In BGC Partners (Singapore) Ltd and another v Sumit Grover [2024] SGHC 206 (BGC v Grover), the Singapore High Court allowed the employer’s claim for recovery of an unpaid loan with contractual interest from a former employee and dismissed the latter’s counterclaim for unlawful termination and unpaid contractual bonus. The Court held that the employment contract was validly terminated on account of the former employee’s failure to meet his performance ratio, and that the former employee was not entitled to damages for wrongful termination.
The termination of an employment relationship can lead to a host of complications not only in relation to the termination itself but also from the entire course of the employment. The case of BGC v Grover underscores key areas of contention throughout the employment relationship, from the initial contract formation to the point of termination. This serves as a crucial reminder for employers to be vigilant in addressing these potential issues.
The plaintiffs in the case, BGC Partners (Singapore) Ltd (BGC) and GFI Group Pte Ltd (GFI), are Singapore-incorporated companies part of the BGC group of companies headquartered in New York and London. The plaintiffs are in the business of inter-dealer broking for various financial products including currency swaps, equities, interest rate swaps, and energy products. The defendant was formerly employed by the plaintiffs as a broker specialising in a financial product known as Indian Rupee non-deliverable forwards.
BACKGROUND
The defendant was approached by GFI to join as a broker in or around July or August 2017. On 9 November 2017, the defendant entered into a letter of employment with GFI (Employment Agreement) and two Loan Agreements and Promissory Notes under which GFI granted the defendant loans amounting to over SGD $2.5 million (Loan Agreements).
On 21 February 2018, the defendant commenced his employment as a broker with GFI pursuant to the Employment Agreement.
Following a merger between the plaintiffs, the defendant accepted the transfer of his employment with GFI to BGC on 18 May 2020 and the Employment Contract was novated from GFI to BGC. The first tranche of the 2nd Loan Agreement was assigned from GFI to BGC through a loan assignment dated 1 May 2020.
On 22 September 2021, BGC terminated the defendant’s employment by way of a termination letter. This was allegedly due to the defendant’s failure to meet his performance ratio of 2.5:1 as defined under the Employment Agreement (Performance Ratio) for the months of June 2021 to August 2021.
On 24 December 2021, the plaintiffs commenced a suit in the General Division of the Singapore High Court (HC) to claim from the defendant the unpaid loan and contractual interest under the Loan Agreements.
The defendant disputed the validity of the Employment Contract and counterclaimed for (1) damages for unlawful termination of his employment; and (2) the unpaid contractual bonus for the months of January 2021 to March 2021.
DECISION OF THE HC
The HC found in favour of the plaintiffs on both the claim and the counterclaim.
Plaintiffs Are Entitled to Recover the Unpaid Loan and Contractual Interest from the Defendant
The Employment Agreement (and Hence the Performance Ratio) Was Binding on the Defendant
The defendant’s case was that the binding contract between the parties is a purported oral agreement between the defendant and then–Managing Director and Chief Executive Officer of GFI Chan Chong San (Chan) allegedly acting on behalf of GFI (Alleged Oral Employment Agreement), which does not include the Performance Ratio.
The HC rejected the defendant’s case on the basis that there was no intention to create legal relations under the Alleged Oral Employment Agreement, which is a requirement for a valid contract. The evidence suggests that the consensus reached between the defendant and Chan amounted only to a non-binding, in-principle agreement. The defendant knew that these in-principle terms had to be reduced into contractual form to be binding. The HC further found that even if the Alleged Oral Employment Agreement existed, it would be devoid of legal effect by virtue of the entire agreement clause in the Employment Agreement.
The HC also rejected the defendant’s argument that the Employment Agreement is void by virtue of non est factum. The defence of non est factum is a specific category of mistake where there is a radical difference between what was actually signed and what was thought by the signatory to have been signed, provided that the signatory took care in signing the relevant document and was not negligent. It was found that there is no radical difference between the Employment Agreement and the Alleged Oral Employment Agreement which concerned the same subject matter, that the defendant was negligent or careless in signing the Employment Agreement, and that the defendant’s own conduct following the execution of the Employment Agreement demonstrates that the defendant knew he was bound by its terms including the Performance Ratio.
