28 August 2020


Employers often implement employee share option plans to attract, retain and incentivise key employees and talent. Employers that have such plans in place invariably require their employees to agree to the rules of their plans as a condition for participation. It is not uncommon for there to be rules or regulations stipulating that the employee’s benefits shall be forfeited in the event of any misconduct. Where there is a dispute between the employer and the employee,on any forfeiture of benefits, a decision by the relevant committee of the employer shall be final and binding.

However, in the event that a dispute involves legal issues, does such a committee have the jurisdiction to decide on that dispute? Is such a committee required to abide by any process or rule (e.g. rules of natural justice and due process) before making its decision?

In Leiman, Ricardo and another v Noble Resources and another [2020] SGCA 52, the Court of Appeal, in a panel of five judges,[1] provided clarity on the scope of a committee’s jurisdiction and the process that needs to be observed before a decision is made by such an employer formed committee.

Summary of Background Facts

Mr Ricardo Leiman (“Mr Leiman”) was employed by Noble Resources Ltd (“NRL”) as the Chief Operating Officer of Noble Group Ltd (“NGL”). NRL and NGL are part of the same group of companies (the “Noble Group” or “Noble”). Mr Leiman was subsequently promoted to be the Chief Executive Officer of NGL and was also appointed as an Executive Director of NGL.

During Mr Leiman’s employment with the Noble Group, he was awarded share options (the “Share Options”) pursuant to the Noble Group Share Option Scheme. He was also awarded shares (the “Shares”) pursuant to Noble’s Annual Incentive Plan (“AIP”). The AIP was an incentive remuneration plan under which shares awarded to an employee will be held by NGL’s discretionary trust for a certain period of time during which they cannot be transferred or assigned except in the event of the employee’s death.

(Note: Mr Leiman had assigned some Share Options and Shares to a trust that he established. For brevity, all references to Mr Leiman’s Share Options and Shares in this Case Note include the Share Options and Shares which he had assigned to the trust.)

In late 2011, due to various reasons, the relevant parties began to plan for Mr Leiman’s exit from Noble. Following negotiations between Mr Leiman and Noble, Mr Leiman and NRL entered into a settlement agreement dated 9 November 2011 (the “Settlement Agreement”) containing the terms and conditions on which Mr Leiman would leave the Noble Group.

Mr Leiman’s severance benefits and payments were governed by Clause 3 of the Settlement Agreement. The key sub-clauses are set out as follows:

  • Clause 3(a) provided that Mr Leiman was entitled to receive severance payments and benefits set out in Clause 3 of the Settlement Agreement only if he complied with the non-competition and confidentiality obligations under his employment agreement and the Settlement Agreement.
  • Clause 3(c) provided that Mr Leiman would be entitled to exercise Share Options that were to vest subsequently as well as all vested but unexercised Share Options provided that prior to the exercise he has not acted in any way to the detriment of Noble and NGL’s Remuneration and Options Committee (“R&O Committee”) shall make a final determination in the event of any dispute.
  • Clause 3(d) provided that the Shares held by Mr Leiman and accrued dividends shall vest in Mr Leiman in accordance with the relevant terms of grant, provided that Mr Leiman does not act in any way to the detriment of Noble and the R&O Committee shall make a final determination in the event of any dispute.

Without Mr Leiman’s knowledge, Noble hired a private investigator (the “PI”) in November 2011 to monitor his activities. The PI’s report revealed that Mr Leiman was in discussions with one of Noble’s business partners to start a new commodities business, among other things.

Noble also separately engaged a boutique consulting firm to conduct an investigation into Mr Leiman’s dealings with two employees whom he was involved in hiring in 2006. The investigation revealed that the two employees were allegedly involved in a fraudulent mismanagement of a company in Brazil and that Mr Leiman had knowledge of the various allegations against them during the hiring process.

The R&O Committee had, after taking into account the information revealed from the various investigations, decided to refuse to approve Mr Leiman’s exercise of his Share Options. The R&O Committee determined that the condition in the Settlement Agreement which required Mr Leiman to refrain from “acting in any way to the detriment of Noble prior to exercise” was not satisfied. This was because he had breached his non-competition and confidentiality obligations and had also hired the two employees even though they were unqualified and might have been involved in fraudulent conduct at their previous company.

