Cheah Peng Hock v Luzhou Bio-Chem: Constructive Dismissal & Breach of Mutual Trust

In Cheah Peng Hock v Luzhou Bio-Chem Technology Limited, the High Court of Singapore heard a claim by Mr. Cheah Peng Hock against Luzhou Bio-Chem Technology Limited for constructive dismissal. Mr. Cheah, formerly the CEO, alleged that the company breached an implied term of mutual trust and confidence, leading to his resignation. The court, presided over by Justice Quentin Loh, found in favor of Mr. Cheah, concluding that Luzhou Bio-Chem had indeed breached the implied term, thereby constructively dismissing him. The court awarded Mr. Cheah RMB 8,580,000 in damages and dismissed the defendant's counterclaims.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Cheah Peng Hock sued Luzhou Bio-Chem for constructive dismissal. The court found Luzhou Bio-Chem breached the implied term of mutual trust and confidence.

1.7 Decision Date

5 February 2013

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Cheah Peng Hock	Plaintiff	Individual	Judgment for Plaintiff	Won	Hee Theng Fong of M/s RHT Law LLP Lin Ying Clare of M/s RHT Law LLP
Luzhou Bio-Chem Technology Limited	Defendant	Corporation	Counterclaims Dismissed	Lost	Yuen Djia Chiang Jonathan of Harry Elias Partnership LLP James Lin Zhurong of Harry Elias Partnership LLP Audrey Li of Harry Elias Partnership LLP

3. Judges

Judge Name	Title	Delivered Judgment
Quentin Loh	Judge	Yes

4. Counsels

Counsel Name	Organization
Hee Theng Fong	M/s RHT Law LLP
Lin Ying Clare	M/s RHT Law LLP
Yuen Djia Chiang Jonathan	Harry Elias Partnership LLP
James Lin Zhurong	Harry Elias Partnership LLP
Audrey Li	Harry Elias Partnership LLP

4. Facts

Cheah Peng Hock was employed as CEO of Luzhou Bio-Chem Technology Limited.
Cheah Peng Hock implemented changes to the company's organizational structure.
Niu Jixing, the managing director, appointed himself as joint-CEO.
Cheah Peng Hock was excluded from meetings and decision-making processes.
Cheah Peng Hock's company car was withdrawn.
Cheah Peng Hock's email account was deactivated.
Cheah Peng Hock's office was taken over by Niu Jixing.
Cheah Peng Hock's changes to the organizational structure were reversed.

5. Formal Citations

Cheah Peng Hock v Luzhou Bio-Chem Technology Limited, Suit No 821 of 2010, [2013] SGHC 32

6. Timeline

Date	Event
1988-01-01	Luzhou Bio-Chem Technology Limited founded.
1994-01-01	Luzhou Bio-Chem Technology Limited listed in China.
2006-02-24	Luzhou Bio-Chem Technology Limited listed on the Singapore Stock Exchange.
2008-03-01	Luzhou Bio-Chem Technology Limited's principal corporate office moved to Beijing.
2009-01-05	Cheah Peng Hock started work as a part-time consultant for Luzhou Bio-Chem Technology Limited.
2009-02-01	Cheah Peng Hock approached to take on new role as CEO.
2009-02-25	Letter of authority issued to Cheah Peng Hock.
2009-03-30	Letter of authority issued to Cheah Peng Hock.
2009-03-01	Cheah Peng Hock became acting CEO.
2009-05-04	Sales and management meeting held.
2009-05-11	Board of Directors Remuneration Committee met to discuss the role of the CEO.
2009-05-21	Memo released regarding the role of the CEO.
2009-06-01	Employment Agreement entered into between Cheah Peng Hock and Luzhou Bio-Chem Technology Limited.
2009-08-08	Series of unofficial meetings conducted by Niu Jixing.
2009-08-12	Board Meeting held.
2009-08-12	Meeting with the directors and managers of all centres held.
2009-08-18	Decision made to reverse Cheah Peng Hock’s changes.
2009-08-19	Reversal announced at a key management team meeting.
2009-08-20	Niu Jixing moved into Cheah Peng Hock’s office.
2009-08-20	Cheah Peng Hock found himself unable to log into his email account.
2009-08-24	Cheah Peng Hock sent in a notice of termination.
2009-09-03	Cheah Peng Hock sent an email to the Board of Directors setting out his allegations.
2010-10-25	Cheah Peng Hock issued proceedings claiming contractual damages.
2013-02-06	Judgment reserved.

7. Legal Issues

Constructive Dismissal
- Outcome: The court found that the defendant had constructively dismissed the plaintiff.
- Category: Substantive
- Sub-Issues:
  - Breach of implied term of mutual trust and confidence
  - Repudiatory breach of contract
  - Unauthorised changes to organisational structure
  - Exclusion from meetings
  - Discontinuing of email
  - Removal of company car
  - Removal of office
  - Reversal of changes
- Related Cases:
  - [1978] QB 761
  - [1988] 1 MLJ 92
  - [2005] 4 SLR 344
  - [1998] SGHC 208
Breach of Implied Term of Mutual Trust and Confidence
- Outcome: The court held that the defendant breached the implied term of mutual trust and confidence.
- Category: Substantive
- Sub-Issues:
  - Undermining employee's position
  - Failure to consult employee
  - Exclusion from decision-making processes
- Related Cases:
  - [2011] SGHC 161
  - [1998] AC 20

