High Court · Decided 9 October 2015

Piattchanine, Iouri v Phosagro Asia Pte Ltd

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[2015] SGHC 259Case no. Suit No 404 of 2014

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Laws this judgment relies on

Companies Act 1967

Grounds of decision

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George Wei J:
[1] Iouri Piattchanine (“the Plaintiff”) commenced Suit No 404 of 2014 claiming sums he asserts are due to him following the termination of his employment as Managing Director of Phosagro Asia Pte Ltd (“the Defendant”) on 28 February 2014. The Plaintiff’s claims were essentially advanced on two fronts: for sums due under the contract, and alternatively, for damages pursuant to a breach of contract. The Defendant counterclaims for sums which it alleges the Plaintiff has wrongfully paid to himself by way of expense claims.
Background facts
[2] The Defendant is a company incorporated in Singapore and is engaged in the fertiliser trade. The Defendant is fully owned by Phosint Trading Limited, a Cyprus-incorporated company. Phosint Trading Limited is, in turn, fully owned by the Phosagro Group (which is based in Russia). The Plaintiff was the Managing Director of the Defendant for close to a year before the termination of his employment. The Plaintiff is an experienced senior manager in the fertiliser trade. Maxim Popov (“Popov”) was the Defendant’s other director throughout the material period. He is also the key witness for the Defendant in the present suit. The history of the present dispute traces back to a share purchase agreement signed between the Plaintiff and Phosint Trading Limited.
Share purchase agreement
[3] For almost a year prior to 26 February 2013, the Plaintiff was the sole director and shareholder of Asiafert Trading Pte Ltd (“Asiafert”). Sometime in November 2012, Andre Guryev (“Guryev”), the Chief Executive Director of the Phosagro Group, approached the Plaintiff about a possible sale of Asiafert to the Phosagro Group.
[4] The negotiations culminated in a share purchase agreement dated 26 February 2013 for the purchase of Asiafert by Phosint Trading Limited (“the SPA”). The SPA is exhibited in the Plaintiff’s affidavit of evidence-in-chief (“AEIC”).
[5] I highlight several material terms in the SPA:
(a) By cl 3, the consideration for the purchase of 100% of the shares in Asiafert was US$207,539.
(b) By cl 9.8, the Plaintiff was to bear “all costs incurred by [him] in connection with the preparation, negotiation and entry into of this Agreement and the sale of the Shares”.
(c) By cl 1.2.2 of Schedule 2, one of Phosint Trading Limited’s closing obligations was to “deliver an employment agreement recording the terms of [the Plaintiff’s] continued employment as the Managing Director by the Company” on mutually agreeable terms.
(d) By cl 2.2 of Schedule 3, the Plaintiff warranted that Asiafert had no outstanding liabilities as of 26 February 2013.
[6] When the Phosagro Group bought over Asiafert, they renamed it Phosagro Asia Pte Ltd (ie, the defendant in the present suit).
[7] In short, the Plaintiff sold his company (Asiafert) to Phosint Trading Limited and the Phosagro Group. Aside from the sale price, the Plaintiff’s employment as Managing Director of Asiafert was to be continued on mutually agreeable terms. Indeed, the Plaintiff claims that Asiafert was sold at a “low value” because of the understanding that he would be employed by Phosagro Asia.
The Plaintiff’s employment contract
[8] Pursuant to an employment agreement dated 1 March 2013 (“the Employment Contract”), the Defendant hired the Plaintiff as its Managing Director. The Plaintiff exhibited the Employment Contract in his AEIC. Evidence of pre-contractual negotiations was adduced by the parties. It is undisputed that the Plaintiff prepared the draft of the Employment Contract.
[9] The Plaintiff signed his own Employment Contract on behalf of the Defendant, his employer. When cross-examined as to whether the Phosagro Group had sight of the Employment Contract, the Plaintiff asserts that drafts of the Employment Contract were discussed and exchanged between the Plaintiff, Guryev, and Sergey Sereda (“Sereda”), the Deputy Chief Executive of the Phosagro Group. The Plaintiff asserts that Guryev and Sereda agreed to the Employment Contract exhibited in the Plaintiff’s AEIC. I have no reason to doubt this evidence.
[10] I note that the copy of the Employment Contract exhibited in Popov’s AEIC is identical to that exhibited in the Plaintiff’s AEIC, save that “Annex 2” (on housing entitlement) is missing from the version of the Employment Contract exhibited in Popov’s AEIC. In this regard, the Plaintiff was cross-examined on whether he had sent Annex 2 of the Employment Contract to Guryev and/or Sereda for approval. The Plaintiff claimed that he could not remember if the Annexes were sent to Guryev and/or Sereda, but insisted that the parties had agreed on all the terms therein.
[11] At this juncture, I stress that save for Annex 2, the Defendant does not challenge the terms and validity of the Employment Contract exhibited in the Plaintiff’s AEIC. The only disputed fact appears to be whether Annex 2 also forms part of the Employment Contract, however, nothing turns on this.
[12] I now set out some of the material terms in the Employment Contract:
[13] The Plaintiff’s salary was provided for in cl 5 of the Employment Contract and was set out in “Annex 1” (being S$40,600 per month from 1 March to 31 December 2013, and S$47,300 per month thereafter). The Plaintiff’s bonus entitlement was provided for in cl 6 of the Employment Contract and was set out in “Supplement to Annex 1” (being a guaranteed bonus of 50% of the Plaintiff’s annual remuneration, and a discretionary bonus of up to 50% of the Plaintiff’s annual remuneration). The relevance of this will become clearer below in the context of the Plaintiff’s entitlement (if any) to a “one-off” bonus when his contract is terminated prior to expiration of the three-year term.
[14] Besides his salary and bonuses, in brief, the Plaintiff was also entitled to the following benefits under the Employment Contract:
(a) Clause 7: to have a telephone and overseas telephone bills incurred in discharge of his duties paid for by the Defendant.
(b) Clause 8: to have his utility bills paid for by the Defendant.
(c) Clause 9: club membership fees, membership fees in various business clubs which are deemed beneficial to the Defendant’s business, as well as fees for language courses, business schools, and seminars would be borne by the Defendant.
(d) Clause 10: the Defendant was to provide a motorcar “of suitable type” for official and private use (all associated expenses including petrol and parking fees were to be paid by the Defendant).
(e) Clause 11: to be reimbursed for all travelling, hotel and other out-of-pocket expenses incurred during business trips “according to the Company regulations”.
(f) Clause 12: to be reimbursed for all entertainment expenses reasonably incurred in discharge of his duties in “accordance with the Company regulations”.
(g) Clause 13: to be provided free medical consultations and medicine for him and his family.
(h) Clause 16: his and his family’s travelling expenses during annual leave would be borne by the Defendant.
(i) Clause 19: the Defendant was to purchase life and accident insurance policies for the Plaintiff.
[15] “Annex 2” to the Employment Contract states that the Defendant is obliged to pay for the Plaintiff’s housing rent. It will be recalled that the parties disagree whether “Annex 2” is properly part of the Employment Contract.
The management of the Defendant
[16] As managing director, it appears that the Plaintiff had wide-ranging powers to run the Defendant’s business and entertain actual or potential business partners. There was no evidence that the Plaintiff had to report to anybody when making day-to-day financial or other decisions on behalf of the Defendant. Based on the evidence before me, there were no rules relating to the corporate governance of the Defendant imposed by the new owners. Indeed, this is borne out by the fact that the Plaintiff was even permitted to sign his own employment contract.
[17] The Plaintiff managed the Defendant with Popov, the Defendant’s other director. Whilst the evidence could have been clearer, it appears that the Plaintiff first became acquainted with Popov when Asiafert was a customer of the Phosagro Group. Shortly after the sale of Asiafert to the Phosagro Group, Popov was appointed as an executive director of the Defendant (in or about May 2013). The evidence was that Popov enjoyed similar entitlements to expenses. That said, as will be seen, there is disagreement as to whether there was a practice or understanding to the effect that expenses could be claimed upfront (as and when incurred) with subsequent verification and adjustment (if needed) only at the end of the accounting year.
