DISMISSAL: Constructive dismissal - Company taken over by a new company - Claimant resigning as the Director of the company but staying on during transition period to help out the new company - After the restructuring, claimant offered a position by the new company - Claimant rejecting - Claimant demanding reinstatement back to the position of Executive Director - Effect of - Company refusing - Claimant claiming constructive dismissal - Whether proven by the claimant - Whether the claimant had voluntarily resigned - Effect of - Whether there had been a dismissal - Industrial Relations Act 1967, ss. 20(3) & 30(5)

DISMISSAL: Constructive dismissal - Claimant being offered a new position by the company - Claimant rejecting and claiming constructive dismissal - Whether the new company's offer of employment had merely been an offer - Whether the company's new offer had breached a fundamental term of the claimant's contract which had gone to the root of the contract - Effect of - Whether the claimant had been premature in claiming constructive dismissal - Effect of - Industrial Relations Act 1967, ss. 20(3) & 30(5)

EDEN ENTERPRISE (M) BERHAD v. THUM SOON YIN
INDUSTRIAL COURT, KUALA LUMPUR
MARIAH AHMAD
AWARD NO. 7 OF 2010 [CASE NO. 2(21)/4-2266/04]
4 JANUARY 2010

AWARD

(NO. 7 of 2010)

Mariah Ahmad:

[1] The dispute before the court is over the claimant's alleged dismissal by the company on 3 April 2003 and vide a letter dated 28 July 2004 the dispute was referred to the court by the Honourable Minister of Human Resources for an award.

[2] This case was actually heard before another Chairman who has since retired. On 23 March 2009 the case was further mentioned before me and at the further mention date, both parties consented to have the award be handed down by me after oral submissions to highlight the evidence and the written submissions filed earlier.

Facts Of The Case

[3] The claimant commenced employment with the company sometime in the year 1974 as a Home Catering Waiter at a monthly salary of RM180. Throughout the years of his employment, the claimant rose up through the ranks holding positions of responsibility until he was appointed to the position of Director and Executive Director / Senior General Manager of the company as well as all the company's 13 subsidiaries on 2 June 1994. The company and its 13 subsidiaries were bought over by the Zil Group of Companies in October 2002. When the take over occured on 4 October 2002, the company was in dire financial straits and was insolvent. It was not a normal company in a healthy state. With the take over all the directors of the company, including the claimant, were required to leave their executive and directors positions within the Eden Group. The claimant also tendered his resignation as Director of the company. However the claimant and three (3) non-executive directors were asked to stay on to assist during the transition period. At the end of the transition period the company offered the claimant a position after the restructuring of the company by the new management. The offer was made vide a letter dated 26 March 2003.

[4] At the time of takeover by the Zil Group, the company was the holding company of companies within the Eden Group. The company was and is at all material times listed on the 2nd Board of the Bursa Malaysia / KLSE. Until October 2002, the company's core business was in food and beverage (F&B) which were operated through the company subsidiaries.

[5] At the time close to the takeover, the evidence before the court shows that the company had been suffering from huge losses between 1999 and September 2002. The company and the Eden Group also suffered from negative shareholder finds which means it could not meet its debt obligations and it faced legal action from various banks. The details of the financial woes of the company could be seen from the audited financial statements at pp. 4 - 44, 45 - 94, 95 - 142 of COB1.

[6] Zil Enterpise Sdn Bhd (Zil) was involved in the business of infrastructure / power general manufacturing and property. Zil did not have experience in the food and beverage business. Zil concluded a reverse takeover of the company on 4 October 2002 through the injection of assets into the company in exchange for shares. The takeover was sactioned by the Board of Director of the company while the claimant was a director (see minutes of the Company's Board Meeting of 23 June 2000 at pp. 9 - 15 of COB). The relevant agreements are at pp. 55 - 82, 84 - 109 and 111 - 113 of COB. At p. 114 - 117 of COB, copy of an agreements between Zil Enterprise and Multi Destar (M) Sdn Bhd for payment of commission to Multi Destar for its role in brokering the takeover. It was a condition of the agreement that Multi Destar would procure and deliver to Zil signed letters of the directors named in the agreements from all their executive and salaried positions in the Eden Group without any claim whatsoever for compensation for loss of office. The claimant was one of the persons who was to resign from his Board and executive possitions.

[7] The letter of offer of employment dated 26th March 2003 which forms the basis of the claimant's claim on constructive dismissal is reproduced below:

EDEN

Eden Enterprises (M) Berhad

(A member of Zil Group of Companies)

(Co. No. 036216-V)

Our Ref : EE/CSD/HRM/MHa/03L026/03

Your Ref:

March 26, 2003

Private And Confidential

Thum Soon Yin

187 Jalan USJ 2/1

Subang Jaya

47600 Petaling Jaya

Selangor D.E.

Dear Mr Thum

Offer Of Employment

As your are aware, further to your resignation as Director for all companies, under and inclusive of Eden Enterpises (M) Sdn Bhd, you were informally requested to assist in wrapping up operations of the Eden Floating Palace Sdn Bhd, Eden Restaurants Sdn Bhd and in the general transition of the business after the take over.

As the transition has now been completed and the Eden Floating Palace Sdn Bhd and Eden Restaurant Sdn Bhd operations in Johor Bahru have been shut down and demobilized since the end of February 2003, the time now comes for us to focus on operations in our new set up to turn the company around from accumulated losses incurred over the years.

We have worked out a suitable position for you in our new set up. Accordingly, we are pleased to offer you the position of Senior General Manager, Operations reporting to the Director of Operations in our new set up. Your appointment will be with effect from 1 March 2003.

Your job responsibilities will be as per the Job Description Sheet attached.

Commensurate with your experience and also taking into account the job responsibilities you will hold, your salary will be RM10,000 per month will effect from 1 March 2003.

During your employment with the company, you will be subjected to all rules and regulations that are applicable within the company. However, the following provides you with a guideline of some of the benefits you will enjoy as an employee:

Thum Soon Yin

Contract of Employment

1. Reporting

In performance of your duties, responsibilities and job functions, you will be directly responsible to the Director of Operations.

2. Company Car

You will be provided with a company car ant type of car will be determined by the company.

3. Working Hours

Monday to Friday	:	9 am to 6 pm
Lunch hours	:	1 pm to 2 pm

In view of your status, position and responsibilities, you may be expected to put in effort and work over and above the normal hours as and when required to meet the exigencies of the company's business. Executive staff is not entitled to overtime payment.

