Singapore court undertakes detailed examination of employee claim for wrongful dismissal

The Employment Agreement included the following terms, which are relevant to the present purposes.

• Clause 2.1(f): Mr Höptner was to “work in any place which [Three Fins] may reasonably require…and travel on the business of [Three Fins] from time to time as determined by the Board”. Clause 2.1(d) defined the term “Board” as the Three Fins’ board of directors.
• Clause 4.3(b)(i): If prior to the second anniversary of his employment, Mr Höptner’s employment was terminated “by [Three Fins] otherwise than by way of Termination for Cause”, Three Fins would pay Mr Höptner an amount equal to US$5.3 million less the total compensation paid to Mr Höptner up to the date of termination (the Termination Bonus).
• Clause 4.3(c): “Termination for Cause” was defined to mean termination by Three Fins in circumstances where Three Fins “reasonably considered that [Mr Höptner] has materially failed to comply with his obligations” under the Employment Agreement.
• Clauses 4.4 and 4.5: Mr Höptner was entitled to a housing and education allowance, both payable in 12 equal monthly instalments together with his base salary.
• Clause 11.2(a)(ii): Three Fins may “summarily dismiss” Mr Höptner without further notice or payment of wages in lieu if Mr Höptner “misconducts himself…, such conduct being inconsistent with the due and faithful discharge of [Mr Höptner’s] duties”.

Under the Employment Agreement, Mr Höptner’s employment commenced on 1 January 2021, and he was expected to be based in Singapore. However:

• From 1 January 2021 to 5 March 2022, Mr Höptner shuttled between Germany and Hong Kong and worked out of both countries, without objection from Three Fins.
• It was only on 5 March 2022 that Mr Höptner relocated to Singapore and worked out of Singapore until 6 July 2022. Whether Mr Höptner’s relocation to Singapore was authorised was in dispute.
• On 7 July 2022, Mr Höptner relocated to Germany and worked out of Germany until 20 October 2022. Whether Mr Höptner’s relocation to Germany was authorised was also in dispute.

By a letter dated 20 October 2022 (Termination Letter), Three Fins terminated Mr Höptner’s employment for cause, with immediate effect, pursuant to Clause 4.3 in conjunction with Clause 11.2(a)(ii) of the Employment Agreement. The Termination Letter also demanded payment of the sum of US$157,300, being the balance of sums allegedly misappropriated by Mr Höptner to fund his personal and unauthorised relocations.

On 19 December 2022, Mr Höptner filed his claim against Three Fins to contend that his dismissal was wrongful and in bad faith, and an attempt by Three Fins to circumvent its contractual payment obligations. Accordingly, Mr Höptner sought to claim the Termination Bonus and housing and education allowance, among others.

In response to Mr Höptner’s claim, Three Fins submitted (among others) that:

• they had reasonably considered that there were grounds for Termination for Cause as defined in Clause 4.3 of the Employment Agreement; and
• there were valid grounds for summary dismissal under Clause 11.2 of the Employment Agreement, which included (i) Mr Höptner’s unauthorised relocations to Singapore and Germany; (ii) Mr Höptner’s unauthorised expenses arising from the unauthorised relocations; and (iii) Mr Höptner’s false claim that he had approval from Wong for the relocations.

High Court’s decision

The High Court held that there was no Termination for Cause pursuant to Clause 4.3 of the Employment Agreement. In particular, the said clause should be construed strictly due to its penal nature (i.e., it could deprive Mr Höptner of his entitlement to the Termination Bonus under Clause 4.3(b)(i)), and Three Fins would therefore have to show that it, and not any other person, had made the determination that Mr Höptner had materially failed to comply with his obligations under the Employment Agreement.

The High Court found that although the Termination Letter was issued by Three Fins and signed by the head of human resources of the HDR Group, it was Reed, who was neither a director of Three Fins nor acting on behalf of its board of directors, who made the determination to dismiss Mr Höptner. Additionally, Three Fins’ board of directors never met to discuss the matter. On that basis, the High Court held that there was no valid determination made by Three Fins (and therefore no Termination for Cause), and Mr Höptner was entitled to payment of the Termination Bonus accordingly.

