Singapore High Court upholds employers’ rights to terminate employee for failure to meet performance targets, and recover “golden hello” cash advances paid to employee

27 August 2024

BGC Partners (Singapore) Limited and GFI Group Pte Ltd v Sumit Grover [2024] SGHC 206

In the recent decision of BGC Partners (Singapore) Limited and GFI Group Pte Ltd v Sumit Grover, the General Division of the High Court of Singapore upheld the employers’ right to terminate the employment of a senior employee for poor performance and consequently recover significant cash advance loans of over US$2 million paid to the employee by the employer. The court also upheld the employers’ exercise of discretion in withholding bonuses to the employee.

The successful employers in this case were BGC Partners Singapore Ltd (“BGC”) and GFI Group Pte Ltd (“GFI”) (together, “Employers”), both part of BGC Group, the leading global financial brokerage group headquartered in New York and London.

Allen & Gledhill Partner Tay Yong Seng represented the successful employers.

Employers in the financial brokerage industry often use cash advance loan agreements to incentivise high earning employees to join the employer. These loans - sometimes known as “golden hellos” - are paid upfront to the employee upon commencement of employment. If the employee does not fulfil the terms of the loan agreement (such as failing to serve the full term of employment), the loan is recoverable. This decision is significant in confirming the validity of the Employers’ rights of recovery under their loan agreements against an under-performing employee despite his attempts to characterise the payments as penalties which were unenforceable.

The decision is also important because it considered various key issues in managing employment contractual relationships, ranging from initial contract formation such as non est factum and non-applicability of collateral oral agreements as opposed to signed written agreements, to employers’ exercise of discretion in awarding bonuses during the term of the contract, and employers’ freedom to exercise their right to terminate at the end of the contract. 

The High Court reaffirmed the prevalence of the written agreement (via the entire agreement clause) over collateral oral agreements. The court also upheld the Employers’ discretion to award bonuses (under an appropriately worded bonus clause) and freedom to exercise their contractual right of termination.

Background

Mr Sumit Grover (“SG”) was initially employed by GFI, and then BGC, as a broker specialising in Indian Rupee non-deliverable forwards (“NDFs”). After commencement of employment, he received significant sums of over US$2 million under cash advance loan agreements. As a high performing broker drawing high remuneration, SG’s written employment contract (“Written Agreement”) expressly required him to produce revenue that was 2.5 times his employment costs (“Performance Ratio”).

In September 2021, BGC terminated SG’s employment for failing to meet his Performance Ratio. The termination of employment triggered the cessation of SG’s partnership in BGC Holdings LP (a BGC Group entity in the USA), which in turn activated his obligations to immediately repay the cash advances he had received. When SG failed to repay the cash advances, the Employers commenced proceedings in the Singapore High Court against SG to recover the unpaid sums.

SG denied liability, arguing that the Written Agreement (with Performance Ratio) was void for reasons of non est factum. SG claimed that an alleged oral employment agreement (without Performance Ratio) between him and his former GFI manager should be binding instead. SG also argued that the loan agreements were unenforceable because the interest rate under the agreements was so high that it amounted to a penalty.

Separately, SG counterclaimed for unpaid bonuses and damages for unlawful termination of his employment.

SG’s arguments were all dismissed. The court found for the Employers on each of the above issues.

 Oral agreement superseded by written agreement

The court found the Written Agreement to be valid and binding.

The general rule that a party who signs a document is bound by that document (regardless of whether he has read or understood the document) applied to this case. The non est factum principle operates as an exception to this doctrine, but two requirements need to be shown: (i) a radical difference between what was signed and what was thought to be signed, (ii) the signatory was not careless in signing the relevant document. These requirements were not met on the facts of the case.

SG could not prove that the Written Agreement was radically different from what he thought he signed. The court found that a Performance Ratio was common in the broking industry and an experienced broker like SG would have known of its prevalence. Despite this, during cross-examination, SG was unwilling to answer the Employers’ questions on whether he was familiar with the Performance Ratio. The court found that SG’s reluctant and evasive responses leaned in favour of finding that SG in fact knew about the Performance Ratio.