4. Notice of Termination of Employment

Notice for termination of employment will be three (3) months by either party or three (3) months salary in lieu of such notice.

5. Transfer

In accordance with the company's policy, the company may at its discretion transfer you from one place to another or to another Division or Territory or to another company within Eden Group of Companies. Any transfer may not necessarily mean a transfer to a higher grade.

6. Training

The company has its own policy pertaining to training and career development. There may be occasions where an employee is identified for local or overseas courses so as to upgrade his/her skill/management techniques. In such an event, you would be required to sign a bond. This period would be in accordance with the company's policy on training.

7. Public Holidays

You shall observe all public holidays gazette by the Federal Goverment and the State Government where you work.

8. Bonus

Subject to your satisfactory performance and provided in the Management's opinion profits are sufficient and satisfactory, a discretionary bonus may be considered at the end of each financial year. The staff must be in the service of the company at the time of payment of bonus.

9. Medical Benefits

Free medical attention will be provided for you subject to the treatment being given by the company's doctor o physician referred to by the company's doctor(s). This however, will be subjected to the company's Medical and Hospitalisation Benefits.

The medical benefits provided however, shall not include expenses for optical services, dental, maternity, cosmetic surgery, mental disorder due to abuse of alcohol, drug abuse and those arising out of unlawful acts.

10. Annual Leave

You shall be entitled to paid annual leave at the rate of twenty-six (26) working days per annum.

11. Sick Leave

You shall be entitled to fourteen (14) days paid sick leave in each calendar year when certified by the company doctor.

12. Income Tax

You shall be fully liable for payment of Income Tax payable in respect of your remunerations.

13. Employees Provident Fund (EPF)

You will be required to contribute to the Employees Provident Fund at the prevailing statutory rate and the company will do likewise.

14. Other Service Benefits

Other service benefits not mentioned in this letter will be in accordance with the approved Company's Policy for Executives, which may be amended from time to time.

15. Retirement Age

You will retire from the company when you attain the age of 55. Any extension of employment beyond age 55 will be at the sole discretion of the company and based on terms mutually agreed upon between the company and you.

16. Office Secretary

All information obtained in the course of work with this company shall be deemed as strictly confidential. No such information shall be divulged to any outside party without the written permission of the Executive Chairman. Failure to observe this rule shall render you liable to disciplinary or legal action.

17. Office Rules and Regulations

You are subject to company's rules and regulations and other procedures as may be made known to you from time to time, throughout your period of service in the company.

18. General Conduct/Breach of Contract.

18.1 Throughout your services with the company, your conduct must be exemplary and in such a manner which will not discredit or bring disrepute to the company. Your are expected to perform duties assigned to you loyally, efficiently and honestly benefiting your status as an Executive of the company.

18.2 You are required at all times to faithfully and diligently perform and observe the duties which will be assigned to you by your superiors and devote your time and attention to discharging those duties and functions developed upon you.

18.3 You are not allowed to engage directly or indirectly in any other employment without the written consent of the company.

19. Amendments

In this letter of appointment, an attempt has been made to cover the more specific terms and conditions of employment. Those not included shall be applied in accordance with the existing procedures and policies of the company.

The company reserve the right to review these terms and conditions of service without giving any reason. Any alteration, amendment or addition to those terms and conditions of service shall be advised to employees in writing or by circulation in writing from time to time.

We look forward to you joining our team. If you accept the company's offer and terms and conditions of employment, please signify your acceptance by signing on the duplicate of this letter that is attached and returning the same to us within seven (7) days from the datehereof. If you do not accept the offer within the stipulated period, this offer will lapse.

Yours Faithfully

Eden Enterprise (M) Bhd

Datin Fadzilah Md Ariff

Executive Director

______________________________________________________________________________________________________

I, Thum Soon Yin NRIC No: 560322-07-5319 hereby agree to the foregoing terms and conditions of employment as set out above and accept this offer.

...	...
Signature	Date

[8] In response to the above letter of offer the claimant sent a letter dated 1 April 2003 (at pp. 23 - 24 of CLB1) whereby he rejected the offer and demanded that the company reinstate him as the Executive Director. The said letter reads as follows:

Your Ref : EE/CSD/HRM/MHa/03L026/03

Tham Soon Yin,

No. 187, Jalan USJ 2/1,

Subang Jaya,

47600 Petaling Jaya

Selangor Darul Ehsan

1st April 2003

Datin Fadzillah Md. Ariff Executive Director, Eden Enterprise (M) Berhad, 15th Floor, Amcorp Tower, No.18, Jalan Persiaran Barat, 46050 Petaling Jaya, Selangor Darul Ehsan

By Hand

Dear Datin,

Re: Offer Of Employment As Senior General Manager, Operations.

Reference in made to your letter dated 26 March 2003 in respect of the above matter.

As you are aware, I am the Executive Director of Eden Enterpise (M) Berhad (the company) and 13 of its subsidiaries. I was also a Director of all the 14 companies and I was removed as Director of all the companies after Zil took control of the company and its subsidiaries. My monthly total remuneration package is around RM30,000 and I am also provided with 2 cars.

The company's offer to employ me as a Senior general Manager at a monthly salary of RM10,000 on terms which are inferior to that which I have been enjoying, is totally unacceptable to me. Having been the Executive Director of the company, you cannot possibly expect to me to accept this demotion at a vastly reduced remuneration package. The offer in inhumane and humiliating. You are compounding it by requiring me to report to the newly recruited Director of Operations.

Please be informed that the company by it's conduct is repudiating its contract with me and if you insist on demoting to me to the post of Senior General Manager at the reduced monthly salary of RM10,000 with the attendance interior benefits, I will be compelled to treat myself as constructively dismissed by the company.

If you do not withdraw the above letter on or before the end of the working day on 3 April 2003 and reinstate me as Executive Director of the 14 companies, I will be compelled to treat myself as constructively dismissed without just cause or excuse by the company.

Your Faithfully,

[9] The company in response to the claimant's letter above wrote to the claimant a letter dated 3 April 2003 which reads as follows:

EDEN

Eden Enterprise (M) Berhad

(A member of Zil Group of Companies)

(Co. No. 036216-V)

Our Ref: EE/CSD/HRM/MHa/03L048/03

April 3, 2003

Private And Confidential

Thum Soon Yin 187 Jalan USJ 2/1 Subang Jaya 47600 Petaling Jaya Selangor Darul Ehsan

Dear Mr Thum

Offer Of Employment

We are in receipt of your letter dated 1 April 2003.

