Appelqvist, Pontus Paal v Eon Reality Pte Ltd [2022] SGHC 296

The plaintiff, Pontus Paal Appelqvist, a Swedish national, works and resides in Singapore. He was previously the Vice President of Sales for the Asia-Pacific of the defendant, Eon Reality Pte Ltd, a company carrying on the business of the development, sale, and marketing of augmented and virtual reality software solutions. They have diverse customers, in education, government and industry. The defendant is a wholly owned subsidiary of EON Reality, Inc., the second plaintiff in counterclaim, a company incorporated in the United States of America.

The defendant terminated the plaintiff’s employment on 3 March 2021 with one month’s salary in lieu of notice. The plaintiff was then earning a monthly salary of S$19,000. He was involved in the sales of Interactive Digital Centre (“IDC”) projects of the defendant. They were long-term projects that included setting up facilities (with various partners). The facilities enable people to experience and understand the concept of virtual reality. The first stage of an IDC project involves the delivery to the local or joint venture partner, and the installation of equipment. The next stage requires the defendant to work with the partners in the operation of the IDC hub.

It is not disputed that the plaintiff’s commission and salary are subject to the contract offer dated 13 December 2009 and its subsequent amendments. Nine addendums were made in total to the plaintiff’s contract offer (cumulatively, the “Employment Contract”). These addendums incorporated the plaintiff’s revised monthly salary, which increased over the years, as well as revised sales targets and commission rates for each year. The plaintiff’s remuneration had two components: first, a “fixed salary” which started at S$9,600 when he was employed in 2010 and was gradually increased to S$19,000 in 2021; and second, a “commission” which was based on specified commission rates applicable to “EON Net Sales”.

The plaintiff was dismissed from his employment on 3 March 2021 and he is now claiming unpaid salary in lieu of notice of five months’ salary, amounting to S$95,000 (the “Salary Claim”) and outstanding sales commission of S$1,389,100.08 for 18 IDC projects (the “Commission Claim”). On the Salary Claim, the defendant says that the plaintiff was lawfully terminated and given the requisite notice of four weeks, pursuant to s 10(3) of the Employment Act (Cap 91, 2009 Rev Ed) since there was no notice period stated in the defendant’s contract. On the Commission Claim, the defendant disputes liability for five of the 18 projects, namely, Deakin (Australia) Ref Q-2225 (“Deakin (Australia)”), AVR (Japan) Ref Q-2578 (“AVR (Japan)”), TXI Partners (Taiwan) Ref Q-2606 (“TXI Partners (Taiwan)”), Jinda (China) Ref Q-2649 (“Jinda (China)”) and GVS (Thailand) Ref 2972 (“GVS (Thailand)”). For Deakin (Australia), AVR (Japan) and TXI Partners (Taiwan), the defendant says that these projects are “washout” projects, and that the applicable Sales Policy and Procedures (“SPP”) at the relevant times state that commission would not be paid for projects that are deemed “washout”. For Jinda (China) and GVS (Thailand), the defendant says that the plaintiff is not entitled to any commission as both projects were non-performing. For the remaining 13 projects, the defendant admits that it is liable for commission, but disputes the quantum of commission due.

I shall deal with the Salary Claim first. The plaintiff relies on the 1st Addendum that was made on 23 February 2010, which states the following:

There were no other addendums on this point after 23 February 2010. The plaintiff claims that the termination notice period was thus mutually amended to six months, and the defendant breached the Employment Contract when it gave the plaintiff only one month’s salary in lieu of notice.

The defendant’s position is that the plaintiff was employed by EON Reality, Inc (the second plaintiff in counterclaim) and not the defendant. It further says that there was no notice period stated in the contract offer dated 13 December 2009 for the alleged notice period in the 1st Addendum to be extended from. It says, therefore, the plaintiff had been lawfully terminated.

It is incontrovertible that the plaintiff was employed by the defendant and not the second plaintiff in counterclaim. Several of the contracts were signed by Mr Sunkad Sridhar Harihar (“Mr Sridhar”), the defendant’s Managing Director and the plaintiff. The plaintiff’s official appointment was also that of “VP Sales of Asia Pacific” with the defendant.

I am of the view that the plaintiff is entitled to six months’ salary in lieu of notice. Every addendum states that, “[f]urther to the … employment contract … dated Dec 13 2009 and previous amendments to the same”. The last addendum was made on 1 February 2020. It is clear that the notice period as stated in the 1st Addendum on 23 February 2010 is still valid and enforceable. I therefore order that the defendant pays the plaintiff six months’ salary in lieu of notice less the money already paid so far.

