What damages may an employer have to pay for breach of duty?

A year after the Singapore Court of Appeal (“CA”) clarified the principles and factors that the Singapore courts will apply and take into account when considering an employer’s duty of care in the provision of a reference for its employee, the Singapore High Court awarded the same employee with the sum of S$4,026,000 for the employee’s loss of earnings (see Ramesh s/o Krishnan v AXA Life Insurance Singapore Pte Ltd [2017] SGHC 197).

At first glance an award of S$4 million in damages to a former employee looks like an astronomical figure but is it really?

  1. The sum awarded was for 5+2 years’ worth of annual loss of earnings from August 2011 to July 2018, the first 5 years’ worth being for loss of earnings and the next 2 years’ worth being for loss of future earnings (although the employee sought 4 years’ worth of loss of future earnings).
  2. The employee’s remuneration in the preceding 3 years was equal to or far more than the average sum awarded for the 7 year period. In 2009 he earned S$694,963.55.  In 2010 he earned S$2,389,629.98.  In 2011 he earned S$1,702,250.87.
  3. The employee had sought S$27 million in loss of earnings based on an estimate that he would have earned S$3m in year 1 and S$6m per year for the next 4 years.
  4. He also sought S$15 million in loss of future earnings for the next 4 years on the basis that he would take about 4 years to rebuild the 100-adviser agency he would otherwise be operating by now.
  5. No aggravated damages were awarded although he sought 50% of his loss of actual and future earnings as the sum of aggravated damages.

What factors were considered, or what formula did the Court apply?

  1. When a tortious wrong has been committed by a defendant, the plaintiff ought to be restored to the same position as if the tort had not been committed. That is the aim of an award of damages.
  2. In cases where a plaintiff seeks compensation for the loss of earnings or profits it would otherwise have received but for the defendant’s tortious action, the courts will engage in the “hypothetical exercise” of estimating the loss, provided that the plaintiff adduces sufficient evidence. The evidence is not assessed on the basis of a balance of probabilities. Rather, the court does its best to evaluate the chances, taking all significant factors into account.
  3. The employee was leaving AXA for Prudential and the CA found that Prudential eventually decided not to hire the employee because of AXA’s significant delays in responding to Prudential’s background checks on the employee. Thus, but for AXA’s negligence, Prudential would have hired the employee.
  4. It then follows that this is not a mere ‘loss of chance’ case, and all losses arising from AXA’s negligence are recoverable in full, subject only to mitigation and the requirement that the losses suffered be a reasonable foreseeable consequence of the tort.
  5. Loss of the high remuneration he would have earned in Prudential is a reasonable foreseeable consequence of the negligence.
  6. Damages were awarded for loss of earnings from August 2011 (assuming that but for AXA’s negligence the employee would have started work with Prudential within 6 weeks of his application) to July 2016 (which is when the CA released its decision in favour of the employee and thus ‘vindicated’ the employee’s reputation).
  7. However, the sum of damages was not based on the employee’s estimation of his likely growth in Prudential or his past success in AXA as there were too many uncertainties in those estimations. Instead, more conservative estimates would be based on the Establishment Package offered by Prudential (although it was both a draft and a conditional offer).  The Establishment Package had included a commencement allowance of S$675,000 and monthly pay of S$65,625 for the first 12 months and S$43,750 for subsequent months.
  8. Aggravated damages, unlike punitive damages, serve a compensatory function – they are awarded to augment a sum awarded in general damages to compensate for the enhanced hurt suffered by the plaintiff due to the aggravation of the injury by the manner in which the defendant committed the wrong or by his motive in so doing.
  9. Aggravated damages can be awarded in appropriate negligence claims but exceptional or contumelious conduct or motive in committing the wrongdoing is necessary. However, in this case, there was no finding of bad faith on AXA’s part nor was there any proof that AXA’s dominant motive was to injure the employee.

This case (both in terms of the decisions on liability and on damages) encapsulates many issues arising from allegations of negligence on an employer’s part and looks set to be the precedent for the relevant legal principles for at least the near future.

Click here to read an earlier article summarizing the CA’s findings on an employer’s duty of care.

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