We write to inform you that we will require some additional time to furnish you with an appropriate response as your dateline of 3 April 2003 is insufficient for a proper consideration of all the issues you have raised. We will only be able to revert to you by Tuesday, 8 April 2003. We trust that this will be acceptable.

As you are not in the office today, this letter will be dispatched to your home address in Subang Jaya.

Your Faithfully

Eden Enterprise (M) Bhd

Datin Fadzillah Md Ariff

Executive Director

[10] The company replied to the claimant letter above vide a letter dated 7 April 2003 (see p. 52 of COB) which letter is reproduced below:

EDEN

Eden Enterprise (M) Berhad

(A member of Zil Group of Companies)

(Co. No. 036216-V)

Our Ref : EE/CSD/HRM/MHa/03L071/03

Your Ref :

Private And Confidential

April 7, 2003

By Hand/Courier

Thum Soon Yin 187 Jalan USJ 2/1 Subang Jaya 47600 Petaling Jaya Selangor D.E.

Dear Mr Thum

Offer Of Employment

We refer to your letter dated 1 April 2003. We must express our surprise at the contents of your letter.

From the outset, you would be well aware that you resigned from all your directorships from Eden Enterprise (M) Berhad as well as its subsidiaries with effect from 18 October 2002. There was no resolution by the board to remove you and accordingly it is inaccurate for you to allege that you were removed.

Since in or around October 2002, you were also well aware that you no longer functioned as Executive Director of any of the companies. This was the understanding between you and the company and you have never raised any argument to the contrary. Additionally, you are well aware from a memo dated 1 January 2003 and subsequent discussions with the Chief Operating Officer, that your identifiable role in the company would be that of Senior General Manager, F&B Operations. We are thus surprised that you now seek to stake claim on the position of Executive Director for all the companies.

We are also surprised that you have seen fit to bring up the issue of reporting to the Director of Operations. During the past few months, right up till the end of February 2003, you were reporting to the same Director of Operations and working closely with him. There was never any protest on this arrangement from you.

Accordingly, on the basis of your own knowledge that you are no longer the Executive Director for all the Companies, inclusive of Eden Enterprise (M) Berhad, we do not see how the question of restoring you to that position can arise.

We also do not agree that there is any demotion or reduced salary package as you allege. The fact is that since you are no longer the Executive Director of the Companies and since the functions for which you had been informally retained to assist in clearing up has ceased since the end of February 2003, we had to formalise you in a position within the company. We had in good faith, designed the position of Senior General Manager, F&B Operations for you rather that to just sideline you from the new structure and thus we made you the offer accordingly. The salary package was also offered to you to commensurate with the duties and responsibilities that will be entrusted to you in the new role offered to you.

Accordingly, we do not see any basis for the contentions you have raised in your letter to us. We further do not see how you can claim to be constructively dismissed from a position that you were no longer holding. At this time, the offer that was communicated to you remains open and we urge you to consider the same. We will extend the deadline for you to accept the position of Senior General Manager, F&B Operations till 9 April 2003.

Should you still insist on claiming constructive dismissal, which we deny any basis for you to do so, we reserve our rights.

Yours Faithfully

Eden Enterprise (M) Berhad

Datin Fadzillah Md. Ariff

Executive Director

[11] On 17 April 2003 the company again wrote to the claimant which letter (see pp. 54 of COB) is reproduced below:

Eden

Eden Enterprise (M) Berhad

(A member of Zil Group of Companies)

(Co. No. 036216-V)

Our Ref: EE/CSD/HRM/MHa/03L071/03

Your Ref:

Private And Confidential

April 17,2003

By Hand/Courier

Thum Soon Yin 187 Jalan USJ 2/1 Subang Jaya 47600 Petaling Jaya Selangor D.E.

Dear Mr Thum

Offer Of Employment

We refer to our letter to you dated 26 March 2003. It is noted that despite our extended deadline for you to accept the offer to join us as Senior General Manager of Eden Enterprise (M) Berhad, you have to date not replied to confirm your acceptance. You have also on 11 April 2003 returned the company car that you were using. We will thus take it that you have decided not to take up the offer to join us as Senior General Manager Operations. In the circumstances, we wish you all the very best in your future endeavours.

Yours Faithfully

Eden Enterprise (M) Berhad

Datin Fadzillah Md. Ariff

Executive Director

[12] On 21 May 2003 the claimant sent another letter (see pp. 44 - 45 of CLB) demanding for reinstatement to his position as Executive Director failing which he would maintain his stand that he had been constructively dismissed without just cause or excuse. The contents of the said letter is reproduced below:

Thum Soon Yin

187 Jalan USJ 2/1

Subang Jaya

47600 Petaling Jaya

Selangor D.E.

21st May, 2003

Datin Fadzillah Md. Ariff

Executive Director

Eden Enterprises (M) Berhad

15th Floor, Amcorp Tower,

No. 18, Jalan Persiaran Barat,

46050 Petaling Jaya,

Selangor Darul Ehsan.

Dear Sir,

Re: Offer Of Employment

Reference is made to your letter dated 7 April 2003 in respect of the above matter.

Please be informed of the following:

1. The contents of paragraph 2 of the end said letter is not correct. The letter of resignation was prepared by the Company Secretary and given to me for my signature. I was also informed that it was the instruction from Zil Group that I should resign as a Director of from the company and its subsidiaries.

2. With regard to paragraphs 3 and 4 of the said letter, the first sentence is not true. There was no such understanding and I was not given such a memo. There were no discussions with the Chief Operations Officer. As I was left with no choice and in order for a smooth operations of the company, I cooperated and reported to the Director of Operations.

3. With regards to paragraphs 5 of the said letter, I disagree with the contents of the first paragraph. I was functioning as an Executive Director of the Companies, there was no change in my job functions and there was no necessity to demote me or reduce my salary package. I consider the new offer with the reduced salary as a demotion which amounts to a fundamental breach of my contract of employment with the company.

4. With regard to paragraph 6 at the 2nd page of the said letter, as I have explained to you, I cannot accept the new position with the reduced salary and I am prepared to be reinstated to my former position as Executive Director/Senior General Manager of the companies.

If you refuse to reinstate me to my former position, I maintain my stand that I have been constructively dismissed in law and in fact without just cause or excuse.