[18] When it came to handling the finances of the company, it appears that the following processes were in place:
(a) The Plaintiff and Popov were both authorised to sign all cheques on behalf of the Defendant, with no limit as to amount. However, Popov gave evidence that he never actually signed cheques. Popov’s evidence was that the Plaintiff kept tight control over the Defendant’s accounts and cheque books.
(b) The Defendant’s accounts were done by an external accountant, Tricor Singapore Pte Ltd (“Tricor”). Tricor would come to the Defendant’s office once a week to handle the Defendant’s accounts.
(c) Every month, the Plaintiff would submit his credit card statements together with supporting receipts to Tricor. The Plaintiff had a credit card in his name which he used primarily for corporate expenses, but occasionally for personal expenses too. During the year, Tricor did not spend much time checking the Plaintiff’s credit card bills. The Plaintiff would then sign a cheque to himself as reimbursement for his expenses. Popov similarly submitted expense claims for reimbursement, and it was the Plaintiff who signed the cheques to Popov. According to the Plaintiff, at the end of the financial year, Tricor would identify expense claims that the Plaintiff and Popov were not (or appeared not to be) entitled to and seek reimbursement from them. I shall call this the “expense accounting practice”.
(d) The Defendant’s financial year ran from January to December. The Plaintiff’s evidence is that the expense accounting practice was carried over from Asiafert, where he was sole shareholder and director. While the evidence on this was confused, it seems that this practice was never directly communicated to the Phosagro Group. That said, it does not appear that Guryev or any other officer of the Phosagro Group initiated discussions with the Plaintiff on his expense claims during the year or that he was told that his approach was contrary to the practice which the Phosagro Group wished to implement.
(e) When questioned, the Plaintiff accepted that the expense accounting practice could give rise to problems where the director was unable to repay expenses at the end of the financial year. However, the Plaintiff’s position, which he strenuously asserted, was that this was the usual practice at Asiafert and that it was the job of the accountants (Tricor) to verify expense claims at the end of the financial year. I accept the Plaintiff’s evidence that the expense accounting practice was adopted in Asiafert and that he continued with this practice when Asiafert was sold and renamed as the Defendant. Popov testified that based on his experience, such a practice was not a generally acceptable corporate practice. No independent evidence was placed before the court as to what the normal or standard practice for expense claims by senior employees or officers are in Singapore. Indeed, it may well be that the rules and procedures will vary considerably and in any case, at the end of the day, what is important is to examine any internal company regulations as well as what is provided for in the contract between the Plaintiff and the Defendant.
(f) The Defendant’s management accounts were sent to the Phosagro Group every month. The directors’ expenses were listed therein, but a detailed breakdown cannot be found in those accounts. As a minimum, it must follow that the Phosagro Group must have been aware that the Plaintiff was making expense claims during the year. Moreover, the Phosagro Group must have been aware of the terms of the Plaintiff’s contract and his contractual entitlement to the various heads of expense claims and benefits.
(g) Based on the evidence before me, the Defendant had no regulations that governed the accounting practices of the company or the entertainment and expense claims of directors. Whilst cll 11 and 12 of the Employment Contract referred to reimbursement of expenses in accordance with the Company Regulations, no such regulations were adduced in evidence. Moreover, there is no evidence that the Phosagro Group required the Plaintiff to implement any company regulations to govern the reimbursement of expense claims. There is also no evidence that Popov had complained to the Phosagro Group about the absence of company regulations.
Breakdown of the relationship between the Plaintiff and Defendant
[19] Shortly after the Plaintiff started work with the Defendant, tensions arose between the Plaintiff and Popov as well as the officers from the Phosagro Group. The parties did not see eye to eye on many management decisions. To be clear, the disagreements related to the direction of the company’s business, not the day-to-day management or expense claims.
[20] The tipping point that led to the Plaintiff’s termination seemed to have been the Plaintiff’s response to the Phosagro Group’s intended appointment of Sereda as a director of the Defendant. The Plaintiff claims that in February 2014, when he heard about the possibility that Sereda would be appointed on the Defendant’s board of directors, he wanted to ensure that there would not be a conflict of interest for Sereda to be both a director of the Defendant, and a director of the Phosagro Group. The Plaintiff therefore sought legal advice from M/s Rajah and Tann LLP (“R&T”) on the issue.
[21] In its legal advice, R&T opined that there would likely be a conflict of interest for the same person to act as director of both a parent and subsidiary company. On 26 February 2014, the Plaintiff forwarded R&T’s legal advice to Phosint Trading Limited’s solicitors.
[22] On 27 February 2014, the Plaintiff received an email from Guryev which contained only one line: “What r u doing?”. On the same day, the Plaintiff replied to Guryev’s email explaining that he had sought R&T’s advice in the interest of the company and the shareholders. The Plaintiff received no further reply from Guryev.
The Plaintiff’s termination
[23] On 28 February 2014, the Plaintiff returned to Singapore from a business trip in Japan. When he landed and opened his email, he received a termination letter from the Defendant dated 28 February 2014 (“28 February 2014 Letter”), and signed by Popov.
[24] I set out the material portions of the 28 February 2014 Letter:
[25] Pausing here, I note that para 3 of the letter expressly refers to payment to the Plaintiff of such monies due to him under the contract subject to any deductions to be determined by the relevant authorities.
[26] The Plaintiff testified that upon receiving the 28 February 2014 Letter, he called Popov, who informed him that the decision was taken by the shareholders. The Plaintiff also sent an email to Guryev to ask if his termination was a mistake, and if not, how they could arrange his smooth departure from the Defendant, but he received no reply.
[27] Subsequently, on 18 March 2014, the Plaintiff received a second letter from the Defendant (“the 18 March 2014 Letter”). The material portions of the 18 March 2014 Letter are as follows:
[28] The 18 March 2014 Letter came with a huge stack of receipts relating to the allegedly wrongful claims made by the Plaintiff. The Plaintiff did not respond to justify the claims listed in the 18 March 2014 Letter.
[29] On 4 April 2014, the Plaintiff’s solicitors sent a letter to the Defendant claiming that there was no basis to the allegations made in the 18 March 2014 Letter, and claiming for a sum of S$1,946,400 which was asserted to be due and payable to the Plaintiff. The present proceedings were then commenced by the Plaintiff on 14 April 2014.
The parties’ respective claims and positions
Plaintiff’s claims
[30] The Plaintiff’s primary claim is that the Defendant has breached its contractual obligation to employ the Plaintiff for three years by terminating his employment with immediate effect on 28 February 2014. In consequence he claims that he suffered the following losses pursuant to that breach:
(a) Salary for the period between March 2014 and February 2015 amounting to S$567,600.00.
(b) Salary for the period between March 2015 and February 2016 amounting to S$567,600.00.
(c) Guaranteed bonus for the period between March 2013 and February 2014 amounting to S$243,600.00.
(d) Guaranteed bonus for the period between March 2014 and February 2015 amounting to S$283,800.00.
(e) Guaranteed bonus for the period March 2015 to February 2016 amounting to S$283,800.00.
Total: S$1,946,400.00 (“the Primary Claim”)
[31] The Plaintiff alternatively claims that it is a term of the Employment Contract that an annual salary as one-off payment was to be paid to him should the contract be terminated by the Defendant before the end of the three-year term. Therefore, the Defendant is contractually obliged to pay the Plaintiff the following sums:
(a) Salary for three months’ notice amounting to S$141,900.00
(b) Salary for the period between March 2014 and February 2015 amounting to S$567,600.00.
(c) Guaranteed bonus for the period between March 2013 and February 2014 amounting to S$243,600.00.
