On receipt of the letter Lim left the office of Ong. Nothing more was heard from Lim until Lim's solicitors wrote to H alleging that the notice of termination of employment was defective. Lim found employment several months later at a reduced salary.
At the trial, the judge found that it was due to a clerical error, the notice of termination was typed on the letterhead of H Malaysia. The Court rejected the contention of the of H that the notice was nevertheless valid as it was signed and handed over by Ong to Lim personally. The Court held that the notice was invalid on the ground that H Malaysia was a separate entity from H. The Court awarded Sim the sum of $24,000 being the salary he would have received from H for the period when Lim was unemployed. H appealed.
At the Court of Appeal, three main points were canvassed. First, that the notice issued to Lim was valid or alternatively sufficient notice of termination had in any event been given. Second, Lim had by conduct accepted the termination of employment. Third, the amount of damages awarded to Lim was excessive.
On the first point the Court of Appeal agreed with the judge that the notice issued to Lim was of no effect and did not bring about a termination of Lim's employment with H. Clause 7.01 of the employment agreement expressly provided that the employment may be terminated by H giving one month's written notice to Lim. The notice purportedly issued to Lim was not issued by H but by a completely different entity, H Malaysia, with whom Lim had no contractual relationship whatsoever. The notices were defective not just on account of the use of a wrong letterhead but also because Ong did not issue the notice on behalf of H but on behalf of H Malaysia. The effect might have been different if Ong had issued the notice on behalf of H, though the letterhead used was that of H Malaysia. The Court of Appeal decided that no valid written notice of termination was given by H to bring to an end the employment contract.
The second point raised by H was this: that even if the notices were invalid, Lim had by his conduct accepted the termination of his employment. H relied on the fact that the Lim did not turn up for work after the meeting with Ong in Malaysia. The Court of Appeal felt that was reading far too much into Lim's conduct which was brought about by the H's operations manager telling Lim not to turn up for work for the next one month but to keep themselves contactable for assignments. What could Lim do? He could not be expected to barge into H's office in Singapore when he had been told not to do so? The fault for the defective notice lay with H. A party who wishes to exercise a right under a contract must do so in accordance with its terms. It does not lie in the mouth of a party to say that as the other party did not object he must be deemed to have accepted the notice. In a contractual relationship, he parties could by word or conduct vary the terms of a contract. But there must be clear proof that there was such an intention to vary the terms. There was really nothing in the conduct of Lim which showed that he had unequivocally accepted the termination. On the contrary, there was evidence that he was not happy and consulted his solicitors for advice.
Turning to the third question, it was true that after the Meeting, H had nothing to do with Lim. H had effectively repudiated the employment contract with Lim and had Lim excluded thereafter. In those circumstances what then would be the correct measure of damages for the wrongful dismissal? The normal measure is the amount the employee would have earned under the contract for the period until the employer could lawfully have terminated it, less the amount he could reasonably be expected to earn in other employment. If the contract expressly provides that it is terminable upon say a month's notice, the damages will ordinarily be a month's wages. These principles were recently re-stated in the case of Gunton v Richmond-Upon-Thames London Borough Council where the judge said:
Where an employee has been wrongfully dismissed, he is entitled, subject to mitigation, to damages equivalent to the wages he would have earned under the contract from the date of dismissal to the end of the contract. The date the contract came to an end must be ascertained on the assumption that the employer would have exercised any power he may have had to bring the contract to an end in the way most beneficial to himself; that is to say, that he would have determined the contract at the earliest date at which he could properly do so. If an employer who is entitled to dismiss a servant on not less than three month's notice, wrongfully purports to dismiss the servant summarily, the dismissal, being wrongful, is a nullity and the servant can recover as damages for breach of contract three month's remuneration and no more, subject to mitigation; that is to say, remuneration for the three months following the summary dismissal.
If the employer wrongfully dismisses the servant on a month's notice and continues to employ him and pay him during the month, no breach occurs until the employee is excluded from his employment until the end of the month, in which case he is entitled, subject to mitigation, to damages equivalent to three month's remuneration from the date of exclusion. If the employer were to pay the employee one month's remuneration in lieu of notice and were to exclude him from his employment forthwith, there would be an immediate breach of contract by the employer; the employee would be entitled to three month's remuneration by way of damages, but would have to give credit for the one month's remuneration paid in lieu of notice.
Under cl 7.01 all that H needed to bring about a lawful termination of each of the contracts of employment was to give a month's notice or pay a month's salary in lieu of notice. That was all the quantum of damages which Lim was entitled to. As the last drawn monthly salary of Lim was $4,180, the Court of Appeal accordingly reduced the amount of damages awarded to Lim to that amount. The Court of Appeal ruled that the judge was in error to hold that until Lim had accepted the repudiation by taking up other employment, he was entitled to all his salary for that period as dama ges. The refusal by an employee to accept a repudiation by the employer cannot enhance the quantum of damage the employer is liable to pay in accordance with the terms of the contract of employment.
(This case is adapted from a reported decision of the Singapore Courts)
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