Singapore - Standards and Safeguards in Internal Investigations

In the recent case of Dong Wei v Shell Eastern Trading (Pte) Ltd & Another [2022] SGHC(A) 8, the Singapore High Court (Appellate Division) took the opportunity to consider the applicable standards and procedural safeguards to be adopted when conducting investigations into employees. Here, we explore some of the key observations made by the Court in the context of corporate investigations and consider their impact on the conduct of internal investigations into employees.

This case arose out of an investigation that the first respondent, Shell Eastern Trading (Pte) Ltd (“Shell Eastern”), had undertaken into the appellant, Dong Wei, in relation to allegations of conflict of interest and breaches of the company’s code of conduct. Though the investigation was ultimately inconclusive, Shell Eastern later terminated Dong Wei’s employment with pay in lieu of notice, pursuant to the express terms of his employment agreement. Thereafter, S&P Global Platts (“Platts”) approached Shell Eastern with enquiries relating to its ongoing investigations, and subsequently published an article relating to the same. This article allegedly hampered Dong Wei’s attempts at securing comparable employment, and he commenced proceedings seeking damages that he claimed to have suffered.

The observations of the Singapore High Court (Appellate Division), in dismissing Dong Wei’s appeal, provide useful guidance to employers that conduct internal investigations into their employees. Employers would certainly appreciate the Court’s findings that it was appropriate to place an employee on suspension pending the outcome of an internal investigation if there were valid grounds to do so, and that it may be permissible for such a suspension to continue even after investigations are concluded, to allow time for the employer to consider if the employment relationship should continue. In addition, employers should take note of the important elements identified by the Court as constituting a properly managed investigation, which include ensuring the absence of pre-judgment, avoiding prejudice to the fair conduct of the investigation, and allowing the subject of the investigation a fair opportunity to respond to the allegations made.

Background

Dong Wei was employed by Shell Eastern from 2006 until the termination of his employment on 10 January 2018. As a Senior Freight Trader, one of his primary responsibilities was selling freight space in ships owned and/or chartered by Shell Eastern or its affiliates. The second respondent, Mr Lim Ming Way (“Mr Lim”), was Dong Wei’s line manager.

By way of background, Dong Wei had previously been the subject of two earlier investigations by Shell Eastern, in relation to allegations that he had shown favouritism to a company called First Fleet (in 2015) and that he had received gifts from them (in 2016). In both cases, the investigations concluded that the allegations were unsubstantiated.

On 29 September 2017, Dong Wei made a phone call to Jason Balota (“Mr Balota”), who was a gas oil trader with Vitol Asia Pte Ltd (“Vitol”), and purportedly attempted to market a third-party vessel belonging to Dong Wei’s “friend’s company” to ship a gas oil cargo from Nanjing to the United States.

On 20 October 2017, Shell Eastern’s Business Integrity Department (“BID”) commenced an investigation into Dong Wei, to look into concerns that Dong Wei had offered the services of his “friend’s company” to a Vitol trader. Such conduct circumvented the proper practice of contacting a trader’s chartering manager, rather than a trader directly. After Dong Wei was interviewed by BID on 23 October 2017, he was placed on mandatory leave with salary and informed that he would be told of the outcome of the investigation upon its conclusion.

The investigation concluded on 21 November 2017. Though the allegations against Dong Wei were “inconclusive”, there was no valid explanation as to why Dong Wei would knowingly depart from market practice to contact Mr Balota to obtain information about Vitol’s cargo, when Shell Eastern had no vessel available to offer freight space.

On 29 November 2017, Platts contacted Shell Eastern for comment on rumours that it had been conducting investigations into its employees, including Dong Wei, for corruption (amongst other things). Shell Eastern’s spokesperson declined to comment specifically, and in essence provided a “non-answer”. 

Thereafter, on 12 December 2017, Platts published an article (the “Platts Article”) stating that Shell Eastern had been investigating claims of “unethical dealings including charges of corruption in its tanker chartering team”. Though the article did not identify Dong Wei, it identified the chartering team and stated that “at least one employee has been asked to take leave pending further investigation”. Dong Wei was the only one in the team placed on leave at the time.

On 10 January 2018, Shell Eastern terminated Dong Wei’s employment immediately with pay in lieu of notice. Up to that point, Dong Wei had remained suspended with full pay, and was never told of the outcome of the investigation despite multiple requests from him.