Based on the R&O Committee’s determination, Noble also informed Mr Leiman that he was not entitled to the Shares (currently held by NGL’s discretionary trust), and that they would not be transferred to Mr Leiman after the lapse of the restriction period.

Mr Leiman brought an action for a declaration that the R&O Committee’s determinations on his entitlements were invalid. The High Court had dismissed Mr Leiman’s claims, and Mr Leiman appealed against the High Court’s decision.

The Court of Appeal, in deciding on Mr Leiman’s appeal, addressed issues pertaining to the proper construction of contracts in the context of terms that vest decision-making powers in a contractually designated entity and the extent to which a court may review the exercise of those powers when a decision made by that entity is challenged.

Court of Appeal’s Decision

Clause 3(a) of the Settlement Agreement

The Court of Appeal clarified that whether Mr Leiman had complied with his contractual non-competition and confidentiality obligations would be a legal question to be determined by a court.

In the absence of very clear language suggesting otherwise, where parties subject rights to the fulfilment of a legal requirement, the question of whether that requirement has or has not been met is a quintessentially legal question. Such a question is typically to be resolved by a body tasked with making legal determinations, such as the court, and not the R&O Committee. The R&O Committee, being a commercial body, is not prima facie suited to make determinations of a legal nature.

In this case, any dispute as to whether or not Mr Leiman was in compliance with his obligations under the Settlement Agreement was a matter solely for the court.

Clause 3(c) and Clause 3(d) of the Settlement Agreement 

Clauses 3(c) and 3(d) of the Settlement Agreement deal with the entirely separate commercial question of whether Mr Leiman had acted to Noble’s commercial detriment. Such determinations are to be made by the R&O Committee, which was a body of commercial people.

The operative words in Clauses 3(c) and 3(d) of the Settlement Agreement require that Mr Leiman must not have acted to the “detriment” of Noble. In determining whether Mr Leiman had acted to the “detriment” of Noble, the Court of Appeal held that the R&O Committee must direct its inquiry as to whether Mr Leiman had done anything that was in fact detrimental or harmful to Noble’s business interests. Any determination by the R&O Committee must involve some particularisation of actual loss, harm or damage to Noble that can fairly be said to be a consequence of the relevant acts by Mr Leiman. In other words, the R&O Committee was only entitled to find that Mr Leiman had acted to the “detriment” of Noble if it found that his actions had some actual adverse consequence on Noble’s business interest.

Further, the Court of Appeal explained that it is not necessarily the case that every breach of a contractual obligation will give rise to commercial detriment. Accordingly, the R&O Committee could not determine that Mr Leiman had acted to the detriment of Noble simply because he had breached his contractual non-competition and confidentiality obligations. The R&O Committee must consider whether Mr Leiman had engaged in any conduct that was commercially detriment to Noble – such detriment had to comprise actual harm or detriment.

As there was a lack of evidence of actual commercial detriment caused to Noble by Mr Leiman’s conduct, the Court of Appeal ruled that R&O Committee was not entitled to deprive Mr Leiman of his right to the Share Options and the Shares. Therefore, Mr Leiman was wrongfully denied the opportunity to perfect his title to the Share Options and the Shares. In the circumstances, the Court of Appeal ordered that damages be assessed for the losses sustained by Mr Leiman as a consequence of Noble’s failure to permit him the opportunity to perfect his title to the Share Options and the Shares following the R&O Committee’s invalid determination.

The Court’s jurisdiction to review the R&O Committee’s decisions under Clauses 3(c) and 3(d) of the Settlement Agreement

There was no dispute by the parties as to whether a court could review the substantive merits of a decision by the R&O Committee. Insofar as the Settlement Agreement vested the power to make the relevant decisions under Clauses 3(c) and 3(d) of the Settlement Agreement in the R&O Committee, it was not open to the court to consider the correctness of such decisions or to substitute its own views for those reached by the R&O Committee except on the grounds of irrationality or bad faith.

