Can an Employer Summarily Terminate an Employee’s Employment for Breaches of His or Her Employment Contract, Whilst the Employee is Whistleblowing?

Uday Mehra v L Capital Asia Advisors, L Capital (HK) Limited, Ravi Thakran & Nauman Hasan [2022] SGHC 23*

1. Introduction

The Singapore High Court recently issued its judgment in Uday Mehra v L Capital Asia Advisors, L Capital (HK) Limited, Ravi Thakran & Nauman Hasan (“Uday Mehra v L Capital Asia Advisors and Ors”). The judgment contains important guidance on employer-employee disputes in Singapore law, and particularly on the scopes of employees’ duty of confidence to their employers and the implied term of mutual trust and confidence in employment contracts.

2. Factual Background

The Plaintiff, Mr Uday Mehra (“Mr Mehra”), was the former employee of the first two defendants, L Capital Asia Advisors and L Capital (HK) Limited (collectively, the “LCA Group”). The LCA Group raised, managed and invested private equity funds. The third defendant, Mr Ravi Thakran (“Mr Thakran”) was the founder and chairman of the LCA Group. The fourth defendant, Mr Nauman Hasan (“Mr Hasan”), was an HR executive of LVMH Moet Hennessy Louis Vuitton SE (“LVMH”), which was the ultimate owner of the LCA Group.

The LCA Group employed Mr Mehra from February 2012 to June 2015. Mr Mehra left his employment with a men’s fashion internet start-up in India called Zovi.com to join the LCA Group.

From 2014 – 2015, Mr Mehra’s relationship with the LCA Group broke down over the interpretation of Clause 3.1 of his employment contract, which provided that Mr Mehra would be awarded “2.5% carry for the next fund raised by L Capital Asia Advisors”. Mr Mehra thought this entitled him to a sum of US$37.5 million on the next fund raised by the LCA Group, whereas the LCA Group contended it only entitled him to an estimated US$4.77M. The dispute culminated in the LCA Group terminating Mr Mehra’s employment for wilful insubordination and misconduct.

Mr Mehra subsequently brought a lawsuit against the LCA Group alleging: (i) breach of Clause 3.1 of his employment contract by the LCA; (ii) fraudulent misrepresentation; (iii) breach of his employment contract by summary dismissal; (iv) a conspiracy on the part of the LCA Group, Mr Thakran and Mr Hasan to injure him by unlawful means; and (v) that the LCA Group’s summary dismissal of his employment without basis had stigmatised him in the labour market and caused him loss in future employment prospects.

The LCA Group in turn brought a counterclaim against Mr Mehra for breach of confidence due to his forwarding work-related emails from his work email account to his personal email account.

The Judge dismissed all of Mr Mehra’s claims. The Judge also found that Mr Mehra had breached his obligation of confidence to the LCA Group. Each of these claims is analysed below.

3. Mr Mehra’s claim that the LCA Group had promised him 2.5% of the gross profits of the next fund it raised

Mr Mehra contended that Clause 3.1’s provision that he would be awarded “2.5% carry for the next fund raised by L Capital Asia Advisors” meant 2.5% of the gross profits of the next fund raised by the LCA Group. Mr Mehra also alleged the LCA Group had promised him as much in a series of emails and phone conversations, which induced him to leave his employment with and valuable stock options at Zovi.com. Mr Mehra’s claim in breach of contract sought the share of the fund he claimed to be entitled to as a result of Clause 3.1 of his employment contract. His claim in fraudulent misrepresentation sought to recover the losses he claimed to have suffered when he gave up valuable stock options at Zovi.com to join the LCA Group on the faith of their alleged promise to pay him 2.5% of the gross profits of the next fund.

On the other hand, the LCA Group argued that Clause 3.1 of Mr Mehra’s employment contract only meant that he would be awarded 2.5% of the carry on the next fund it raised. The LCA Group further adduced expert evidence to argue that the phrase “carry” in the private equity industry commonly referred to 20% of the profits remaining after investors had been returned their capital and been paid an annual return of 8% on their capital.

The Judge held that the LCA Group’s interpretation was correct and that they had not breached Clause 3.1 of Mr Mehra’s employment contract. The Judge noted that both parties’ experts agreed the phrase “carry” referred to 20% of the fund’s profit that remains after costs have been paid, investors have received capital back and their agreed rate of return on their capital. He also observed that the phrase “gross profits” was never stated in Clause 3.1 of Mr Mehra’s employment contract.