I apologise for the delay in responding to you as I could not get advice from my counsel who was on long medical leave.

Yours faithfully,

(Thum Soon Yin)

The Law

[13] The term "constructive dismissal" has been clearly defined in the case of Western Exccavating (E.C.C.) Ltd v. Sharp [1978] 1 All E.R. 713 where Lord Denning MR held that the correct test to apply is the contract test. At p. 717 he enunciated the contract test as follows:

... if the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave at the instant without giving any notice at all or, alternatively, he may give notice and say he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once. Moreover, he must make up his mind soon after the conduct of which he complains, for if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract.

[14] The law relating to constructive dismissal has been clearly set out in the Supreme Court case of Wong Chee Hong v. Cathay Organisation (M) Sdn Bhd. [1988] 1 CLJ 45; [1988] 1 CLJ (Rep) 298 where Salleh Abas L.P. had stated at follows:

We think the word "dismissal" in this section should be interpreted with reference to the common law principle. Thus it would be dismissal if the employer is guilty of a breach which goes to the root of the contract or if he evinced an intention no longer to be bound by it. In such situations, the employee is entitled to regard the contract as terminated and himself as being dismissed.

[15] The test for constructive dismissal is where the conduct of the employer amounts to a breach of a fundamental terms of the contract of employment or where he has evinced an intention no longer to be bound by the contract of employment. This test is known to be the contract test.

The basic principles involved in determining the issue of constructive dismissal are summarised in Bryn Perrins Industrial Relations and Employment Law as:

In order for the employee to be able to claim constructive dismissal, four conditions must be met:

(i) There must be a breach of contract which may either be an actual or anticipatory breach;

(ii) That breach must be sufficiently important to justify the employee resigning;

(iii) He must leave in response to the breach; and

(iv) He must not delay too much in terminating the contract in response to the employer's breach.

If the employee leaves in circumstances where these conditions are not met, he will be held to have resigned and there will be no dismissal within the meaning of the legislation at all

[16] In the case of Lewis v. Motorworld Garages Ltd. [1986] ICR 157 it was as follows:

It is now well established that the repudiatory conduct may consist of a series of acts or incidents, some of them perhaps quite trivial, which cumulatively amount to a repudiatory breach of the implied term of the contract of employment, that the employer will not without reasonable and proper cause conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.

[17] In the court of Appeal case of Quah Swee Khoon v. Sime Darby Bhd [2001] 1 CLJ 9, his Lordship Gopal Sri Ram JCA observed as follows:

Constructive dismissal can take place, as we have attempted do demonstrate, in a number of cases. Since human ingenuity is boundless, the categories in which constructive dismissal can occur are not closed. Accordingly a single act or a series of acts may, according to the particular and peculiar circumstances of the given case, amount to a constructive dismissal.

[18] The claimant bears the burden of proving that he was constructively dismissed by the company. In order to establish the case of constructive dismissal, the claimant must prove the following elements:

(a) The company, by its conduct, had breached a term or terms of his contract of employment or has evinced an intention no longer to be bound by it;

(b) the breach is a fundamental one going to the root and foundation of the contract;

(c) he left in response to that breach and not for some unconnected and ancillary reason; and

(d) he did not delay too long in terminating the contract in response to the company's breach, otherwise he may be deemed to have waived the breach.

The Issues

[19] The issue before the court is whether the claimant had been constructively dismissed by the company and if the claimant had been dismissed whether the dismissal is with just cause or excuse.

Evaluation Of The Evidence And Findings

[20] It is the claimant's contentions that he had been constructively dismissed.

[21] In his statement of case, the claimant has set out the following reasons as to why he considered himself to have been constructively dismissed by the company. Paragraphs 5, 6, 8, 9, 11 and 12 are reproduced below:

5. The claimant contends and will so contend that the company and its 13 subsidiaries were bought over by the Zil Group of Companies with effect from 18 October 2002.

6. The claimant further contends that he was requested by the management of the Zil Group to resign as Director of the company and its 13 subsidiaries which the claimant did. However the claimant retained his position as Executive Director / Senior General Manager.

8. The events leading to the dismissal of the claimant are as set out hereunder:

8.1 On 20 December 2002, the claimant was informed by his Personal Assistant, one Miss Tong who has based at the Eden Village Restaurant, Kuala Lumpur that the Group Finance Manager, one En. Nik Mohd Fuad refused to sign the claimant's allowance cheques amounting to RM3364 under the Eden Village Restaurant, Kuala Lumpur and another cheque for RM1000 for allowance claimable under Eden Restaurant at the KLIA Airport. These allowances were for the month of January, 2003.

8.2 On 27 December 2002, the claimant was informed by Ms. Agnes Chim from Eden Floating Palace Sdn. Bhd. that the said En. Nik Mohd Fuad refused to sign the claimant's allowances of RM1500 under Eden Floating Palace Sdn. Bhd. and another cheque of RM2500 under Star Von Sdn. Bhd. also for the month of January, 2003.

8.3 On 17 January 2003, the claimant was informed by the Human Resources Director, one En. Mazlan that the claimant was to be based at the Zil Group's office at Kelana Jaya with effect from that very day. As instructed the claimant reported to work at the Kelana Jaya office on the same day.

8.4 On 29 January 2003 the claimant went on his annual leave which has approved. Upon his return from his annual leaves on 15 February 2003, the said En. Mazlan verbally informed the claimant that his salary will be reduced to RM10,000 per month and that all his claims will be on a case to case basis. The claimant being dismayed with the unilateral change in the term of his employment requested that it be reflected in writing.

8.5 On 18 February 2003, the said En. Mazlan offered to sell Star Vor Sdn. Bhd. to the claimant at the nominal consideration of RM1. Star Von Sdn. Bhd. was a pub in Johor Bahru. At that point in time Star Vor Sdn. Bhd.'s tenancy agreement was about to expire. En. Mazlan informed the claimant that the offer of sale of Star Vor Sdn. Bhd. was conditional upon the claimant leaving the company.

8.6 On 19 February 2003, the Director of Operations, one En. Abdullah Rasul invited the claimant for coffee at about 10.30am and made the same offer that En. Mazlan had made the day before.

8.7 The Zil Group's office was subsequently shifted from Kelana Jaya to Amcorp Mall, Petaling Jaya on 3 March 2003. As 4 March 2003 was a holiday, the claimant duly reported at the new office on 5 March 2003.