I now turn to the Commission Claim. The plaintiff says that throughout the period of his employment with the defendant, the defendant had put in place a process whereby a Sales Commission Report would set out the salient details of the relevant project and calculate the percentage and quantum of commission payable to the defendant’s personnel. However, from around 2016, the defendant started to delay the provision of Sales Commission Reports to the plaintiff and also did not pay him some of the commissions he had earned. In particular, on 20 August 2020, he was informed via a letter from the second plaintiff in counterclaim that three projects, Deakin (Australia), AVR (Japan) and TXI Partners (Taiwan) were deemed “washout” and no commission would be released to all parties involved, including the plaintiff.

For each commission claim, the defendant’s operative SPP provides the following conditions:

Clause 2 of the defendant’s operative SPP further states:

As to when the commissions are to be paid out, Mr Sridhar explained under cross-examination that the payments of advance commission before the conclusion of the project were “out of goodwill”. However, the plaintiff’s Employment Contract expressly states that “[a]ll commissions payable upon receipt of pro-rated payment from customer starting at end of each calendar quarter.” Prior to 2020, each iteration of the SPP had a clause for “Commission Payout”, stating that where a purchase order is cancelled, an account manager (or salesperson) would “only be eligible for Commission Payout for any pro-rated payments received prior to cancellation as per the Employment Agreement and Sales Policy”. I am of the view, that on a reasonable construction, these clauses allow commissions to be paid out on a pro-rated basis, with no requirement that an entire project to be completed or for the full payment from the customer to be made before commissions can be paid.

The next question is, whether the plaintiff is entitled to any commission in respect of the projects that were declared by the defendant as “washout”. It must first be determined whether the September 2020 SPP (the “2020 SPP”), which introduced a “project washout clause”, was validly incorporated. The defendant’s position is that three of the Projects, namely, Deakin (Australia), AVR (Japan) and TXI Partners (Taiwan) were deemed to be “washout projects” as per Clause 11 of the 2020 SPP and therefore no commissions were payable to the plaintiff. Clause 11 states:

The SPP is a document that was first issued in 2012 and was subsequently revised multiple times until 2021. The plaintiff says that he was only made aware via email of the 2020 SPP on 2 September 2020, a day after he was informed that there would be no commission for what had been deemed “washout projects”. He further says that he was not given reasonable notice of the 2020 SPP and that he did not agree to the variations to the Employment Contract made by the 2020 SPP. Mr Sridhar testified that the SPPs were made available on to a staff portal which all employees have access to, though only evidence was adduced that the 2019 SPP was uploaded on the staff portal. In my view, the terms of the plaintiff’s employment clearly incorporated the most updated SPP in force at the time of the amendment. In every iteration of the plaintiff’s Employment Contract, the last clause states: “All other terms as per… Sales Policy Handbook”. This clearly is a reference to the relevant SPP in force at the time.

The question still remains, however, as to whether the term which the defendant sought to introduce into the 2020 SPP on “washout projects” applies. Where there is a signed contract with an explicit incorporating clause, onerous and unusual conditions can be incorporated even if the signing party had not been specifically drawn to them (Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR(R) 712).

In the present case, it is not disputed that the plaintiff signed the last amendment to the Employment Contract on 1 February 2020. It is also not disputed that the term on “project washout”, which significantly affects the plaintiff’s commission, was only introduced in a new SPP in September 2020, though that version of the SPP was backdated to 1 January 2020. While the defendant says says that it has “reserved its power to vary the terms of the SPPs at its sole discretion”, this is neither apparent from the wording of the Employment Contract nor that of the SPP. There is no indication that the plaintiff and defendant intended that the terms of the SPP could be unilaterally varied to introduce new terms, which significantly changes an employee’s commission structure without reasonable notice given. I am thus of the view that the 2020 SPP, which introduced the term of “project washout”, has not been incorporated into the Employment Contract. Although the 2020 SPP was not incorporated into the Employment Contract, it is still necessary to consider whether, in light of how commissions are calculated (see [10] above), the plaintiff is entitled to the commission as he claims.