8. Remedies Sought

Contractual Damages

9. Cause of Actions

Breach of Contract
Constructive Dismissal

10. Practice Areas

Commercial Litigation
Employment Disputes

11. Industries

Bio-Chemical

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Western Excavating (E.C.C.) Ltd v Sharp	N/A	Yes	[1978] QB 761	N/A	Cited for the test for constructive dismissal.
Wong Chee Hong v Cathay Organisation (M) Sdn Bhd	N/A	Yes	[1988] 1 MLJ 92	N/A	Cited for the principle of constructive dismissal.
Tullet Prebon (Singapore) Ltd v Chua Leong Chuan Simon	High Court	Yes	[2005] 4 SLR 344	Singapore	Cited for the acceptance of constructive dismissal outside any statutory context.
Ramzi Toufic Fares v Aidec Management Company Pte Ltd	High Court	Yes	[1998] SGHC 208	Singapore	Cited for the application of the doctrine of constructive dismissal in the common law context.
Chan Miu Yin v Philip Morris Singapore Pte Ltd	High Court	Yes	[2011] SGHC 161	Singapore	Cited for the assumption that an implied term of mutual trust and confidence is part of Singapore law.
Aldabe Fermin v Standard Chartered Bank	N/A	Yes	[2010] 3 SLR 722	N/A	Cited for the principle that an employment contract is not a commercial contract.
Wong Leong Wei Edward & Anor v Acclaim Insurance Brokers Pte Ltd	High Court	Yes	[2010] SGHC 352	Singapore	Cited for the principle that an employee owes his or her employer a duty of good faith and fidelity.
Rickshaw Investments Ltd & Anor v Nicolai Baron von Uexkell	N/A	Yes	[2007] 1 SLR(R) 377	N/A	Cited for the principle that an employee owes his or her employer a duty of good faith and fidelity.
Man Financial (S) Pte Ltd v Wong Bark Chuan David	N/A	Yes	[2008] 1 SLR(R) 663	N/A	Cited for the principle that an employee owes his or her employer a duty of good faith and fidelity.
Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney	New South Wales Court of Appeal	Yes	[2008] NSWCA 217	Australia	Cited for the use of mutual trust and confidence as a synonym for a good faith obligation.
Johnson v Unisys Ltd	N/A	Yes	[2003] 1 AC 518	N/A	Cited for the implied duty of mutual trust and confidence has also been likened to good faith.
Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd	N/A	Yes	[1991] 1 WLR 589	N/A	Cited for describing the implied term of mutual trust and confidence as an “implied obligation of good faith”.
Ng Giap Hon v Westcomb Securities Pte Ltd and others	Court of Appeal	Yes	[2009] SGCA 19	Singapore	Cited for the caution against too readily implying a term in law.
Walker v Citigroup Global Markets Australia Pty Ltd	N/A	Yes	[2006] FCAFC 101	Australia	Cited for the duty of good faith has more often been applied to the formation of the employment agreement and used as a tool of interpretation to read down more onerous clauses.
Malik v Bank of Credit and Commerce International S.A. (In compulsory liquidation)	N/A	Yes	[1998] AC 20	N/A	Cited for the duty of mutual trust and confidence has been consistently applied even before it was accepted by the House of Lords.
Johnstone v Bloomsbury H.A.	N/A	Yes	[1990] 1 QB 333	N/A	Cited for the principle that express terms may modify the scope of the implied term.
Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd	N/A	Yes	[2006] 3 SLR(R) 769	N/A	Cited for the inherent risk of terms implied in law necessarily involving a measure of uncertainty.
Post Office v Roberts	N/A	Yes	[1980] IRLR 347	N/A	Cited for the implied term of mutual trust and confidence has been applied in constructive dismissal cases.
Woods v W.M. Car Services (Peterborough) Ltd	N/A	Yes	[1982] ICR 693	N/A	Cited for the implied term of mutual trust and confidence has been applied in constructive dismissal cases.
McCabe v Cornwall County Council and another	N/A	Yes	[2005] 1 AC 503	N/A	Cited for the difficulties of the Johnson approach.
Omilaju v Waltham Forest London Borough Council	N/A	Yes	[2005] ICR 481	N/A	Cited for the “last straw” doctrine.
Lewis v Motorworld Garages Ltd	N/A	Yes	[1986] ICR 157	N/A	Cited for the question is, does the cumulative series of acts taken together amount to a breach of the implied term?

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Employment Act	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Constructive dismissal
Implied term of mutual trust and confidence
Repudiatory breach
Joint-CEO
Organisational structure
Management autonomy
Board approval
Unauthorised changes
Exclusion from meetings
Company car
Email account
Office
Reversal of changes

15.2 Keywords

constructive dismissal
employment law
breach of contract
CEO
Singapore
Luzhou Bio-Chem
Cheah Peng Hock

17. Areas of Law

Area Name	Relevance Score
Employment Law	95
Constructive Dismissal	90
Breach of Contract	75
Implied Terms	70
Repudiation	65
Contract Law	60
Wrongful Repudiation	55
Interpretation of contractual terms	50
Corporate Law	30
Business Litigation	25

16. Subjects

Employment Dispute
Constructive Dismissal
Breach of Contract