(d) Guaranteed bonus for the period between March 2014 and February 2015 amounting to S$283,800.00.
Total: S$1,236,900.00 (“the Secondary Claim”)
[32] Essentially, in the Primary Claim, the Plaintiff is bringing a suit for damages pursuant to the Defendant’s contractual breach. The Plaintiff’s claim is for the salary and bonuses he would have earned if he had been employed for the full three-year term.
[33] In the secondary claim, however, the Plaintiff does not plead any contractual breach; instead, the Plaintiff claims that certain sums are simply due under the Employment Contract given that the said contract was terminated (in accordance with the terms of the contract) before the expiry of the three-year term. I observe that para 12 of the statement of claim might be read to suggest that the Secondary Claim in fact arises from the Defendant’s breach of contract as well. However, reading para 9 of the statement of claim, which states that “the Defendant is contractually obliged to pay the aggregate sum of S$1,236,900.00”, it is clear that the Secondary Claim is not premised on a contractual breach.
[34] The Defendant’s primary position is that the Plaintiff is not entitled to any payment upon termination because of certain unauthorised payments he made to himself in breach of express and/or implied terms of the Employment Contract as well as the Plaintiff’s general and fiduciary duties to the Defendant.
[35] In particular, the Defendant relies on the contractual right to summary termination under cl 14 and 20 of the Employment Contract in asserting that the Plaintiff is not entitled to any sums upon termination. The Defendant also submits that its termination letter on 28 February 2014, while failing to mention summary termination or the Plaintiff’s misconduct, was without prejudice to its right to subsequently clarify that the Plaintiff was summarily terminated on the grounds of his misconduct.
[36] However, in its closing submissions at [84]–[103], the Defendant submits that it also had a common law right of termination pursuant to repudiatory breaches by the Plaintiff.
[37] I observe that while the Defendant did specifically plead its rights under cl 14 and 20 of the Employment Contract, it did not specifically plead the fact that it had a common law right to termination pursuant to repudiatory breaches by the Plaintiff.
[38] Nevertheless, it is clear that the Defendant is taking the position that it had the right to terminate the Plaintiff without making any compensatory payments. Moreover, I am satisfied that the Defendant has pleaded the essential facts to support its legal submission that it has a common law right to terminate the Employment Contract. Therefore, I shall proceed on the basis that the Defendant’s claim to be entitled to terminate the Employment Contract summarily is founded both on the contract itself, as well as at common law.
[39] The Defendant also takes the position that the Primary Claim is without basis as the contract does not entitle the Plaintiff to be paid a salary for the remaining period of the three-year term if the Plaintiff is “prematurely” terminated. Moreover, the Defendant submits that no bonuses are due to the Plaintiff because his first year bonus had not accrued as of 28 February 2014, when the Plaintiff’s employment was terminated. The Plaintiff’s Employment Contract commenced on 1 March 2013, and as of 28 February 2014, the first year of employment was not yet completed.
Defendant’s counterclaim
[40] The Defendant also counterclaims for damages arising from the Plaintiff’s breach of his contractual, general and fiduciary duties to the Defendant.
[41] In this regard, the Defendant claims that the Plaintiff is “liable to repay and/or account for the monies that had been paid without due and/or proper authorisation.”
[42] According to the Defendant, this amounts to a total of S$499,719.20. The Defendant attached a breakdown of the alleged unauthorised claims made by the Plaintiff in its pleadings. However, a more detailed tabulation of each unauthorised claim together with references to the supporting documentation (eg, receipts) can be found in Popov’s AEIC at MP-13.
[43] In brief, the Defendant’s counterclaim consists of eight categories of allegedly unauthorised payments, which entail 867 claims. The eight categories (as helpfully summarised in Popov’s AEIC) are as follows:
(a) Category A: claims amounting to S$100,340.40 which the Plaintiff admits are unauthorised in his Reply and Defence to Counterclaim (Amendment No 1) (see Annex A). The Plaintiff states that he fully intended to settle those sums at the end of the financial year (after the accounts had been audited), but that he was not given a chance to before he was terminated.
(b) Category B: claims relating to expenses incurred prior to the commencement of the Employment Contract (ie, 1 March 2013). The Defendant submits that the Plaintiff cannot make claims for expenses incurred by him before 1 March 2013 because the Defendant (and its new owners) is not liable for such expenses under the SPA.
(c) Category C: claims relating to the Plaintiff’s expenses overseas which the Defendant asserts were the Plaintiff’s and his family’s personal vacation expenses. The Plaintiff claims that these overseas expenses were either spent on business trips or on entertaining potential business partners for the Defendant’s business.
(d) Category D: claims for services and purchases that the Defendant asserts are personal in nature and which the Plaintiff is not entitled to under his Employment Contract. The Plaintiff’s position is generally that these expenses either relate to benefits he was entitled to under his Employment Contract, or were made for the Defendant and its staff.
(e) Category E: claims for food and beverage expenses. The Defendant asserts that these are personal expenses especially since they are largely for meals on the weekend or public holidays. The Plaintiff claims that all the expenses in Category E are business expenses.
(f) Category F: claims for expenses made at hotels in Singapore. The Defendant asserts that these are not business expenses incurred on behalf of the Defendant, but the Plaintiff claims that these hotel expenses were incurred when he hosted actual or potential business partners of the Defendant.
(g) Category G: claims for taxi services in Singapore. The Defendant asserts that the Plaintiff had no basis to make taxi claims because the Defendant already paid for his motor car. The Plaintiff however claims that these were mostly his family’s transport expenses which he was entitled to claim for under the Employment Contract.
(h) Category H: residual category of claims which include a substantial payment to Fincastle Trading Limited (S$209,601.63) and a payment to BNP Paribas (S$10,718.50).
Issues
[44] The legal and factual issues in this case are interlinked and not easily separated. As such, I propose to structure my judgment as follows. First, I will consider the Defendant’s counterclaim, ie, whether the alleged unauthorised claims made by the Plaintiff (save for those admitted by the Plaintiff in Category A) are indeed unauthorised (as falling outside what the Plaintiff was entitled to claim). Resolving this may help to provide a sharper focus for the remainder of the judgment.
[45] Second, I shall consider whether there is any contractual basis for the Plaintiff’s Primary Claim for the salary and bonuses he would have earned during the remaining period of the three years should the Employment Contract not have been terminated.
[46] Third, I shall consider the general principles of employment law regarding an employer’s termination of an employee’s employment contract. In particular, it will be necessary to consider the permissibility of raising new grounds or reasons for termination at a subsequent date when those grounds or reasons were never raised at the time of termination.
[47] Fourth, I shall consider the parties’ respective entitlements following the Defendant’s termination of the Plaintiff’s employment on 28 February 2014. In particular, the following issues arise:
(a) What are the grounds and reasons relied upon by the Defendant at the time of termination, ie, 28 February 2014?
(b) What is the relevance of the 18 March 2014 Letter?
(c) Is there a basis for the summary termination of the Plaintiff based on the Plaintiff’s purported misconduct (ie, whether there was a repudiatory breach under common law, or whether the conditions in cl 20 are satisfied)?
(d) Can the grounds, reasons and facts retrospectively raised on 18 March 2014 after the Plaintiff’s termination as well as at trial now justify the Defendant’s summary termination of the Plaintiff’s employment?
[48] Finally, I shall consider whether the Plaintiff’s first year’s bonus accrued to him on or before 28 February 2014 under the Employment Contract.
Issue 1: Extent of wrongful claims and payments