The first project that the defendant says the plaintiff is not entitled to any commission is Deakin (Australia). The purchase order was dated 30 November 2015. The value of the Deakin (Australia) agreement was US$6,582,511.00 and S$75,000 had already been paid out as advanced commissions to the plaintiff on 21 December 2015 and 29 January 2016. Mr Sridhar had conceded that US$5,850,298.11 had already been paid by the customer under the project. However, he also says that there had been no net sales made as the contract was non-performing and that the IDC Hub was never established. And thus, due to Deakin’s failure to fulfil its contractual obligations, the second plaintiff in counterclaim was unable to pay US$254,000 to third-party suppliers. The defendant has adduced a letter from the counsel of Deakin University notifying the defendant of the termination of the master agreement. The defendant says that “[b]y some estimates, the EON group lost more than 18 million in USD”.

The second project is AVR (Japan). The purchase order was dated 19 September 2017 and the contract value was US$6,692,752. The second plaintiff in counterclaim never received the full payment as per the contract. AVR (Japan) had allegedly made several contractual breaches. The second plaintiff in counterclaim is also involved in a legal dispute with AVR (Japan). As such, the AVR (Japan) agreement was “forfeited, not performed and hence void”. As of 31 December 2021, the second plaintiff in counterclaim’s financial statements reflect US$6,395,343 in liabilities due to the legal dispute with AVR (Japan).

The third project is TXI Partners (Taiwan). The purchase order was dated 9 December 2017 and the contract value was US$6,692,752. The full amount appears to have been paid up by the customer. However, TXI (Partners) did not sell a single license and did not pay the platform fees from customer sales as expected. Mr Dan-Ioan Lejerskar (“Mr Dan”), the director of the first plaintiff in counterclaim and the defendant testified that there were several contractual breaches made on the part of TXI Partners (Taiwan), including theft of software, infringement of copyright and significant reputational damage to the second plaintiff in counterclaim. Mr Dan testified that there was no revenue taken from the TXI project and that the second plaintiff in counterclaim suffered the largest financial losses to date from this project.

Following from the above, it is clear that the three projects incurred losses, the projects were not completed, and full payment was not made to the defendant. I accept the defendant’s submissions that there were no resulting revenues from these long term projects, which incurred more losses than earned revenue. However, there is no requirement for an entire project to be completed or for the full payment from the customer to be made before commissions are paid out (see [11] above). Nonetheless, the SPP provides that the calculation of commission is based on the net sales from each project (see [10] above). These two terms appear to be at odds with each other.

Taking into account the business purpose of the provisions, it is more reasonable to find that the commission is dependent on the net sales of the project, and can be paid out on a pro-rated basis so long as the net sales are positive. The commissions were likely intended to be paid out on a pro-rated basis on the basis that IDC projects were typically long-term projects. However, where one such project fails, and the company suffers significant losses as a result, the parties were more likely to have intended that no commission for that project is paid out.

Second, for the GVS (Thailand) Project. The purchase order was for the price of US$10,105 dated 15 February 2021. The defendant adduced evidence that the purchase order for this project was cancelled by the customer. Given that no net sales were made from this project, I agree with the defendant that the plaintiff is not entitled to any commission.

Finally, I now consider how much commission the plaintiff is entitled to for the remaining projects. The defendant accepts that there are still some commissions owing to the plaintiff for 13 other projects. Of the 13, the quantum of S$130,039.11 for the project NTU (Singapore) is undisputed. However, the defendant disputes the quantum of commission for the remaining 12 projects. The details and the parties’ respective positions are as follows:

For China Merchants (China) (Ref: Q-2416), the discrepancy in the quantum arises because the defendant calculated the remaining sum based on an exchange rate of SGD-USD of 1.365 as of August 2020, which was when the sales commission report was prepared, but the plaintiff calculated the remaining sum based on an exchange rate of SGD-USD of 1.375 as of October 2016, which was the month that the purchase order was made. The defendant says that the commissions were only due at the completion of the project and therefore it was fair and just to calculate the exchange rate as at the date of the completion of the project. I reiterate [11] that according to the Employment Contract, commissions could be paid out on a pro-rated basis and were not necessarily only due at the completion of the project. Further, there is a clause in every iteration of the SPP providing that “the foreign exchange rate is locked on the date of the first invoice for the respective projects”. This should similarly apply to the calculating of commissions. I thus accept the plaintiff’s claim quantum, which is based on an exchange rate as of August 2020.