The court also found that SG was indeed careless in signing the Written Agreement. SG argued that he had relied on his former manager at GFI when he signed the document, instead of reading through it before signing. Nevertheless, SG had several days to read through the Employment Agreement and could even have sought legal advice during that period. If SG chose to sign the document without reading it, he was careless and could not rely on non est factum.

On a related note, the court doubted SG’s alleged lack of proficiency in English, noting that he could testify directly in English on some matters and even read and recite his confidentiality obligations in the Written Agreement in English.

As for the oral agreement between SG and his former GFI manager, the court found that it was only a non-binding, in-principle agreement (which still had to be reduced into writing) prior to the signing of the Written Agreement. In any event, the “Entire Agreement” clause in the Written Agreement meant that any oral agreement would be superseded by the Written Agreement.

Employers’ discretion in awarding bonuses

The court agreed with the Employers that SG was not entitled to the contractual bonuses.

The court first stated that there is no absolute rule that all contractual bonuses are discretionary in nature. Nevertheless, the court accepted that the bonus clauses in the Written Agreement did give the Employers discretion in awarding bonuses. Among other things, the Written Agreement only stated that the employee would be “eligible” for a bonus and that the entitlement to the bonus only arose “when and if a bonus is paid”.

The court held that BGC had acted reasonably in exercising its discretion to withhold the bonus payments to SG. This was because, as the court found, SG had refused to share his customer lines with his other BGC colleagues. In addition, SG failed to come into the physical BGC office for at least 27 days without legitimate reason.

Employers’ freedom to exercise its termination rights

SG did not dispute that he failed to meet his Performance Ratio. However, he argued that BGC was under a duty of implied trust and confidence when exercising its right of termination and that BGC had breached this duty.

The court rejected SG’s argument and doubted the existence of any such duty of implied trust and confidence under Singapore law. Instead, the court accepted BGC’s position that its contractual right of termination was unqualified, following the decision of the Appellate Division of the High Court in Dong Wei v Shell Eastern Trading [2022] 1 SLR 1318.

Even if such an implied term of mutual trust and confidence did exist, the court found that there was no breach by BGC. The court found that BGC acted in good faith and with reasonableness in the process leading up to SG’s termination, including offering him various alternative job roles as opposed to immediate termination. The court found these steps to be BGC’s “genuine attempts to retain [SG] and demonstrate good faith on BGC’s part”. The court found that the actions of two of BGC’s senior managers, Mr Brad Howell and Mr Jordan Prasad, “demonstrate[d]…personal attempts to help [SG]”. SG rejected these options and BGC subsequently terminated his employment.

BGC’s termination of SG’s employment also caused SG’s partnership in BGC Holdings to cease, which in turn triggered SG’s repayment obligations under his cash advance loan agreements, together with contractual interest. SG argued that the interest rendered the loans unenforceable as penalties. This argument was rejected. The court followed the Singapore Court of Appeal decision in Ethoz Capital v Im8ex Pte Ltd [2023] 1 SLR 922 in holding that the penalty doctrine only applies to secondary obligations triggered by breach of contract, not repayment primary obligations assumed by SG that are activated by cessation of partnership in BGC Holdings.

Practical implications

This decision emphasises the importance of careful conduct in dealing with employment contracts and managing the employment relationship. The decision contains important lessons for both the employee and the employer.

For the employee, the court commented that “this case presents a cautionary tale of the importance of reading and understanding” an employment contract.

For the employer, BGC’s conduct in managing the employment relationship was approved by the court on several occasions, including the management of the termination process. As noted above, the court found that the steps taken by BGC after SG failed to meet his Performance Ratios were “genuine attempts to retain [SG] and demonstrate good faith on BGC’s part”. The actions of BGC’s senior managers “demonstrate[d]…personal attempts to help [SG]”.

Reference materials

The judgment is available on the Singapore Courts website www.judiciary.gov.sg.