[49] As managing director, the Plaintiff was entitled to receive payment for certain expense claims from the Defendant. These included claims for benefits that he was entitled to under the Employment Contract, as well as claims for business expenses. In particular, cll 11 and 12 of the Employment Contract state as follows:
[50] Given that the Plaintiff’s expense claims were broken down into eight categories, I shall consider each category in turn to determine if the expense claims made by the Plaintiff were indeed wrongfully made.
[51] At this juncture, I highlight the fact that the Defendant has alleged there were more than 800 wrongful expense claims made by the Plaintiff. Aside from evidence of supporting receipts and an assertion by Popov in his AEIC that the expense claims were wrongful, there was no other evidence or indeed cross-examination on the majority of the alleged unauthorised claims.
[52] Whilst it is obvious that going through all 800 alleged wrongful expense claims in the evidence would take a considerable amount of time, it stands to reason that this is a matter the Defendant must be prepared to address. Indeed, the parties were requested to address the issue of how the court should approach the merits of the Defendant’s counterclaim (wrongful expense claims) given the large number of claims. The question was not however directly dealt with in the submissions.
[53] That said, whilst the Defendant did not address in detail the wrongfulness of the claims in each category, it appears that the Defendant’s focus was primarily on establishing the wrongfulness of the expense accounting practice instituted by the Plaintiff (based on the Category A payments admitted by the Plaintiff), rather than on proving each detail in the counterclaim, ie, that the entire S$499,719.20 worth of claims highlighted by the Defendant in its pleadings were wrongful.
[54] To be clear, the Defendant did cross-examine the Plaintiff on some of the individual claims. It follows that the Defendant is essentially relying on the court drawing inferences from (a) the expense accounting practice that the Plaintiff had adopted, and (b) the evidence from the particular expense claims that the Plaintiff was cross-examined on.
[55] Given that the Defendant is the party claiming for the “reimbursement” (by way of an account or damages) of the said sums, the burden of proof is naturally on it to demonstrate that the claims made by the Plaintiff were indeed wrongful. The problem, however, is that evidence on the majority of the allegedly wrongful claims made by the Plaintiff was simply not adduced or tested in court. Ultimately, the question must be whether the Defendant has done enough for the court to draw an inference that all the alleged wrongful claims were indeed wrongful such that it can be said to have made out its case.
[56] As will be seen from the following paragraphs, I am unable to make a factual finding on most of the individual claims/expenses said to be unauthorised. In the discussion that follows, I will generally limit any factual findings or discussion to the allegedly wrongful claims that were actually traversed at trial.
[57] It is unnecessary to consider “Category A” given that the Plaintiff has admitted that the claims listed therein are sums he was not entitled to claim. But it is noted that there is the general question as to the propriety of his practice of claiming and receiving payment “upfront” and leaving it to the accountants to raise queries at the end of the year. This will be discussed below.
Category B
[58] The Defendant’s objections to the claims made by the Plaintiff in Category B are two-fold. First, the Defendant submits that the fact that the claims were incurred before 1 March 2013 is sufficient to prove they are wrongful. Second, at trial, the Defendant also questioned whether the expenses were of a personal or business nature.
[59] In relation to the second ground, when questioned about several specific expenses during cross-examination, the Plaintiff claimed that he either did not remember what the expenses were for, or explained that the expenses were for things like bottled water for the company and for entertaining business partners (whose identities he cannot remember).
[60] In my view, the evidence on this point unfortunately does not allow me to reach a finding of fact that the Category B claims traversed during cross-examination were personal rather than business expenses. There simply is not enough evidence. The Plaintiff was able to give reasonable explanations for at least some of the claims put to him, and while there is no independent evidence backing up the Plaintiff’s testimony, there is similarly no independent evidence backing up the Defendant’s position that the claims are wrongful either. I therefore reject the submission that the Category B claims were personal rather than business expenses.
[61] Fortunately, given the presence of some documentary evidence, I find myself more able to evaluate the Defendant’s first submission. The Defendant primarily relies on the terms of the SPA and the date of commencement of the Employment Contract to submit that it is not liable for any of the Plaintiff’s expenses prior to 1 March 2013. The Plaintiff relies on pre-contractual communications between the parties which he submits evinces an understanding that the Defendant will be liable for all operating expenses incurred by Asiafert from 1 February 2013.
[62] Having considered the evidence and submissions of the parties, I agree with the Defendant that the Plaintiff was not entitled to make claims for the expenses he incurred prior to 1 March 2013. This is so even if these were business expenses of Asiafert. My reasons are as follows:
(a) First, the Employment Contract does not entitle the Plaintiff to any benefits from the Defendant prior to its commencement on 1 March 2013. The Employment Contract is clearly forward looking and has no clause that suggests the Defendant would bear the Plaintiff’s expenses incurred prior to the commencement of the contract.
(b) Second, as mentioned at [5(d)] above, by cl 2.2 of Schedule 3, the Plaintiff warranted that Asiafert had no outstanding liabilities as of 26 February 2013. Given that the claims made by the Plaintiff in Category B were not on Asiafert’s balance sheets, I agree with the Defendant that it would clearly be inconsistent for the Plaintiff to claim that these sums were due to him from Asiafert prior to 26 February 2013, the date the SPA was signed.
[63] On balance, the documentary evidence therefore suggests that the Plaintiff was not entitled to claim the expenses he incurred prior to 1 March 2013. While the Plaintiff did adduce two emails dated 14 January 2013 and 4 February 2013 suggesting that the new investors were to bear Asiafert’s operating expenses from 1 February 2013, I note that both these emails were sent by the Plaintiff to Popov, and in both instances, the Plaintiff has failed to adduce evidence of concurring replies from officers of the Phosagro Group. I therefore attach no weight to the Plaintiff’s unilateral email communications.
[64] Thus, I find that the Defendant’s counterclaim in respect of Category B succeeds. The amount of expenses wrongly claimed and paid amounts to S$8570.12.
[65] That said, I also accept that the Plaintiff genuinely believed at the time he claimed these expenses, and indeed even at trial, that he was entitled to make these claims. In other words, his evidence was that he did not deliberately make claims for items he knew he was not entitled to. Indeed, his unilateral email communications to Popov are consistent with a finding that he always believed he was entitled to have his expenses from 1 February 2013 covered by the “new investors”. The relevance of this holding will become clearer below in respect of the discussion of the seriousness and gravity of the wrongful claims and the Defendant’s claimed right of summary termination under cl 20.
Category C
[66] As mentioned, Category C claims relate to the Plaintiff’s expenses overseas which the Defendant asserts were the Plaintiff’s and his family’s personal vacation expenses. The Plaintiff’s position is that these are expenses he is entitled to be reimbursed for under his Employment Contract (viz cll 11, 12 and/or 16).
[67] At cross-examination, only a portion of the Category C claims were traversed. Given the relatively lengthy cross-examination on the Category C claims, I summarise the main points that came out of the cross-examination:
(a) The hotel bills show that at least some of the hotel reservations were made for more than one person. The Plaintiff admitted at trial that his wife and/or son have stayed with him on occasion when he was on business trips.
(b) The Plaintiff admits that at several of the business meals, his wife was in attendance as well.