For SCDF (Singapore) (Ref: Q-2729), the discrepancy in the quantum arises because the defendant and plaintiff relied on two different purchase orders to calculate the quantum owed. The plaintiff relies on a purchase order generated on 24 August 2018 comprising a three-year contract for maintenance services for SCDF. The defendant relies on a later purchase order generated on 7 November 2018 for the same services. The defendant says that the later purchase order is the amended and accurate one. I reviewed the two purchase orders and accept that the defendant’s purchase order is more up-to-date. Accordingly, I accept the defendant’s calculation of the quantum that is owed to the plaintiff.

For the remaining projects, the discrepancy in quantum arises because both parties have provided different values of the COGS. I will consider each project in turn.

For SCDF (Singapore) (Ref: Q-2885), the discrepancy in the quantum is due to the calculation of COGS. It is undisputed that the purchase order for this project was S$72,925. The plaintiff says that the defendant’s Commission Report and accompanying spreadsheet are highly dubious and the invoices submitted in support include services for Amazon Web Services and Sindhu School Fees, neither of which were part of the purchase order from the SCDF. The defendant says that the COGS of the project is S$65,986.25, resulting in a Net Sales of S$6,938.75, of which S$416.33 is payable to the plaintiff as commission. The invoices largely matched the COGS provided by the defendant, even though not all invoices had been provided. Although there were invoices from Amazon Web Services and, oddly, an invoice of S$9,715.60 for school fees of NPS International School for a student “Sindhu Sunkad”, those invoices do not seem to be included in the calculation of the COGS and I will thus disregard them. Given that the project is still ongoing, the COGS estimates are projections and are not final. I accept the defendant’s COGS estimates but deduct 10% as a general adjustment. Accordingly, the amount owed to the plaintiff for SCDF (Singapore) is:

In total, the plaintiff is owed the following outstanding commissions:

Lastly, I deal with the counterclaim. The plaintiffs in counterclaim say that:

In respect of the Sales Target Claim, the plaintiff says that the plaintiffs in counterclaim have failed to establish that the purported inability to meet the sales target was a breach of his Employment Contract as there is nothing on the plain reading of the 9th Addendum which stipulates that the sales target is a mandatory one. In respect of the Duty of Care Claim, the plaintiff says that his job scope as a salesperson did not include performing customer due diligence. In any case, no duty of care arises between himself and the second plaintiff in counterclaim (EON Reality, Inc) as he was at all times an employee of the first plaintiff in counterclaim (EON Reality Pte Ltd).

In respect of the Sales Target Claim, I am of the view that the plaintiff did not breach his Employment Contract in failing to achieve his yearly sales target. Such targets are typically used to incentivize salespersons to make more sales. The sales target as stipulated in the contract was not a condition of the contract.

In respect of the Duty of Care Claim, I also am of the view that the defendant in counterclaim did not owe a duty to perform customer due diligence. While Mr Dan has, in his affidavit of evidence-in-chief, stated that the plaintiff’s job scope involves “conducting the necessary due diligence and verification that the customers and/or partners in foreign countries are financially solid”, and that he was to, inter alia, “review financial information such as audited financial statements” and “review auditor’s report”, this was not found in any part of the plaintiff’s contract. Instead, the emails show that the responsibility of due diligence fell with the Finance Department, consisting of Mr Nick Bothwell and Mr Vaughn Merrill. While the salespersons were kept in the loop of the due diligence policies, this did not mean that they were required to perform such due diligence, a task normally performed by the legal and accounting departments.

The judge, as a finder of fact, has it easy when there is no evidence. Where items claimed are not supported by evidence, they are excluded. However, judicial despair may be provoked by competing and incomplete evidence. For innominate items, such as general expenses, that seem to have been incurred but not supported by proof, the court will usually decide between allowing them in their entirety or dismissing them in their entirety. Where, as in this case, neither option would have yielded a fair result, the court has to make some adjustments by way of a discount of what it considers just and fair although there is no means of determining whether this, admittedly arbitrary, exercise achieves a just result because justice implies that each party receives what he deserves. Without evidence, justice can be an illusive gauge. Deciding the general adjustment to be made to the COGS from the point of fairness is no less certain, but is, as in this case, a little more palpable because fairness can be discerned through the approach and application of the solution. It is thus what I have done, for the alternative will be unfair and may be unjust.

The plaintiff’s claim is thus allowed to the extent mentioned above. The counterclaim is dismissed. For the avoidance of doubt, the amounts payable by the defendant to the plaintiff are as follows: S$95,000 for salary in lieu of notice and S$670,698.55 for outstanding commissions. As such, the total due to the plaintiff is S$765,698.55.