Thereafter, Dong Wei allegedly applied for comparable positions at four other freight transport companies, who purportedly declined to consider his application on account of the Platts Article and the unresolved allegations of impropriety against him. Dong Wei thus commenced action against Shell Eastern and Mr Lim for damages he claimed to have suffered.

Decision of the High Court (General Division)

The High Court (General Division) dismissed Dong Wei’s claims against Shell Eastern and Mr Lim. Though the Court accepted that an implied term of mutual trust and confidence in employment contracts was recognised in Singapore law, the Court ultimately found that there was no breach of such a term on the facts. Additionally, the Court rejected Dong Wei’s other claims of conspiracy, negligence, tort of malicious falsehood, vicarious liability, and liability for inducing a breach of contract.

Decision of the High Court (Appellate Division)

In dismissing Dong Wei’s appeal in its entirety, the Court focussed its analysis on the three heads of losses sought to be recovered by him given the overlap in the applicable facts:

1. First, the damages flowing from his allegedly wrongful suspension and Shell Eastern’s purported mismanagement of the investigation (the “First Head of Loss”).
2. Second, the cash bonuses and share options he would have received or retained had he not been wrongfully terminated, or had his termination not been wrongfully brought about (the “Second Head of Loss”).
3. Third, the damages flowing from the stigmatisation he allegedly faced in the freight industry which had purportedly prevented him from securing new, comparable employment (the “Third Head of Loss”).

In relation to the First and Second Heads of Loss, the Court found that even if Dong Wei had successfully proved the commission of the wrongs associated with these purported losses (which he had not), he did not in fact suffer any loss as he had been paid a full salary for the entire period of his suspension, and also received pay in lieu of notice upon the termination of his employment. Similarly, the Court found that the causes of action with respect to the Third Head of Loss (both pleaded and not pleaded) were not made out.

On the issue of the existence of the implied term of mutual trust and confidence, it is important to note that the Court declined to endorse its existence in Singapore law, noting that the issue had yet to be settled by the Singapore Court of Appeal.

Key Observations of the High Court (Appellate Division)

Employers would do well to take note of several key observations made by the Court:

1. That formal steps should be taken to ascertain the existence of valid grounds to place an employee under suspension, pending the outcome of an investigation. In this case, Shell Eastern had interviewed Dong Wei before he was suspended, during which he had admitted to having acted in contravention of market convention. The Court was of the view that his admission, notwithstanding the explanation he had offered, was sufficient justification for Shell Eastern to suspect that something might have been amiss. Moreover, Dong Wei had also been the subject of an earlier investigation relating to a potential conflict of interest, which would have bolstered Shell Eastern’s suspicions. As such, the company had valid grounds to place Dong Wei on suspension pending the outcome of the investigation.

2. Employers may reconsider their working relationship with employees, despite investigations yielding inconclusive outcomes. However, such outcomes do not entitle a company to terminate an employee with cause. To this end, it may be permissible to keep an employee on suspension whilst an employer considers whether to exercise its right to terminate their employment, provided that the period of suspension is not unduly long. Lifting the suspension before such a decision is made, may create confusion as this could suggest to the employee that no further action would be taken by the employer.

3. That a properly managed corporate investigation would encompass elements such as:

1. the absence of undue influence or prejudice on the fair conduct of the investigation;
2. the absence of pre-judgment on the fact-finding process and that the outcome of the investigations was not preordained;
3. allowing the subject of the investigation a fair opportunity to respond to the allegations made against him/her; and
4. conducting the investigations without undue delay.

4. The Court took pains to emphasize the importance of employers treating their employees with dignity and respect, even when the “two-way” employment relationship is coming to an end. In this regard, the Court took a dim view of Shell Eastern’s refusal to inform Dong Wei of the investigation’s outcome, noting that as the subject of the investigation, “it would only be fair” for Dong Wei to have been informed of its outcome. This was all the more so given Shell Eastern’s earlier representation to him, that he would in fact be informed of the outcome.

Comment

The distinct nature of the employer-employee relationship as compared to many other commercial contractual relationships, clearly requires employers to exercise a greater degree of consideration and empathy towards their employees. In this regard, companies should take heed of the key observations by the High Court (Appellate Division) as set out above, that underscore the importance of ensuring the integrity, fairness, and adequacy of investigations undertaken by companies, into their employees.

Should you require any assistance with or support on regulatory and investigation matters, our team would be happy to assist. Please do not hesitate to contact Tan Weiyi or Jeffrey Koh.