(c) The Plaintiff testifies that for many of the business trips he claimed for, it was partially for leisure and partially for work. He had meetings with business partners throughout the time he spent overseas, but did not spend the entire time working. The evidence shows that the Plaintiff admits that some of the claims on a single trip may be personal, whilst others may be for business, and that he does, at least on some occasions, distinguish them.
(d) The Plaintiff was often able to recall the specific people he met on the various business trips the Defendant’s counsel questioned him about during cross-examination.
(e) It became clear that many of the business meetings the Plaintiff had were with people the Plaintiff considered potential business partners, rather than present business partners of the Defendant.
[68] At this juncture, it is useful to go back to the Employment Contract to see what the Plaintiff is entitled to claim. Clause 11 allows the Plaintiff to be reimbursed for all “travelling, hotel and other out-of-pocket expenses according to the Company’s regulations” when on business trips. It is clear that on many of the business trips he went for, and during many of the business meals, his wife would be in attendance (and occasionally his son would stay in the hotel room as well). However, the question remains whether this renders the Plaintiff’s claims for the hotel room he stayed in as well as the meals in which his wife was present wrongful.
[69] First, I re-emphasise that there were no “Company Regulations” governing these matters. This is clear from Popov’s evidence during cross-examination. The court must therefore make a decision on the broad wording of the Employment Contract alone.
[70] In this regard, I find that the evidence before me is insufficient to allow a finding of fact that any of the claims made under Category C related to expenses on purely personal holidays, rather than on mixed business and personal trips. The Plaintiff, when probed, was always able to explain the business meetings he attended. While there is no independent verification of any of the Plaintiff’s evidence, the Defendant has similarly adduced no evidence that the Plaintiff was giving false testimony. I therefore find myself with no option but to operate on the premise that the Plaintiff’s testimony is true.
[71] As such, the question is whether “business trips” under cl 11 includes trips which the Plaintiff spent with his wife and on occasion, his son, and on which he had a number of business meetings, but did not spend all his time working. In my view, in the absence of specific company regulations to the contrary, I find that such trips can be considered business trips under cl 11. At the senior management level, I accept that a lot of business trips entail meeting and entertaining present and potential business partners. It is not surprising that the Plaintiff’s wife might join some networking events or dinners. Moreover, I accept that while the Plaintiff’s family may have stayed with him on occasion when he was on business trip, this did not disentitle him from claiming the expense as a business trip expense under cl 11. Indeed, in respect of hotel claims for example, I note that the Plaintiff always only booked one hotel room for each business trip. If the Plaintiff had booked more than one hotel room, that might have raised some eyebrows. However, if the Plaintiff’s family simply came along and stayed with him (or sat in his limousine) during his business trips, this does not, in my view, disentitle the Plaintiff from claiming the hotel expense as a business trip expense.
[72] Of course, I acknowledge that there was no independent, corroborating evidence that the Plaintiff did indeed attend business meetings on the various trips he claimed for. This assumption is solely based on his testimony. However, given that the Plaintiff has shown a willingness to admit that certain overseas expenses were personal, and has also generally been able to offer some explanation of each trip raised during cross-examination, I find that on the evidence, the Defendant has not proven that the expense claims in Category C are wrongful.
Category D
[73] Category D claims relate to services and purchases which the Defendant asserts are personal in nature and which the Plaintiff is not entitled to under his Employment Contract. A large number of claims are embodied within Category D. They include S$3140.55 for telephone and broadband services, S$104.74 for Ritz crackers, sour cream and cottage cheese from Cold Storage, S$677 for perfumes from Watsons, S$2,865 for a fountain pen, S$138 for contact lens solution, as well as many claims in respect of iTunes charges (mostly of small sums).
[74] Indeed, it is noted that some of the Category D expense claims relate to purchases at pharmacies. In some cases, the items are not mentioned. In other cases, the item, such as contact lens solution, is mentioned. Whilst these may be expenses of a personal nature, I note that under cl 13 of the Employment Contract, the Plaintiff is entitled to claim medical expenses.
[75] During cross-examination, the Plaintiff was questioned only on a few purchases, which he explained as follows:
(a) Transaction at St Regis Hotel dated 3 March 2013: the Plaintiff explained that this was for a spa service he and his wife enjoyed at the hotel, and which he was entitled to claim as a substitute for a club membership which he did not sign up for but was entitled to under the Employment Contract.
(b) Transaction at Huber’s Butchery dated 11 August 2013 under the name of “Tattana Piattchanine” (the Plaintiff’s wife): the Plaintiff explained that his wife bought this bottle of wine on his behalf to entertain some business contacts.
(c) Transaction at the Oak Cellar for a bottle of Chateau Petrus dated 15 January 2014: the Plaintiff explained that the bottle of wine was purchased as a gift for Guryev. The cost was $3,402, which the Plaintiff accepted was expensive. His response was that it was a special wine for a special person.
(d) Transaction at DFS Venture dated 4 August 2013: the Plaintiff explained that he purchased the bottles of alcohol to entertain guests at restaurants or as business gifts.
[76] Regarding the transactions at (b) to (d) set out above, I find that there is insufficient evidence to demonstrate that the purchases were not business expenses. The Defendant has failed to adduce objective evidence to show that the purchases were for the Plaintiff’s personal use or otherwise disprove the Plaintiff’s evidence.
[77] As for the spa services at the St Regis (set out at (a) above), however, I find that this is a wrongful claim as the Plaintiff is not entitled to such benefits under the Employment Contract. The Plaintiff cannot claim to be entitled to spa services under his Employment Contract just because he did not exercise his right to a club membership. Therefore, the Defendant’s counterclaim in relation to Category D succeeds only in relation to the Plaintiff’s claim for the St Regis spa service (and other related spa services and treatments).
[78] To be clear, I make no specific finding in relation to the other items in Category D as evidence on those was simply not adduced at trial. I will address the question as to whether it is possible to infer that all the Category D expenses were wrongful based on the items that were covered in cross-examination later in this decision.
Category E
[79] Category E relates to claims for food and beverage expenses. The Defendant submits that many of these expenses are largely for meals on public holidays or Fridays, Saturdays and Sunday evenings. The Plaintiff’s position is that these were all claims in relation to entertainment expenses incurred by the Plaintiff in the discharge of his duties. During cross-examination, the Defendant’s counsel questioned the Plaintiff about three specific meal expenses:
(a) The first was an expense of $2,155.68 incurred at Morton’s steakhouse, which the Plaintiff testified related to a business dinner with one Mr Lomakin, a general director of the International Potash Company, and now said to be a member of parliament in Russia.
(b) The second was an expense of $1,194.66 incurred at Waku Ghin, which the Plaintiff testified related to a meal he had with a general director of a company which builds gas and oil pipelines in Kazakhstan.
(c) The third was an expense of $1,177 incurred at Imperial Treasure, which the Plaintiff testified was for a meal between himself, his wife, Popov, and Popov’s wife.
[80] It is useful at this juncture to consider the specific criticisms made by the Defendant against the Plaintiff’s entertainment expenses.
(a) First, the Defendant submits that there was no need to entertain potential suppliers (eg, Mr Lomkin from the International Potash Company) as the Defendant's business model was one which relied on the Phosagro Group entirely for its supplies. Against this, the Plaintiff’s position was that this business model was unviable and that the Defendant should look towards diversifying. The Plaintiff was simply trying to keep the option of diversifying alive.
