SC LLC is thrilled to have prevailed for our client against a large tech MNC in establishing that the implied term of mutual trust and confidence (“ITMTC”) exists in Singapore law.
In a landmark judgment, the Court held that the ITMTC exists under Singapore law after conducting a comprehensive analysis across Commonwealth jurisdictions. This is an important development given that recent cases had cast doubt on the ITMTC following Dong Wei v Shell Eastern Trading (Pte) Ltd [2022] 1 SLR 1318.
The Court’s reasoning was premised on three grounds. First, on precedent, Singapore Courts have consistently recognised the ITMTC since Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd [2013] 2 SLR 577. Second, on principle, the Court found the term sufficiently certain as (i) it requires extreme behavior satisfying a high threshold of conduct “calculated and likely to destroy or seriously damage” trust and confidence; (ii) impact is assessed objectively; and (iii) employers can justify actions where there is reasonable and proper cause. In any event, terms can be implied in law based on justice, fairness, and public policy. Third, on policy, the Court recognised that employment is a “relational contract” with inherent power imbalances making employees vulnerable.
The judgment clarified the ITMTC’s content. The Court confirmed that the duty not to behave in an intolerable or wholly unacceptable way falls within the ITMTC, adopting the formulation that “employers should not not behave in a way which is intolerable or in a way which employees cannot be expected to put up with any longer”. Importantly, whether conduct is intolerable is assessed objectively and not based on whether the employee subjectively found it intolerable or chose to resign.
On the facts, the Court found a breach where our client was placed on a Performance Improvement Plan (“PIP”) while the decision to terminate had already been made.The Court held that where a PIP does not provide a genuine opportunity for improvement, this constitutes a breach of the ITMTC.
This judgment provides invaluable guidance on the ITMTC’s existence, scope, and application. For employers implementing PIPs, the key takeaway is that such processes must be genuine remedial tools with authentic intent to provide improvement opportunities. The process should align with its stated purpose, and employees should receive clear feedback throughout on their progress and standing. The firm recognition of the ITMTC by the Court will also expand the scope for constructive dismissal claims by employees for unacceptable conduct leading to their resignation.