8.8 Having not heard anything further from the Management about his standing allowances, the claimant met with the Chief Operating Officer on 12 March 2003. The Chief Operating Officer informed the Claimant that he will get back to the claimant about the issue within a week.

8.9 On 28 March 2003, at about 5.15pm, En. Mazlan handed the claimant a letter dated 26 March 2003 wherein it was stated inter alia, that:

(i) the claimant's new position will be that of Senior General Manager;

(ii) the claimant's salary will be reduced to RM10,000 with effect from 1 March 2003;

(iii) the claimant will be subjected to new terms and conditions of employment as listed in the letter in addition to existing ones;

(iv) that the type of company car that the claimant will use will be determined by the company;

(v) the claimant was to report officially to the Director of Operations.

8.10 Vide letter dated 1 April 2003, the claimant wrote to the company complaining that the company had repudiated its contract of employment with the claimant and requested the company to withdraw its letter of 26 March 2003 by 3 April 2003, failing which the claimant will treat himself as constructively dismissed by the company.

8.11 The company only replied vide letter dated 7 April 2003 denying the claimant had been constructively dismissed.

9. The claimant contends and will so contend that the company's letter dated 26 March 2003 which sought to vary the claimant's terms and conditions of service unilaterally and to demote him, amounted to fundamental breaches of the terms of his contract of employment with the company entitling the claimant to consider himself constructively dismissed.

11. The claimant contends and will so contend that the company by its conduct had breached the following express/implied terms of his contract of employment with the company:

(i) that the company would not without reasonable cause conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee. The company had by its conduct breached this fundamental term of the contract of employment,

(ii) that the company would not exercise its powers in such a manner as to lower the claimant's dignity and self-esteem amongst his colleagues and within the community,

(iii) that the company would act towards the claimant in good-faith,

(iv) that the company would exercise its powers in relation to the claimant reasonably, fairly and lawfully.

12. The claimant will also contend that the company, by its conduct had repudiated its contract of employment with him and had initiated a series of events that was designed to drive the claimant out of his employment, thus entitling the claimant to treat himself as constructively dismissed by the company without just cause and excuse.

[22] The claimant CLWI gave evidence and he confirmed the contents of the statement of case. According to the claimant when he received the letter dated 26 March 2003 from the company, he was quite surprised for two reasons. Firstly, he had never resigned from his position as Executive Director and the company was fully aware of it. It is true that he resigned as a director, as after the takeover by Zil Group, they wanted to get their own people to sit on the Board of Director's of the company. He had no problems with that but at no point in time did he agree to resign as the executive Director. It was his understanding that he would continue to as executive director. Secondly, he was surprised that the company was purporting to offer him a new contract of employment when his old contract of employment was still continuing. In addition the company sought to reduce his basic income by RM9,000 a month, which is reduction of 47%. If at all, he would have agreed to the reduction of the Director's allowance of RM2500 per month as he was no longer a director on the company's Board of Directors. He felt the company was trying to get rid of him by demoting him and reducing his salary drastivally.

[23] In his evidence - in - chief (supplementary questions and answers) the claimant testified that he joined the company called Eden Catering Sdn. Bhd. in 1974. It was part of the Eden Group. When he joined the company there was no letter of appointment issued to him. According to the claimant he was at that point of time (in year 1974) he was 18 years of age.

[24] According to the claimant he was appointed as Eden Director in all the subsidiaries company of Eden Enterprise (M) Sdn Bhd. In term of operations he was employed as an executive director. The claimant stated the letter at pp. 2 to 3 of CLB1 and also p. 10 of CLB is a letter of resignation whereby he resigned as a director but not as an executive director.

[25] According to the claimant he wrote a memorandum to the Group Human Resources Manager En. Mazlan Harun when he came to know that he was not paid the allowances and the bonus for year 2002.

[26] According to the claimant before the offer letter was issued to him, by the company, the company did not terminate him officially as the Executive Director. His function as Executive Director of the company was to oversee all the operations from north to south until Langkawi. The claimant stated there was no such understanding between the company and him that he would not function as executive director for 2002 and that his identifiable role was to be the Senior General Manager, F&B Operations.

[27] The claimant stated there was no discussion about the cessation of his services as the Executive Director either officially or unofficially.

[28] In reference to the letter at p. 52 of COB, the claimant said it was an official reply from the company to the issue which the claimant had raised in claiming constructive dismissal in his letter at pp. 23-24 of CLB1. The claimant stated it was not true that he no longer function as the Executive Director of the companies as stated at p. 52 of COB. He stated he did function as Executive Director of the companies from October 2002 onwards.

[29] In cross-examination the claimant was referred to the documents at pp. 20-32 of CLB and he agreed that the documents was a memo dated 1 January 2003 concerning the organization of the Eden Group operation following the take over. He agreed that by this memo the F&B Operation were divided into Restaurant and non-restaurant business and he was redesignated a Senior General Manager. Restaurant reporting to the Director of Operations, En. Abdullah bin Rasul. The claimant agreed that he had complied with this memo and had reported to En. Abdullah bin Rasul.

[30] In his re-examination, the claimant denied that there was any arrangement between Dato' Rahim and himself.

Q : Was there any arrangement between yourself and Dato' Rahim following the take over about your position after the take over by Zil Enterprise?.

A : No.

[31] In cross-examination the claimant agreed that the entire F&B entertainment business in Johor and a Food Court at Sunway at the Klang Valley were closed down. Thus all that remained in the F&B business was 5 restaurants, one at KLIA, one at Jalan Raja Chulan, Kuala Lumpur, and three in Penang.

The Company's Evidence

[32] The company adduced evidence through a total of three witnesses.

[33] COW3, Tan Sri Abdul Rahim, the Executive Chairman of the company gave evidence as follows:

According to COW3, he joined the company after a reverse takeover by Zil Enterprise Sdn. Bhd. ("Zil"). He was then Executive Chairman as well as the controlling shareholder of Zil. Prior to the takeover, he did not have any involvement with the company.

Prior to the take over amongst others, Zil was involved in the business of infrastructure/power generation, manufacturing and property.

Refering to page 55-82 of COB, COW3 said it is a copy of the sale and purchase agreement between Serata Padu Sdn. Bhd. and the company dated 20 April 2000 pursuant to which the company bought all the shares in Stratavest Sdn. Bhd. Stratavest Sdn. Bhd. is a special purpose company with the principal activity of developing and operating a power plant in Sandakan, Sabah.

