The Employment Relationship: A Two-Way Street

The Singapore Appellate Division of the High Court expresses its preference for fairness in investigations and in termination in Dong Wei v Shell Eastern Trading (Pte) Ltd and another [2022] SGHC(A) 8

TL;DR

• Even if you are wronged, you cannot claim for more than what you are entitled in a lawful termination.
• While not legally obliged to do so, employers should be fair to employees by disclosing the outcome of internal investigations.
• The Appellate Division of the High Court (the “Court”) clarified that the status of an implied term of mutual trust and confidence in employment contracts is still unsettled.
• Favouring the concept of the freedom of contract, the Court expressed its preference not to limit a party’s contractual discretion when exercising the right to terminate with notice.

The case

Shell Eastern conducted internal investigations against an employee, Dong Wei,  for alleged conflicts of interests and breaches of the company’s code of conduct. During the investigations, Dong Wei was suspended from work on full pay pending its outcome. Shell Eastern’s notice of suspension stated that he would be informed of the outcome of the investigations. However, these investigations found that the allegations were “inconclusive”.

During this period, S&P Global Platts (“Platts”), a trade publication, caught wind of the investigations. However, Shell Eastern declined to comment. Platts published an article soon after on investigations of corruption and unethical dealings, which Dong Wei suggested had affected his reputation and his prospects of obtaining new employment.

Dong Wei commenced proceedings against Shell Eastern and his line manager, Mr Lim Ming Way for, amongst other things, breaches of his employment contract and breach of confidence of the internal investigations resulting in the Platts article which affected his reputation.

The Decision

The Singapore Appellate Division of the High Court (the “Court”) dismissed the appeal. The key points worth highlighting are as follows:

1. No losses suffered even if there were commission of wrongs under the “minimum legal obligation rule”

Dong Wei alleged that Shell Eastern and Mr Lim committed various wrongs from the start of the internal investigations to his wrongful termination. This included fabrication of complaints by Mr Lim of other key witnesses, Shell Eastern decision to suspend him and the way Shell Eastern had mismanaged the entire investigations process.

The Court affirmed the High Court’s factual finding that none of his complaints were made out.[1] However, it emphasized that, even if there were commissions of any wrongs, Dong Wei had suffered no losses – he had received his full salary when suspended and also pay in lieu of his notice period under an express termination clause. He was not entitled to recover damages beyond his entitlement to claim what he would have been able to earn under his employment contract in a lawful termination. In coming to this conclusion, the Court re-affirmed the “minimum legal obligation rule” that limits the amount of damages a wrongfully terminated employee can claim to what he/she would have been able to earn under his/her employment contract in a lawful termination.

2. Failure to inform Dong Wei of investigation outcome

Dong Wei argued that Shell Eastern’s notice of suspension expressly stated that he would be informed of the outcome of the investigation. However, despite his repeated requests for disclosure, Shell Eastern resiled from its promise. At the appeal, he argued that Shell eastern was contractually obliged to (a) correct misinformation to protect him from reputational harm and (b) provide with him a formal document stating the outcome of the investigation.

The Court dismissed Dong Wei’s appeal on these issues as they were not pleaded in the lower court. What was more significant, however, was the Court’s comments on Shell Eastern’s conduct post-investigation despite its decision to dismiss the appeal. The Court opined that, unlike typical commercial relationships, employment is a two-way relationship. It would only be fair for the employer to inform the employee of the outcome of the investigation regardless of whether it was legally obliged to do so.

3. No implied term of mutual trust and confidence in employment contracts

The implied term of mutual trust and confidence is a term implied by law into an employer-employee relationship that imposes a duty on employers to refrain from, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or damage seriously a relationship of trust and confidence that exists between the parties.

The Court explored the jurisprudence surrounding the implied term in Singapore, Australia and the United Kingdom. However, it was unwilling to acknowledge the existence of such a term, preferring to state that its status in employment contracts in Singapore is still unsettled. This remains an issue to be further explored.

4. Freedom of contract prevails in termination: A party’s discretion to exercise its right to terminate with notice should not be restricted

Dong Wei argued that an employer’s express right to terminate an employee without cause and with notice or pay in lieu of notice should be exercised in good faith, not arbitrarily or capriciously. This meant that acting to the contrary would amount to wrongful termination.

The Court rejected this proposition, highlighting the crucial point that a party’s right to terminate should not be limited. Especially in the context of employment contracts, the right to terminate “cuts both ways”. In the court’s own words (in obiter), it would be “unpalatable” if employers are compelled to hire and retain, while employees are forced to work.

Significance of this decision

Whilst the Court did not break new ground on any novel point of law in this decision, it is encouraging to see the the Court’s inclination (albeit in obiter) towards a mutually respectful two-way relationship between employers and employees. In particular, each party’s freedom to terminate the employment relationship.

In line with ensuring procedural fairness in employment investigations,[2] this case is also a timely reminder for employers to put in place mechanisms post-investigation to inform employees of the outcome of internal investigations.

PDLegal would like to thank trainee Vincent Lee & intern Joanna Teo for their contribution to the article.

[1] The Appellate Division explained that this was because Dong Wei failed to challenge the lower court’s decision to dismiss certain causes of action. For brevity, we will not be covering these issues in this case note.

[2] See recent cases of Wong Sung Boon v Fuji Xerox Singapore Pte Ltd [2021] SGHC 24 and Singapore Recreation Club v Abdul Rashid Mohamed Ali [2020] SGHC 156.