The issue was whether a court could review the process by which a decision-making body or committee of a contractual entity came to a decision. The Court of Appeal held that in contracts of employment, there is no basis for finding that an employer is obliged to accord to an employee the right to any particular process before undertaking any action unless there was a term to the contrary, whether express or implied. If there was indeed such a right, the court’s assessment of whether such a right has been made subject to any duty of fairness or to the observance of any particular procedure will be a contextual one that duly considers the particular contractual right in question, the language of the provision setting out or conditioning the right, the consequences of any decision made under that provision and what, if anything, was contemplated by way of procedural requirement.

The Court of Appeal proceeded to adopt such an approach for the Settlement Agreement. To determine whether Mr Leiman had any right to due process, the Court of Appeal had to first analyse the relevant clauses (i.e. Clauses 3(c) and 3(d)) of the Settlement Agreement. In doing so, the Court of Appeal came to the conclusion that the R&O Committee had to exercise their decision-making powers in three ways:

  • the R&O Committee’s jurisdiction would only be triggered if Mr Leiman had allegedly done something that amounted to acting “to the detriment of Noble”;
  • the R&O Committee was not tasked to decide in general whether Mr Leiman’s benefits or entitlements should vest. It was specifically designated to make a final determination, in a very specific circumstance – on the issue of whether Mr Leiman had acted to the detriment of Noble; and
  • in the event of a dispute, the R&O Committee’s determination as to whether Mr Leiman had acted “to the detriment of Noble” would be final.

The Court of Appeal ruled that it was implicit from the combination of the three points listed above that Mr Leiman had to first be given notice of Noble’s allegations that he had acted to Noble’s detriment, and if necessary, the basis for such allegations, before the R&O Committee was even activated to make its determination. Once the R&O Committee’s jurisdiction was engaged, it must afford Mr Leiman an opportunity to put forward his reasons for disputing the allegations before the R&O Committee exercised its power to make a final determination as to whether he had acted “to the detriment of Noble”. As the Court of Appeal elaborated, it was a dispute between Mr Leiman and Noble that required determination from the R&O Committee, and for such a dispute to arise, Mr Leiman had to be told what was being alleged against him and given the opportunity to respond in the first place.

Based on the analysis of Clauses 3(c) and 3(d) of the Settlement Agreement,  the Court of Appeal decided that it could review the R&O Committee’s decisions to ensure that they were made after applying a fair process. Further, in considering what constitutes a fair process, the “rules of natural justice” should be considered, which included the rule that every party to a dispute shall be entitled to a fair hearing.

As the R&O Committee failed to ensure that Mr Leiman was made aware of the allegations against him,  or afford Mr Leiman the opportunity to decide whether he disputed them, and if so, to respond to them, [Mr Leiman was never in a position to decide whether to dispute and respond to the allegations. This suggests that the R&O Committee was not properly convened. As a result, the Court of Appeal ruled that there was no valid “final” determination for the purposes of Clauses 3(c) and 3(d) of the Settlement Agreement. The R&O Committee’s purported refusal to grant the various entitlements under those two clauses to Mr Leiman was therefore invalid.


As can be seen, the focus of the Court of Appeal centred on the proper construction and interpretation of the Settlement Agreement. The scope of the R&O Committee’s jurisdiction, whether Noble had suffered detriment and the process which the R&O Committee needed to abide by were determined from a contractual and contextual interpretation of the Settlement Agreement.

Employers and employees alike should be mindful of these considerations when drafting agreements pertaining to employees’ benefits (e.g. share option agreements) – what disputes can be decided by a decision making body (other than a court or a tribunal), what disputes ought to be decided by a court, the due process to be observed etc. The Court of Appeal’s decision in this case, albeit in the context of a settlement agreement between the employee and his employer, will be relevant in the interpretation of such other contracts.


If you have any questions or require any additional information, please feel free to reach out to Dr Qiu Yang, Denzel Chua or any director of ZICO Insights Law LLC.

This article is for general information only and is not a substitute for legal advice.

[1] The Court of Appeal generally sits with three judges when hearing cases. However, paragraph 85A of the Supreme Court Practice Directions provides that the Court of Appeal may determine, as and when appropriate, whether to convene a panel of five or any greater uneven number of Judges.


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