Refering to page 84-109 of COB, COW3 stated it is a copy of a sale and purchase agreement between Zil Enterprise Sdn. Bhd. and the company dated 20 April 2000 pursuant to which, amongst other things, the company bought the land described in the agreement.

Refering to page 111-113 of COB, COW3 stated it is a copy of the Supplemental Sale & Purchase Agreement dated 23 June 2000 between Zil and the company to vary some of the terms in the original Sale & Purchase agreement.

The purpose of these agreements was to have Zil's assets and business injected into the company in consideration for shares in the company. In other words, it was designed to achieve a reverse takeover. The takeover was sanctioned by the Board of the company while the claimant was a director. This can be seen from the minutes of the company's board meeting of 23 June 2000 at pp. 9-15 of COB.

Referring to page 114-147 of COB, COW3 stated it is a copy of an agreement between Zil Enterprise and Multi Destar (M) Sdn. Bhd. for payment of commission to Multi Destar for its role in brokering the takeover. It was a condition of this agreement that Multi Destar would procure and deliver to Zil signed letters of resignations of the director's named in the agreement from all their executive and salaried positions in the Eden group without any claim whatsoever for compensation for loss of office. The claimant was one of the persons who was to resign from his Board and executive positions.

The company's core business prior to the takeover was in food and beverage ("F&B").

Zil did not have any experience in the food and beverage business.

The company was chosen for takeover because COW3 was then looking for a public listed company to consolidate his investments. The company was recommended to him by a few people and he was given the impression that the company's debt situation was manageable.

According to COW3, the takeover transaction completed on 4 October 2002. At that time, the company was listed under PN4 by the stock exchange and was suffering large losses which in turn resulted in negative shareholder funds. By September 2002, it had accumulated losses of RM73,338,464 as can be seen from page 102 of COB1. This financial situation was a lot worse that he expected but he had to go through with the deal because we had already come a long way and it would take a lot more time to find another vehicle for listing.

According to COW3, prior to the takeover, he did not know the condition of the company in detail as they were not allowed to conduct a independent thorough due diligence exercise prior to the takeover. This means that Zil did not know the number and identities of the staff in the company, their terms and conditions, the detailed information on the performance of the outlets and other essential information about the company's business other that what was stated in its annual report and the general information provided to us by the company. So, when the takeover took place, they were really in the dark about the detailed condition and problems of the company. It was only after the takeover that they discovered the depth of the problem. Amongst other things, it was discovered that there were quite a number of actions and decisions undertaken by the previous management of the company that were not to the interest of the company and the new shareholders.

After the takeover was completed on 4 October 2002, a new management team was put in place and the company had new directors appointed. All the former directors of the company and its subsidiaries resigned in line with the agreement with Multi Destar. However, not all of them resigned at the same time. 3 non - executive directors, namely, Encik Azmi Jaafar, Dato' Rashid and Haji Razak resigned with effect from March 2003 to assist in the transition. All the directors with executive and salaried positions resigned. The claimant also signed the same resignation letter as the other directors with the intention of leaving the company as a director and employee. This can be seen from the terms of the letter of resignation submitted by the claimant at page 35-48 of COB and that submitted by the other director's at page 143-146 of COB1. Despite his resignation, unlike the other executive directors, the claimant did not leave immediately.

The claimant did not leave immediately because the core business of the company prior to the takeover was in F&B. Zil did not have the expertise in the area and needed assistance during the transition period. They knew that the losses in the F&B operations needed to be arrested because it was bleeding the company. There were many things unknown to them. They were also hampered by poor documentation. For example, there were debts claimed by creditors totaling about RM3.2 million arising from our Johor Bahru operations but they had no details. They needed to review and rationalize the F&B operations with minimal disruptions following the takeover. They needed someone with a good working knowledge of the company's operations.

COW3 was aware that the claimant was in charge of the Eden Group's F&B operations before the takeover. He was a key person in a lot of those transactions for which the documentation was poor. COW3 therefore approached him and asked him to assist them during the transition period. It was on that basis that an exception was made for the claimant in that he did not need to leave immediately due to the arrangement which they had arrived with him.

COW3 met with the claimant before the takeover was completed. He told him that they needed his assistance in the transition. He told him that once the transition period was over, they would review his positions based on the company's needs. The offer for him to stay on was temporary as COW1 really did not know how things would be and what our needs would be after the transition period. He said that he had no other plans and agreed with COW1 proposal. It was all done informally and in good faith.

Following the takeover, a rehabilitation committee was formed by the Board to review the operations of the company. The review took into account, amongst other things, the need to achieve greater efficiency, the need to arrest the large losses in the F&B operations, the change in the company's core business to infrastructure and the need to integrate Zil's and Eden's operations and business within a new structure.

Following the review, a restructuring was conducted and a number of outlets in Johor Bahru and Kuala Lumpur were closed down.

A new organization structure was implemented. It was announced by Encik Zahar in his memo of 1 January 2003 which can be found at pp. 20-32 of CLB. Pursuant to this memo, the F&B division was divided into restaurant and non - restaurant businesses and the claimant was designated as Senior General Manager (Restaurants), reporting to Encik Abdullah Rasol, the Director of Operations. He would not have responsibility for anything other than the restaurant business. This was in line with his role at that time, in that he was assisting us only in the restaurant business.

By the end of February 2003, Eden Floating Palace and Eden Restaurants operations in Johor Bahru were shut down and demobilized. The transition of the business following the takeover was also complete. There temporary arrangement with the claimant had therefore came to an end.

Since the transition was completed they then had better control and understanding of the operations. The time had come for them to focus on the new set up and turn around the performance of the company. In relation to the claimant, COW1 wanted to find him a suitable new role within the new structure to give him an opportunity to continue to serve the company. They found that they could place him as Senior General Manager (Operations) in the Restaurant operations. With the closures of the various restaurant outlets, restaurant operations had reduced and the work and responsibility for that business activity had accordingly reduced. COW3 asked the then Human Resource Manager of the company, Mazlan Harun, to speak to the claimant about his proposed new role in the company following the transition. Mazlan later told COW 3 that he had spoken with the claimant and that the claimant wanted the offer from the company of 26 March 2003 at 38-42 of CLB being made to the claimant. This letter explained the background and reasons for the offer of employment.