The High Court also held that Three Fins’ summary dismissal of Mr Höptner under Clause 11.2 of the Employment Agreement was not justified. The High Court was of the view that the grounds relied on by Three Fins were either technical breaches at best (which did not justify summary dismissal), or were not made out on the evidence. Pertinently, the High Court found the following:

• In relation to Mr Höptner’s alleged unauthorised relocations to Singapore and Germany in breach of Clause 2.1(f) of the Employment Agreement, the High Court determined that there was a prima facie breach given that there were no formal requests to Three Fins’ board of directors or HDR Global’s Board for approval for Mr Höptner’s relocations to Singapore and Germany in 2022, and no formal approvals were given by either board for those relocations.
• However, the High Court held that these were technical breaches that did not justify a summary dismissal. The High Court found on the evidence that it was sufficient in practice for Mr Höptner to (i) inform the Chairman of HDR Global’s Board of his decision to relocate and to proceed accordingly if the Chairman raised no objections; and (ii) raise the matter to HDR Global’s Board if so requested by the Chairman. On the facts, Mr Höptner had informed Wong and Hayes (in their respective capacities as Chairman of HDR Global’s Board at the material time) of his plans to relocate, and neither raised any objections. Furthermore, Reed (who is part of HDR Global’s Board) was aware of Mr Höptner’s relocations to Singapore and Germany.
• In relation to Mr Höptner’s alleged unauthorised relocation-related expenses, the High Court found that any expenses paid by Three Fins would be subject to a review by the finance department for determining if the expense is a business expense (to be paid by Three Fins) or a personal expense (to be paid by Mr Höptner). In this regard, the evidence showed that any personal expenses to be paid by Mr Höptner would have been deducted from his salary.

Furthermore, the High Court determined on the evidence that Reed’s decision to dismiss Mr Höptner was an attempt to avoid Three Fins’ contractual payment obligations.

In the circumstances, the High Court held that Mr Höptner’s dismissal by Three Fins was wrongful. Consequently,  the High Court awarded Mr Höptner damages, which comprised:

• His unpaid salary, housing allowance and education allowance;
• Payment of six months’ salary in lieu of notice;
• His housing and education allowances for the six-month notice period; and
• Termination Bonus under Clause 4.3(b)(i) of the Employment Agreement.

Both Mr Höptner and Three Fins subsequently came to an agreement on (i) the damages awarded to Mr Höptner in the sum of around US$2.46 million; and (ii) the Three Fins’ counterclaim against Mr Höptner in the sum of US$85,795.95.

The High Court’s decision is currently on appeal.

Conclusion

Employment contracts contain specific provisions on termination of employment based on the circumstances. It is common in Singapore for an employment contract to provide both the employer and employee with a right to terminate the employment contract with notice, as such termination will not be presumed to be wrongful under the Tripartite Guidelines on Wrongful Dismissal in Singapore.

On the other hand, termination of an employment contract without notice (i.e., with immediate effect) does not have such a presumption, and such terms are usually reserved for instances involving grave misconduct by an employee or other egregious situations such that it would be unreasonable for the employee to remain employed. In the event that an employee alleges that there are insufficient grounds to justify a termination without notice and brings a claim for wrongful dismissal, the employer will bear the burden of proving that there is sufficient cause to dismiss an employee immediately.

This case underscores the need for an employer, in cases involving termination of an employee without notice, to (i) conduct a due process inquiry; and (ii) meticulously document all alleged instances of misconduct, the surrounding circumstances, the aforementioned inquiry, and decision to dismiss without notice, as the Singapore courts would heavily scrutinise all aspects relating to the employer’s decision to dismiss the employee.

In addition, employers must ensure that all significant decisions, such as relocations and terminations, are properly authorised and documented by the board of directors and not by a third party, such as a director or employee of a related or holding company.

Employers are well advised to be cautious in exercising their right to terminate employees, especially if such termination is without notice, and review their termination procedures carefully, to minimise any legal and financial repercussions arising from disputes and claims brought by their ex-employees.

Reed Smith LLP is licensed to operate as a foreign law practice in Singapore under the name and style Reed Smith Pte Ltd (hereafter collectively, "Reed Smith"). Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith's Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.

In-depth 2025-115