(b) Second, the Defendant also questioned why the Plaintiff was entertaining business people from countries in which the Defendant had no business in, and from industries which are unrelated to the Defendant’s business (eg, an oil and gas company in Kazakhstan). The Plaintiff’s response to that criticism is simply that he thought it important to develop and maintain relationships with important business people who may be useful for the Defendant’s business in future.
[81] The disagreements between the Plaintiff and Defendant described above were representative of the disagreements that surfaced throughout the trial. In short, the Plaintiff and the owners of the Defendant seemed to have rather different ideas about the direction in which the Defendant’s business should be developed, and how it should be run. In the absence of evidence to the contrary, I accept that the Plaintiff was indeed meeting business partners as described above, and that he genuinely believed that those meetings were beneficial for the Defendant’s business in future. Indeed, much of his entertainment expenses and meetings in Category C, as well as his hotel expenses in Category F (as will be discussed below), were also premised on this belief.
[82] While the Defendant may not agree with the Plaintiff’s vision for the company, and while this certainly eventually led (in part at least) to the Plaintiff’s dismissal, in my view, this difference is not sufficient to render these entertainment expenses “unreasonably incurred” under cl 12 of the Employment Contract. Popov did give evidence that the Plaintiff was expressly allocated certain markets by the Phosagro Group (ie, Asian markets and not markets like Kazakhstan) and was told not to purchase non-Phosagro products for the Defendant’s business because of quality control issues. However, no written evidence to this effect was produced to the court. Indeed, the Plaintiff’s position when questioned by the court was that there was no resolution or direction from the shareholders or management that the Plaintiff was to focus only on a particular business direction. In the absence of such, the Plaintiff was of the view that as managing director, he had the liberty to look ahead and do what he deemed necessary to keep the business competitive.
[83] Given the absence of company regulations or any written board resolutions (or the equivalent) restricting the scope of entertainment the Plaintiff may carry out (or indeed, the amounts he may incur in the course of entertainment) as managing director of the Defendant or limiting the business opportunities he may explore, I am of the view that he was given significant liberty to entertain present and potential business partners. While Popov did testify that the Plaintiff’s mandate to explore markets and business opportunities was limited, the absence of actual documentary evidence of this or evidence from the shareholders who issued this limitation is conspicuous. In the absence of better evidence, I am unable to conclude that the Plaintiff’s expenses at [79(a)] and [79(b)] – and indeed other similar expenses which the Defendant objects to on the ground that it exceeded the mandate the Plaintiff was given – were wrongful.
[84] The expense at Imperial Treasure raises a more difficult question. The Plaintiff justifies this as a company dinner that is beneficial to the Defendant as it maintains a good relationship between the managers. While I can appreciate the incredulity the Defendant’s counsel expressed when questioning the Plaintiff about whether he can expect the Defendant to pay for a meal he enjoys with his wife, Popov and Popov’s wife, I also accept that the Plaintiff genuinely views the meal between the directors of the company as a legitimate company expense.
[85] While there is no provision in the Employment Contract that entitles the Plaintiff to claim for a meal between himself and Popov, hosting a meal for the directors of the company may be viewed as a company expense (in the same way buying water or snack supplies for the company might be). Popov had been sent to Singapore by the Phosagro Group to serve on the Defendant’s board. The Plaintiff and Popov were the key office holders in Singapore and had only relatively recently started working together. On balance, I find that in the absence of specific company regulations to the contrary, the Imperial Treasure meal can be justified as a business expense on the particular facts of this case.
Category F
[86] The claims in Category F relate to expenses at hotels in Singapore. The Defendant submits that it should not be made to pay for the Plaintiff’s personal hotel stays in Singapore. However, the Plaintiff testified that these hotel expenses were never spent on a personal stay for himself or his family. Rather, they were always spent on hosting actual or potential business partners who came to Singapore.
[87] I do not find it necessary to go through each claim that the Plaintiff was cross-examined on. Suffice to say, I find that there is insufficient evidence to prove that these claims were wrongful. The Plaintiff has managed, prima facie, to give reasonable explanations for each hotel expense he was questioned about. In the absence of further evidence to undermine the Plaintiff’s testimony, I am unable to conclude that these were wrongful claims made by the Plaintiff.
[88] I acknowledge that the Defendant’s ultimate owner, the Phosagro Group, may not have agreed with the types of business opportunities the Plaintiff was exploring. However, in the absence of evidence to prove that the Plaintiff’s mandate was clearly limited and communicated to him, and in the absence of better evidence from the shareholders themselves, I am unable to find that the Plaintiff’s entertainment and hosting claims were wrongful.
Category G
[89] The claims in Category G relate to taxi expenses incurred by both the Plaintiff and his family. The Plaintiff explained that under cl 10 of the Employment Contract, the Defendant was obliged to provide the Plaintiff with a motor car “for the discharging his employment obligations and private use”. Thus, some of the taxi claims made related to his family’s expenses when the car was not available for their private use.
[90] In relation to Category G claims, I find that the Plaintiff was not entitled to claim for taxi travel given that the Defendant had already paid for his private car. Clause 10 of the Employment Contract clearly stipulates that he shall be provided with “a motor car”, implying a single car. This was provided by the Defendant throughout the Plaintiff’s employment (initially, by the Defendant bearing the expense of the Plaintiff’s existing car, and subsequently, by the Defendant paying for the purchase of a new Mercedes Benz car that the Plaintiff used). While the private car provided may be used for both business and private purposes, the Employment Contract did not require the Defendant to bear all the transport expenses of the Plaintiff’s whole family. The Plaintiff thus was not entitled to claim for his and his entire family’s transport expenses. Therefore, I find that the counterclaim in respect of the Category G claims succeeds.
Category H
[91] There are two claims under Category H: first, the payment made to BNP Paribas, and second, the payment made to Fincastle Trading Limited.
BNP Paribas
[92] The Plaintiff was not cross-examined on the payment made to BNP Paribas. Popov’s affidavit evidence is that the Plaintiff failed to close the BNP Paribas overdraft facility, incurring unnecessary charges for the Defendant. The Plaintiff however claims that the sums due to BNP Paribas are incurred in the use of the electronic banking system and that he did take steps to close the overdraft account after receiving approval from Mr Alexandra Sharabaiko (“Sharabaiko”), the Chief Financial Officer of the Phosagro Group, to do so.
[93] The evidence shows that there were communications between the Plaintiff and Sharabaiko about closing the BNP Paribas account. However, while the Plaintiff asserts that steps were taken to close the account, there is at best slim evidence of the steps taken by him to do so. In his AEIC, the Plaintiff exhibited an email from Christine Kor, an employee of the Defendant, to himself dated 19 September 2013, containing a letter in the Plaintiff’s name to one Mr Christian Salatko from BNP Paribas indicating the Defendant’s intention to close the BNP Paribas account. However, this is clearly only an internal email between Christine Kor and the Plaintiff. There is no evidence that this letter was sent out. Short of that, I am not convinced that the Plaintiff has demonstrated that he took steps to close the BNP Paribas account.
[94] Indeed, Popov gives evidence in his AEIC that as of 28 March 2014, the BNP Paribas account was in a “pre-close status” because outstanding charges were not settled. Popov then had to take steps to effect the closure of the account, which was finally executed on 25 April 2014.