The salary offered to the claimant in the position of Senior General Manager was RM10,000 a month. This figure was arrived at after taking into account the following matters:

a) the role, work and responsibilities that he would be exercising in that position;

b) our salary structure and in that regard, we took into account the salary of his superiors, Encik Abdullah Rasol as well as the Chief Operating Officer at that time, who had greater responsibility than the claimant but earned less that RM19,000; and

c) he was not involved in Underwater World Langkawi which paid him RM6,000 while Eden Floating Palace Sdn. Bhd., which paid him RM8,000 which we increased to RM10,000.

The claimant did not accept the offer. COW3 was shocked to be shown the claimant's letter dated 1 April 2003 at p. 23-24 of CLB2. COW3 said he did not agree with its contents for, amongst other things, the following reasons:

a) They had an agreed arrangement for him to stay on to assists us during the transition, following which, his position will be reviewed. They have acted in good faith in issuing him the offer of a role in the company on a permanent basis.

b) He was not removed as a director of the company as he had resigned from that position. As he had resigned as a director, he could not be an Executive Director. As far as COW3 knows, the Executive Directors that they have had in the company were always members of the Board.

c) He had been reporting to Abdullah Rasul since January, 2003 and complained to him about it. I do not know why he was suddenly complaining about this.

On 3 April 2003 (at p. 43 of CLB), the company replied to say that they needed more time that the 2 days given to them. It then gave the claimant a letter dated 7 April 2003 (at p. 52 of COB) reiterating the background and reasons for the offer of employment as Senior General Manager (F&B) (Restaurant) of the company. Accordingly the claimant had no basis to allege that he had been constructively dismissed. In any event, the claimant seems to have abandoned his employment as he left even before we could give him a reply. Since he had left employment and had returned the company car in his possession to the company on 11 April 2003. They wrote a letter to him dated 17 April 2003 at page 54 of COB to inform him that we assume that he would not be accepting the offer.

The terms and conditions in the letter of offer of 26 March 2003 was never implemented since he did not agree to it. He had already walked out of his job even before anything could be worked out or agreed with him.

The next witness for the company, Abdullah Rasol, COW1 gave evidence as follows:

COW1 joined the company as Director of Operations on 18 December 2002 and is still working for the company.

As Director of Operations, he was put in charge of the operations of 3 divisions in the company, namely infrastructure, food & beverage ("F&B") and manufacturing.

At the time he joined the company, the F&B operations were running at a huge loss. According to the audited accounts for 2002 at page 141 of COB 1, for the 12 months in 2001 and for 9 months in 2002, it suffered a loss of around rm10.5 million.

The F&B outlets were not operated directly by the company. They were operated through its subsidiaries such as Star Vor Sdn. Bhd., which operated a disco known as Star Vor, Eden Floating Palace Sdn. Bhd., which operated outlets on a floating vessel owned by that company and Eden Restaurant Sdn. Bhd., which operated restaurants, cafes and food courts.

COW1 immediate task in relation to the F&B operations when he joined was to arrest the losses in the F&B operations as a priority matter. His first task was to review the F&B outlets and to recommend closure if they had no future potential. What was clear was that the operations in Johor were doing particularly badly. The Johor food & beverage operations were under the claimant's charge. By 1 January 2003, the company had closed the following outlets in Johor:

(a) the food courts;

(b) the floating vessel based in the Free Trade Zone on which they operated a number of outlets and with the closure of the floating vessel, Eden floating Palace Sdn. Bhd.'s operations ceased;

(c) 2 cafe/pubs operated under the name of WHite Rose Park Bistro and Cafe de Fashion;

(d) kopitiam.

The closure meant that Eden Restaurant Sdn. Bhd.'s JB operations ceased and a number of employees were retrenched. There was also a disco operated in the Johor Bahru Free Trade Zone under the name of Star Vor and that was closed down in 2003. That resulted in Star Vor Sdn. Bhd. also ceasing operations. At round the end of March 2003, a food court which they operated in Sunway was also closed down.

With the closures, all that remained were 4 restaurants namely one in KLIA under the Eden Airport Restaurants Sdn. Bhd., a restaurant in Jalan Raja Chulan, Kuala Lumpur under Eden Village Kuala Lumpur, another in Batu Ferringhi, Penang (Eden Seafood Village Sdn. Bhd.) and a restaurant at Hutton Lane in Penang (under the company).

The claimant was involved in the closures. He assisted in the closures and they relied on him for information in the F&B operations.

Referring to page 20-32 of CLB. It is a memo on the organization and reporting structure which was to take effect from 1 January 2003. The F&B division was split into 2 sections namely, Restaurant and non-Restaurant and the claimant was only put in charge of the restaurant operations as Senior General manager (Restaurants). It seemed to reflect the claimant's role as, from the time the claimant joined the company, he was only involved in the restaurant business and not the non-restaurant business such as catering, an underwater world in Langkawi and Swiss Conferise.

The claimant never informed COW1 that he did not agree to the reorganisation. In fact, he did formally report to COW1 after that memo.

As a result of the closure of the outlets between the end of 2002 and end-March 2003, the F&B operations was reduced drastically and by the end of March 2003, there were only 4 restaurants left within the Eden Group compared to the large number they had previously.

According to COW1, the claimant was not in the office every day and COW1 often did not know where he was. After COW1 found that he was not around on a few occasions, he asked him to inform him in advance if he was not coming to the office but he only did so once in a while. More often that not, COW1 would have to call him to find out where he was and he would claim that he was doing some work outside the office which COW1 was not in a position to verify.

According to COW1, he did not know when the claimant left the company's employment exactly but he was not in the office from about the end of March 2003.

The 3rd witness for the company Nik Mohd Fuad, COW2 testified as follows:

COW2 was the current Director of Energy Sector of the company. He was a chartered accountant by training and he was also a member of the Malaysian Institute of Accountants and CPA Australia.

COW2 joined the company following the takeover of the Company by Zil Enterprise Sdn. Bhd. ("ZIL") on 18 October 2002 as the Director of Finance.

COW2 was involved in the takeover of the company by Zil from the operations side. He was a committee member of the joint due diligence committee which conducted a due diligence on Stratavest Sdn. Bhd. and Time Era Sdn. Bhd. and also prepared the application for Securities Commission approval.

According to COW2 no due diligence was conducted on the company by Zil prior to the takeover. Zil was not allowed to conduct an independent due diligence prior to the takeover but they were allowed to attend some of their operation meetings and to talk to their employees.

Referring to page 4-44 of COB1 , COW2 stated these are the audited financial statements for the company as at 31 October 2000.