The Judge also relied on an email that had been sent to Mr Mehra prior to his signing the employment contract which contained an estimate of the amount he would receive on the next fund (which was US$4.77M). This estimate was consistent with interpreting the phrase “2.5% carry” as a reference to 2.5% of the carry on the next fund and not 2.5% of the gross profits.

The Judge also dismissed Mr Mehra’s claim in fraudulent misrepresentation. He found that none of the phone calls or emails in which Mr Mehra claimed he had been promised 2.5% of the gross profits of the next fund had mentioned the word “gross profits.” The Judge also found that Mr Mehra was already negotiating a severance package with Zovi.com at the time discussion about what he would be awarded as his share of the next fund at the LCA Group took place. In the circumstances, the Judge found that Mr Mehra would have left Zovi.com regardless of whether or not the LCA Group fraudulently misrepresented that he would receive 2.5% of the gross profits on the next fund that the Group raised.

4. Mr Mehra’s Claim that the LCA Group Caused Him Stigma Loss by Summarily Dismissing Him

The LCA Group terminated Mr Mehra’s employment on 19 June 2015, alleging that Mr Mehra (i) repeatedly failed to report for work meetings; (ii) abstained from his primary place of work; (iii) ceased work altogether from March 2015; and (iv) placed pre-conditions on his continued work.

Mr Mehra claimed that none of the above conduct entitled the LCA Group to summarily dismiss him. He alleged that the LCA Group in fact engaged in a conspiracy by unlawful means with Mr Thakran and Mr Hasan to summarily dismiss him for his whistleblowing about several alleged irregular fund activities at the Group. He consequently sought damages consisting of 6 months’ salary which is what he would have received had he been terminated with notice.

Mr Mehra further claimed that the LCA Group’s summary dismissal of him breached the mutual implied term of trust and confidence between employer and employee by stigmatising him in the labour market. He sought damages for this amounting to US$43M.

However, the Judge found that the LCA Group was entitled to summarily dismiss Mr Mehra for his conduct at (i) – (iv) above and had not engaged in a conspiracy to injure him by unlawful means. The Judge decided that an employee who acted in the manner Mr Mehra had would have committed wilful misconduct and insubordination and a repudiatory breach of his employment contract.

The Judge also held that, on the facts of this case, the LCA Group’s decision to terminate Mr Mehra was not motivated by his whistleblowing, and his summary dismissal was therefore justified.

The Judge also dismissed Mr Mehra’s claim for stigma losses of US$43M that had allegedly been caused by the LCA Group vis-à-vis his future employment prospects. The Judge said that where an employee claims that an employer breached its implied term of trust and confidence by summarily dismissing him, the employee could only claim damages restricted to those flowing from breach of the contractual obligation to give notice. The employee could not claim damages for stigmatisation in the labour market unless he claimed the employer breached the implied term of trust and confidence in a manner other than summary dismissal, and there was a link between the employer’s breach and the losses said to have been caused to the employee in the labour market. An example would be where the employer carried on its business in a corrupt manner, thus stigmatising its employees’ reputations. Mr Mehra had brought no such claim in the present case.

5. Mr Mehra’s forwarding of work-related emails to his personal email account breached his obligation of confidence to his employer

Mr Mehra also sent work emails from his LVMH email account to his personal email account without the LCA Group’s knowledge and consent to seek legal advice on his claims against the LCA Group.

The Judge held that Mr Mehra’s doing so was a breach of confidence, given that the LCA Group emails had confidential information and the LCA Group had made it clear to Mr Mehra in the course of his employment and through his employment contract that he was being provided these documents only for the purposes of his employment. The Judge did not regard the fact Mr Mehra was seeking legal advice on these emails as adequate justification for his actions, pointing to the fact he could have obtained the documents by way of discovery in the litigation process that would follow.

6. Conclusion

Uday Mehra v L Capital Asia Advisors and Ors offers important guidance for future employment disputes. Employees in future will have to take care when sending work-related information home. They will also have to carefully consider claims brought on the implied term of trust and confidence, to ensure they can seek damages beyond those simply restricted to their contractual notice period.

*An article on Uday Mehra v L Capital Asia Advisors, L Capital (HK) Limited, Ravi Thakran & Nauman Hasan [2022] SGHC 23 written by Hamza Malik.