[95] On balance, I accept that the Plaintiff had failed to take steps to close the BNP Paribas account even though he was instructed to do so. Having said that, this in my view is at best evidence of some carelessness on the Plaintiff’s part. And even then, the Plaintiff’s carelessness is not clearly established on the evidence as the Plaintiff was never given a chance to explain why he never ultimately effected the closure of the BNP Paribas account despite evidence that he had taken some very preliminary steps to do so. An assessment of whether the Plaintiff was careless in light of this omission must surely be assessed with reference to what a reasonable director in the Plaintiff’s position with the demands facing the Plaintiff at that time might have done. The surrounding facts have not been sufficiently explored for me to come to a proper determination on this point.
[96] Nevertheless, even if the Plaintiff was careless, it does not render the sums paid by the Defendant to BNP Paribas a charge that should be borne by the Plaintiff – it is still a company expense. I note that the Defendant does not plead for losses arising from the Plaintiff’s negligence. Short of that, I find that the charges relating to the BNP Paribas account are company expenses.
Fincastle Trading Limited
[97] It is undisputed that a payment of S$209,601.63 was made by the Defendant to a company called Fincastle Trading Limited on the instructions and authorisation of the Plaintiff. I start by summarising the evidence that was given at trial on the Fincastle Trading Limited payment:
(a) The Plaintiff is the sole shareholder of Fincastle Trading Limited.
(b) The Plaintiff testified that Guryev knew that he was the sole shareholder of Fincastle Trading Limited. Moreover, he testified that Popov, Sereda and Sharabaiko knew about the payment made by the Defendant to Fincastle Trading Limited.
(c) The Plaintiff initially testified that the payment to Fincastle Trading Limited was payment for market consultancy and trade related services. However, on re-examination, the Plaintiff clarified or added that the payment was part of his bonus for the year. The Plaintiff however claimed that it was unclear whether the payment related to the guaranteed bonus due to the Plaintiff annually, or to the discretionary bonus the Defendant may give the Plaintiff under the Employment Contract.
(d) Popov testified that the payment to Fincastle Trading Limited was part of the payment of the Plaintiff’s guaranteed annual bonus. Indeed, Popov admits that he received a similar bonus payment via the company, Zeylon Management Limited. However, Popov explained that he considered the payments to Fincastle Trading Limited and Zeylon Management Limited unauthorised at the time of payment because those payments were paid out without approval from Phosint Trading Limited or the Phosagro Group. Popov testified that he did not feel comfortable about the bonus payments at that time, and hence officially stated that the payment to Zeylon Management Limited was his bonus payment sometime in 2014, and sought official approval from the shareholders. The Plaintiff however did not do the same.
[98] On balance, I do not find that the payment to Fincastle Trading Limited was wrongful. The evidence from both the Plaintiff and Popov is that the payment was made to the Plaintiff as part of his annual bonus. If so, the Plaintiff must be entitled to it. While there is some suggestion in Popov’s evidence that the payments were not properly authorised by the shareholders at the time they were made, no evidence of regulations governing the obtaining of authorisation for the payment of bonuses or related corporate governance regulations were adduced. Indeed, the evidence suggests the corporate controls imposed by the shareholders on the Defendant’s directors were almost non-existent. As such, I find that there is insufficient evidence to justify a finding that the payment to Fincastle Trading Limited was unauthorised at the time it was made. Indeed, I accept the point made by the Plaintiff’s counsel during his cross-examination of Popov that the Defendant has failed to call the officers of the Phosagro Group to dispute the Plaintiff’s assertion that he informed Guryev, Sharabaiko and Sereda about the payment to Fincastle Trading Limited. In any event, even Popov now accepts that the Fincastle payment was made to the Plaintiff as part of his bonus.
[99] I also find that the bonus was part of the Plaintiff’s guaranteed annual bonus. The Plaintiff was equivocal on this, saying it was never clearly stated which part of his bonus this payment belonged to, but Popov took the clear position that the bonus was part of the Plaintiff’s guaranteed bonus. On balance, while the evidence does not allow for a clear finding of fact, I find that the payment to Fincastle Trading Limited was part of the payment of the Plaintiff’s guaranteed annual bonus (just as the payment to Zeylon Management Limited was part of Popov’s guaranteed annual bonus).
Summary on wrongful claims
[100] The Counterclaim includes the following prayers:
(a) The sum of S$499,719.20;
(b) An order for account on the sum of S$499,719.20;
(c) An order for payment by the Plaintiff to the Defendants on all sums found due on the taking of an account; and
(d) Damages
[101] I now summarise my findings and decision in relation to the Defendant’s counterclaim. The Defendant’s counterclaim succeeds in respect of:
(a) The claims in Category A totalling S$100,340.40. These are the expenses that the Plaintiff accepts are outside his entitlement and which he is bound to repay.
(b) The claims in Category B. These are expenses said to have been incurred prior to the commencement of the contract with the Defendant.
(c) The claim for the St Regis spa service and other related spa services and treatments in Category D.
(d) The claims in Category G for taxi services.
[102] The sum of S$499,719.20 is the total amount of alleged unauthorised expense claims. It follows that the Defendant has only partially succeeded on its counterclaim as summarised in [101] above.
[103] I conclude this part of my judgment on the counterclaim with three final observations. First, while I have found on the facts that the Plaintiff did make a substantial number of wrongful claims, I accept that in most cases, the Plaintiff genuinely believed that he was entitled to make the claims. While I have disagreed with some of the Plaintiff’s reasons (for example why he thought it proper to claim for spa services, or taxi claims), I find on balance that the Plaintiff was not knowingly making wrongful claims against the Defendant.
[104] Second, whilst I have found that some of the items (expense claims) examined within Category D fell outside what he was entitled to (for example the spa claim), I am not able to draw an inference that all the other expense claims within that Category must also necessarily be wrongful. For example, I noted earlier that under Category D, complaint was also made of the expense claim of S$3,140.55 for telephone and broadband services. This was not touched on in the oral evidence. The Plaintiff of course denies that this is a personal expense that he is not entitled to claim. Indeed, whilst the matter was not traversed at trial or in submissions, I note that cl 8 of the Employment Contract states that the Defendant will pay the employee’s utility bills. The question as to what is meant by utility bills was not touched on in the evidence or the submissions. Whilst the Defendant has taken the general position that the burden falls on the Plaintiff to explain each and every expense claim and to show why the claim was proper, the Plaintiff has indeed been able to give a response to many of the expense claims when questioned under cross-examination. Moreover, given that the Defendant is the party asserting that expense claims were wrongfully made, the burden is naturally on it to prove its assertion.
[105] Third, the difficulty that the parties had in the trial in marshalling evidence and examining each and every expense claim challenged illustrates the weakness of the expense accounting practice that the Plaintiff asserts was followed at Asiafert and carried over to the Defendant. If expense claims had to be justified as and when presented (and before payment) the room for subsequent dispute and misunderstanding would be much reduced (although not avoided entirely).
[106] That said, as noted already, the owners of the Phosagro Group must have been aware that the Plaintiff was claiming (significant) monthly expenses (even if they did not know of the details at the time). Further, it is also clear that the new owners did not implement new rules or regulations regarding expense claims at or after the time when Asiafert was bought and renamed the Defendant. It also appears that whilst disagreements as to management direction etc arose later, the Phosagro Group was, by and large, content to leave the day-to-day running of the Defendant in the hands of the Plaintiff and Popov.
