Court finds employer tried to avoid contractual bonus payment obligations
The General Division of Singapore's High Court recently dealt with a wrongful dismissal claim involving a Group Chief Executive Officer (GCEO) who was summarily dismissed by his employer.
The worker argued his dismissal was conducted in bad faith and was an attempt to circumvent substantial contractual payment obligations that would have become due shortly after his termination.
The worker claimed he had followed proper protocols regarding his work locations and expense claims. He maintained that he had informed the appropriate leadership about his relocations and that a process existed for the company to pay personal expenses initially and later recover them through salary deductions.
At stake was a termination bonus amounting to millions of dollars that would not be payable in cases of termination for cause. The worker argued there were no legitimate grounds for his dismissal and sought various reliefs including payment of the termination bonus, unpaid salary, allowances, and six months' salary in lieu of notice.
The worker was employed as GCEO effective from January 2021. Before this role, he was CEO of Euwax AG, a German-based financial services provider at the Stuttgart stock exchange, where he launched several cryptocurrency platforms including the Bison mobile trading platform, the BSDX web trading platform, and blocknox cryptocurrency custody service.
His employment contract with Three Fins Pte Ltd, a Singapore-incorporated holding company supporting the BitMEX crypto-trading platform, included provisions for a substantial bonus upon completion of two years of employment.
Specifically, upon satisfactory completion of the first two years, the employer would pay the worker an amount equal to US$5.3 million less his total compensation during that period. If his employment was terminated "by the [employer] otherwise than by way of Termination for Cause" before the second anniversary, the employer would still pay a termination bonus calculated similarly.
The contract defined "Termination for Cause" as termination where the employer reasonably considered that the worker had materially failed to comply with his obligations. The contract allowed either party to terminate by giving six months' notice or paying wages in lieu of notice.
During his employment, the worker worked from multiple locations. Initially, he worked from Germany (January 2021), then Hong Kong (January-March 2021), back to Germany (March-June 2021), then relocated to Hong Kong (June 2021-March 2022), moved to Singapore (March-July 2022), and finally to Germany (July-October 2022). The employer did not initially dispute these working arrangements.
On 20 October 2022, just months before his two-year anniversary, the employer dismissed the worker for cause, alleging unauthorised relocations, misappropriation of company funds for personal relocation expenses, and dishonestly claiming he had approval for these relocations.
The employer argued that the worker's relocations to Singapore and Germany violated his contract, which required him to "work in any place which the [employer] may reasonably require" as determined by the Board.
The court found that in practice, the worker only needed to inform the Chairman of HDR Global Trading Limited's Board (the parent company) of his decision to relocate and could proceed if no objections were raised. This practice was supported by several pieces of evidence, including how the worker's earlier relocations had been handled.
The court noted that the employer had no practice of requiring formal board resolutions for relocations. There was no resolution approving the worker's earlier relocation to Hong Kong in 2021, which wasn't contested by the employer.
Justice Chua Lee Ming observed: "I accepted the [worker's] assertion that in practice it was sufficient for him to inform the Chairman of HDR Global's Board of his decision to relocate and to proceed accordingly if the Chairman raised no objections, and that he would raise the matter to the Board if so requested by the Chairman."
The court found that Samuel Reed, one of the founders who made the dismissal decision, must have known about the worker's relocations much earlier but only began questioning them in September 2022, shortly after a review of contractual payment obligations.
The employer claimed the worker made unauthorised expense claims related to his relocations. The worker argued there was an established process where his personal expenses were initially paid by the employer and then deducted from his salary.
The worker's former Executive Assistant, Ms Cristal Nora Marissa, confirmed this arrangement, testifying she regularly submitted lists of personal expenses to the Finance Department for deduction from his salary. She couldn't explain why some deductions weren't made.
The court found it significant that the employer didn't call key finance staff, particularly Ms Pamela Lam from the finance department who processed payroll, who could have explained the missing deductions. The court drew adverse inferences against the employer, concluding that "the omission to make the deductions from the [worker's] salary had nothing to do with the [worker]."
Evidence showed the employer had previously paid for the worker's personal expenses related to his Hong Kong relocation and later deducted these from his salary, establishing a precedent. The court noted: "In April 2021, the [employer] paid first for the [worker's] personal expenses relating to his relocation to Hong Kong and subsequently deducted the same from the [worker's] salary."
The court determined that "the mere fact that the [employer] had paid some of the [worker's] personal expenses (relating to his relocations to Singapore and Germany) did not justify summary dismissal under cl 11.2 of the Employment Agreement. There was a process in place pursuant to which personal expenses were deducted from the [worker's] salary and in the event of dispute, it was the [financial controller] who decided whether the deductions should be made."
The court found compelling evidence that the employer decided to summarily dismiss the worker to avoid contractual payment obligations that would have become due on 1 January 2023, the second anniversary of his employment.
On 6 September 2022, the head of Human Resources of the HDR Group, sent an email to the founders highlighting the amounts the employer was contractually bound to pay the worker. The HR head pointed out these would not be payable if the worker was "terminated for cause" (in bold font).
The court rejected the HR head’s explanation that he was merely reviewing the employment agreement: "In my view, the intention was to tell the founders that terminating the [worker] for cause was a way to avoid having to pay the amounts set out. This showed that the founders were not only considering terminating the [worker's] employment, they were also looking at ways in which they could avoid the contractual payment obligations."
The HR head initially confirmed during cross-examination that there were email discussions between the founders and the head of legal about avoiding payment of the bonus, though he later changed his testimony. The court found his initial testimony more credible.
Reed only began questioning the worker's relocation to Germany and associated costs on 16 September 2022, after receiving the HR head’s email about payment obligations. Justice Chua stated: "I drew the inference that Reed was looking for grounds on which he could terminate the [worker's] employment for cause."
The court ruled the worker's dismissal was wrongful and the employer failed to establish valid grounds for summary dismissal under the employment contract.
Justice Chua concluded: "In my judgment, these technical breaches of cl 2.1(f) did not justify the [worker's] summary dismissal," referring to the alleged unauthorised relocations. The court found the worker had followed the established practice of informing the Chairman, and no objections were raised.
Regarding the alleged unauthorised expenses, the court stated: "In my view, the mere fact that the [employer] had paid some of the [worker's] personal expenses (relating to his relocations to Singapore and Germany) did not justify summary dismissal under cl 11.2 of the Employment Agreement."
The court also determined that "I agreed with the [worker] that Reed decided to summarily dismiss the [worker] in order to avoid its contractual payment obligations. In my view, the evidence supported such an inference."
As a result, the court awarded the worker US$2,464,354.84 in damages, including his termination bonus, unpaid salary and allowances, and payment in lieu of the six-month notice period.
The court emphasised that "as the [worker's] summary dismissal on 20 October 2022 was wrongful, the termination of his employment was to be treated as a termination on 20 October 2022, with payment of six months' salary in lieu of notice as provided for under cl 11.1 of the Employment Agreement."