BGC Lawfully Terminated the Defendant’s Employment on the Basis that the Performance Ratio Was Not Met
Following from the HC’s finding that the Employment Contract (including the Performance Ratio) were valid and binding, it was held that BGC was entitled to terminate the defendant for his failure to meet the Performance Ratio (which was undisputed). The HC affirmed the principle that parties’ freedom of contract should not be limited by restricting the employer’s right to terminate. This is a case where the defendant was terminated pursuant to an express clause in the Employment Agreement permitting termination by way of notice.
In respect of the defendant’s submission that there is an implied term of mutual trust and confidence in employment contracts, the HC found this to be an open legal question which was unnecessary to resolve on the facts of this case. Even if such an implied duty applies, the HC was of the view that BGC had not breached the duty. The HC found that BGC had acted in good faith and with reasonableness in the process leading up to the defendant’s termination. This includes offering the defendant reasonable alternatives to termination.
The Unpaid Loan Became Due and Payable Under the Loan Agreements
Having determined that the defendant was validly terminated, the HC proceeded to find that his partnership with BGC Holdings LP was also terminated in accordance with the BGC Holdings Partnership Agreement and, consequently, the loans became immediately due and payable under the Loan Agreements. The plaintiffs were hence entitled to the unpaid loan and contractual interests from the defendant.
The Defendant Is Not Entitled to Any Bonuses from BGC
The court will take a contextual approach in interpreting a bonus clause and that how the parties label the nature of a bonus is not definitive. Based on a holistic reading of clause 5 of the Employment Agreement (reproduced below), the HC found that the defendant’s entitlement to bonus payment is discretionary. Clause 5.1 only states that the defendant “will be eligible” for a bonus, not that the defendant will be “entitle[d]” to it (as stated in clause 5.2). Clause 5.1 also goes on to state that “If awarded, the individual bonus will be paid six monthly, 90 days in arrears” [emphasis added], specifying when the bonus payment would be made in the hypothetical event that the bonus is awarded. Finally, clause 5.2 expressly clarifies that the “entitlement” to a bonus only arises “when and if a bonus is paid” [emphasis added].
5. Bonuses
5.1 Individual bonus (1)
You will be eligible for an individual bonus which shall be calculated as follows
[The Payout Rate x Individual Net Revenue] LESS Expenses.
If awarded, the individual bonus will be paid six monthly, 90 days in arrears, that is in September each year for the bonus period 1 January to 30 June inclusive …
5.2 For the avoidance of doubt, the entitlement to the bonus will only arise, when and if a bonus is paid to you.
As for BGC’s decision to withhold bonuses from the defendant, the HC found that it was reasonable for BGC to withhold bonuses on the basis that the defendant had refused to share his customer lines and that the defendant had failed to come into the office for at least 27 days from January 2021 to 15 May 2021 without providing any legitimate reason. BGC’s decision to withhold the bonuses was not arbitrary, capricious, or irrational. In coming to this decision, the HC emphasised that the courts would not interfere with a party’s exercise of contractual discretion unless it is so outrageous in its defiance of reason that it can be properly categorised as “perverse.” This very high threshold was not crossed in this case. The HC also remarked that there is also no contractual obligation for BGC to provide reasons for withholding discretionary bonuses.
KEY TAKEAWAYS
The BGC v Grover decision underscores the importance of clearly defined contractual obligations in the employment context. The HC’s interpretation of the entire agreement clause, Performance Ratio clause, and the bonus clause illustrates how precise language can impact the scope of an employer’s rights and obligations, as well as the validity and enforceability of the employment contract itself.
Further, employers should take note of the implied duty for any contractual discretion to be exercised reasonably. While the threshold for the court’s intervention is a high one, what a disgruntled employee may perceive as unfair or unreasonable is often subjective, leaving open the risk of claims of wrongful termination or breach of contract, regardless of merit.
Finally, this case serves as a reminder that documented communication is key in managing employer-employee relationships. Employers should document their decision-making processes and communicate openly with employees about how decisions are made, which can further enhance transparency and accountability in the employment relationship. Such clarity can help mitigate potential accusations against the employer and protect the employer if necessary.
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