[107] It stands to reason that senior management with broad areas of responsibility will incur or generate considerable legitimate expenses in connection with the company’s business. Depending on the terms of the contract, the range of “perks” such as housing, school expenses for children etc will vary and may come to a considerable amount. Whilst the expense claims made are large, it is clear the Plaintiff only claimed a small fraction of his weekly or monthly expenses from the Defendant. The Plaintiff testified that his total personal expenses were in fact very much larger than what is in issue.
Issue 2: Contractual basis for the Primary Claim
[108] The main ground for the Plaintiff’s Primary Claim is cl 2 of the Employment Contract, which states “the employment shall commence on 1 March, 2013 for the period of three years having the option to be renewed…” [emphasis added]. The Plaintiff submits that terminating the contract before the three-year period expired amounted to a breach of cl 2.
[109] The Defendant on the other hand submits that the Employment Contract clearly contemplated both parties having the contractual right to terminate the contract before the expiry of three years.
[110] In cl 2 itself, consequences for terminating the contract “before expiry of it’s [sic] validity” are stipulated. Similarly, cl 14 states “if the employee is terminated or resigns prior to the completion of his contractual period, annual salary as one-off payment to be settled in full, should the contract is [sic] terminated before expiry of its validity”.
[111] From cll 2 and 14 of the Employment Contract, it is clear that terminating the contract prior to the expiry of the three-year term is not a breach of contract without more; the contract expressly allows it. There is no contractual obligation on either party to ensure the employment relationship lasts for a period of three years. Consequently, the Plaintiff’s claim for the salary and bonuses he would have earned during the remaining two years of the Employment Contract’s validity but for the termination must fail.
[112] The setting out of a term (period) of employment does not preclude a party from terminating the contract prior to the expiry of that period in accordance with the contract provisions. The purpose of stating a period is to delineate how long the contract governs the relationship between the parties. This is important if the parties desire the contract to naturally expire at some point (by effluxion of time), rather than to “end” only when either party terminates it. Of course, it is possible to draft a contract such that both parties may not terminate the contract (without being in breach) prior to the expiry of a stated period. Whether this is the case depends on the construction of the particular contract. In the present case, the Employment Contract clearly envisions contractual termination prior to the expiry of the three-year term, and stipulates the consequences that follow.
[113] It must follow that there are no grounds for the Plaintiff to claim two years’ worth of salary and bonuses under the contract on the basis the Defendant was contractually obliged to employ him for the full three-year term. The most the Plaintiff is entitled to under the contract, leaving aside the question of any accrued bonus, is “100% annual salary” as a one-off payment and three months’ salary in lieu of notice. That said, I also note that there is a question as to whether the Defendant had the option to pay salary in lieu of notice. This is discussed later.
[114] I therefore proceed on the basis that the Primary Claim must fail, leaving only the Secondary Claim to be considered.
Issue 3: Legal principles governing the termination of an employment contract
[115] The general principles of the law of contract apply to employment contracts as well: Ravi Chandran, Employment Law in Singapore (LexisNexis, 4th Ed, 2014) (“Employment Law in Singapore”) at para 6.1.
[116] To clarify the legal backdrop, it will be helpful to discuss briefly the following (in the context of the facts that have arisen): (i) how a right to termination may arise; (ii) the exercise of the right to termination; and (iii) the consequences or effects of termination (ie, the parties’ respective rights and obligations following termination).
How a right to termination may arise
[117] It is well-established that a contract may be terminated by one party either in accordance with the contractual provisions therein (ie, by virtue of the agreement), or under common law following a repudiatory breach by the other party. The same principle applies to employment contracts: Employment Law in Singapore at para 6.1.
[118] In the present case, the Defendant claims a right of termination pursuant to the contractual agreement. It has also asserted a right of termination under common law pursuant to the Plaintiff’s repudiatory breach. It is therefore appropriate to consider the legal principles governing how these rights arise.
A right to terminate under contract
[119] It is well-established that parties may provide for termination clauses in employment contracts which allow the employer or the employee to terminate the employment relationship by giving the other contractual notice. Termination on this basis does not depend on any prior breach of contract at all: The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 2012) (“The Law of Contract in Singapore”) at para 18.024.
[120] Provided that the party exercising the contractual right to terminate complies with the provisions governing the exercise of the contractual right, the terminating party is not in breach of contract. The contract may also stipulate certain consequences upon the exercise of the contractual right of termination.
[121] In the present case, the right to contractually terminate the contract before the expiry of the three-year term may be found at cll 2 and 14 of the Employment Contract.
[122] Pursuant to cll 2 and 14 of the Employment Contract, an employer seeking to terminate the employment contract must give three months’ notice to the employee and must pay the employee a full year’s salary as a one-off payment should it terminate the contract before its expiry.
[123] Where a contract is terminated in accordance with its own terms, and the contract specifies that the other party (ie, the one who did not elect to terminate the contract) is entitled to certain sums of money upon termination, those sums of money will be due to the said party as a contractual debt. The claim is said to be for a debt arising under the contract, rather than for damages pursuant to a breach of contract (indeed there may not even have been a breach). The significance of this point will be addressed later.
The common law right to terminate following a breach
[124] Regardless of whether the contract expressly provides for its own termination, parties may also acquire a right to terminate a contract under common law. It is axiomatic that not all contractual breaches give the innocent party a right to terminate the contract: Sports Connection Pte Ltd v Deuter Sports GmbH [2009] 3 SLR(R) 883 (“Sports Connection”) at [23]. Only repudiatory breaches provide the innocent party with a right of election: to choose whether to “accept” the repudiatory breach so as to discharge the contract thereby bringing it to an immediate end (ie, to terminate the contract), or to “reject” the repudiatory breach thereby keeping the contract “on foot”: The Law of Contract in Singapore at para 17.006.

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Piattchanine, Iouri v Phosagro Asia Pte Ltd

Laws this judgment relies on

Grounds of decision

Background facts

Share purchase agreement

The Plaintiff’s employment contract

The management of the Defendant

Breakdown of the relationship between the Plaintiff and Defendant

The Plaintiff’s termination

The parties’ respective claims and positions

Plaintiff’s claims

Total: S$1,946,400.00 (“the Primary Claim”)

(a) Salary for three months’ notice amounting to S$141,900.00

Total: S$1,236,900.00 (“the Secondary Claim”)

Defendant’s counterclaim

Issues

(a) What are the grounds and reasons relied upon by the Defendant at the time of termination, ie, 28 February 2014?

(b) What is the relevance of the 18 March 2014 Letter?

Issue 1: Extent of wrongful claims and payments

Category B

Category C

Category D

Category E

Category F

Category G

Category H

BNP Paribas

Fincastle Trading Limited

Summary on wrongful claims

(d) Damages

Issue 2: Contractual basis for the Primary Claim

Issue 3: Legal principles governing the termination of an employment contract

How a right to termination may arise

A right to terminate under contract

The common law right to terminate following a breach