked that he be allowed to resign instead to avoid any prejudice to future job opportunities. A2 agreed and, on 15 January 2020, Mr Hardman tendered his resignation. On 29 January 2020, A2 issued a letter to Mr Hardman titled “Terms & Conditions of your resignation dated 15 January 2020”. This letter stated that the 72,590 bonus units would be “issued and vesting [sic] at end February 2020” (“Mr Hardman’s Termination Letter”) (see the Judgment at [30]–[31]). Mr Hardman countersigned the letter to signify his agreement thereto.

However, nothing else was done in respect of those units by the end of February 2020. On 19 February 2020, A1 announced that it had filed an application to delist its shares from the TSX-V. This application was approved on 5 March 2020 and A1’s last trading day was 16 March 2020 (see the Judgment at [32]).

By June, Mr Hardman still had not received the shares representing the 72,590 bonus units owing under the Bonus Units Agreement. Thus, on 17 June 2020, his solicitors wrote to A2 to state Mr Hardman’s view that the delay was a repudiatory breach of the agreement, and, in response, that he was electing to treat the agreement as discharged. In substitution, Mr Hardman demanded his 2018 bonus be paid in cash. There was no response from A2. On 21 September 2020, without prompting from Mr Hardman, A1 then unilaterally issued 205,669 of its shares in Mr Hardman’s name, this being the sum of 133,079 outstanding shares in respect of the units granted pursuant to the 29 March 2019 Grant (see [5] above) and the 72,590 shares that he was entitled to under the Bonus Units Agreement. It bears noting that these 205,669 shares were issued after A1 was delisted from TSX-V and the suit below was commenced.

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1 cases
  • SAIS Ltd v Hardman, Michael Jon
    • United Kingdom
    • High Court
    • 20 September 2022
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