Generally at page 10 COB 1, it shows that the company suffered a loss of 12,889,845 for the year ended 31 October 2000. If you compare the 1999 results with the 2000 results, the company's financial position was getting worse due to further losses suffered in 2000. At page 25 of COB1, it shows that the company was not able to meet its debt obligations including interest servicing & principal repayment to the banks. At note 33, page 39 COB1, the auditors state that 3 banks had started legal action against the company for non-payment of loan facilities totalling more that RM23 million. Note 34 at page 39-40 COB1 sets out a restructuring scheme involving the reverse takeover of the company by Zil to enable the company to pay its debts.

Reffering to page 45-94 of COB1, COW2 stated the document evidences the company's audited financial statements as at 31 December 2001.

Generally, at page 63, it shows that the company continued to suffer losses for the year ended 2001 in the sum of RM29,702,905. Shareholder funds went into a deficit position in that there was negative shareholders funds of RM4,910,041. At page 75-77 of COB 1, the auditors have expressed their uncertainly over the ability of a number of the companies to continue as going concerns. Nearly all these subsidiaries were involved in the F&B operations which were under the claimant's responsibility. At page 80 of COB1, it is noted that the company was not able to meet its debt obligations for the financial year ended 2001 and had been served with notices of demand by various banks. According to page 93 of COB1, the company was listed by the KLSE as a PN4 company and the company faced potential delisting from the stock exchange.

Referring to page 95-142 of COB1, COW2 said these documents are the audited financial statements for the 9 months ended 30 September 2002. It can be seen at page 100 of COB 1 that for the 9 months period, the company suffered a further loss of RM15,470,809. As at 30 September 2002, the company's accumulated losses had increased to RM723,338,464 and the company had negative shareholder funds of RM27,929,768. At page 125, it was noted that the company continues to be unable to meet its debt obligations.

Having looked at the accounts, COW2 stated he would describe the company's financial position between January 2000 - September 2002 and the performance of the food & beverage ("F&B") operations as very bad especially considering that Malaysia was not experiencing a recession during that period. According to the Segmental analysis in the audited accounts at page 39, 89 and 141 of COB1, the F&B operations, the primary business of the company at that time, showed continuous losses between 1999 and 2002.

COW2 further stated during the transition period, after the takeover, they reviewed the operations and they were trying to take control of and understand the operations. COW2 was part of the rehabilitation committee appointed by the company's Board of Directors. The documentation was found to be weak and that made the process even more difficult.

According to COW2, the claimant received no salary from the company. He received a total basic salary of RM19,000 from 3 subsidiaries until December 2002.

According to COW2 he prepared the document page 51 of COB. He did from the payroll and accounting records of the company. "UWL" refers to Underwater World Langkawi, "EVKL" refers to Eden Village Sdn. Bhd. and "EFP" refers to Eden Floating Palace Sdn. Bhd.

In 2002, the claimant receive a salary from the following:

(a) RM6,000 from Underwater World Langkawi;

(b) RM8,000 from Eden Village Sdn. Bhd.; and

(c) RM5,000 from Eden Floating Palace Sdn. Bhd.

Prior to that he received it form various other sources as stated in the table. In January and February 2003, COW2 paid his salary from Eden Village Sdn. Bhd. as Eden Floating Palace Sdn. Bhd. had closed down and he was not involved in Underwater World Langkawi.

COW2 said he did not know whether the claimant was receiving salary from various sources but there was one e-mail trail given to COW2 at page 1-3 of COB2 which suggests that the senior management of the company at that time, including the claimant, decided to take their salaries from profitable businesses for some tax avoidance purposes. It is not proper to charge a person's salaries to profitable entities when a person renders no service to that entity. This is something which COW2 corrected when he realised that it was being practised in relation to the claimant's salary.

COW2 stated he was never shown any records to justify the payments which were made to the claimant. In fact, the claimant did not even have a written employment contract. When the takeover first occurred, COW2 continued to make payments based on the practice in the past. However in January 2003, after he had gained a better control and understanding of the accounts, he noticed that the claimant's claims for allowances and service points were not supported by documentary evidence. Further there were also instances where there were double claims being made for both a fixed monthly travel allowance as well as individual travel claims from the same company. Normally an employee will only get one or the other and not both. This made COW2 quite suspicious and in January 2003, COW2 refused to sign payment vouchers for his fixed allowance claims until further investigations were made into his entitlements. COW2 said he would have a difficult time explaining to an auditor why such payments were made without supporting documents. Until the claimant left, COW2 could not find any document which states his entitlement to a fixed allowance.

The Issue

[34] The issue before this court in a claim on the ground of constructive dismissal is whether the company by issuing the letter at pp. 38-42 of CLB was guilty of a breach which went to the root of the contract of employment of the claimant which entitled the claimant to consider himself as constructively dismissed.

[35] Bearing in mind the above principle, the burden is on the claimant to prove

(i) that the company had committed a serious breach of a fundamental term of his contract of employment or evinced an intention no longer to be bound by the terms of the contract, and that

(ii) that the claimant left soon after the breach.

The Claimant's Submissions

[36] Learned counsel for the claimant submitted that the claimant in his capacity as the executive director had a valid contract of Service with the company which contract of service was never terminated either by the company nor the claimant prior to the company issuing the claimant its offer of a new employment vide its letter dated 26 March 2003. This simply means that when the company issued the claimant its letter dated 26 March 2003 it had clearly exhibited an intention not to be bound by the claimant existing contract of employment. In this way the company has clearly breached a fundamental term of the claimant's contract of employment and it went to the very root of his contract of employment as the executive director.

The Company's Submission

[37] In response to the above submission learned counsel of the company submitted that the claimant cannot be an Executive Director once he ceased to be a director. He cited Ford's Principles of Company Law "^th Edition" at p. 439 where it was stated as follows:

In a public company some directors may be employees of the company (called "executive director's" while others are non-executive directors whose main occupations lie outside the company"). Based on this, he submitted further that an executive director is a director with executive functions. The office of director and executive director is interwined in the position of executive director. Once the claimant ceased to be a director, he cannot be on executive director.

[38] Learned counsel for the respondent further submitted that the company has not breached the claimant's contract for the following reasons:

(a) The company made an offer which was never implemented

(b) The offer was made in accordance with the agreed arrangement with the claimant. He cited the case of Leong Peng Yoong Ors v. Venuganan Muniandy [2007] 1 ILR 30 (Award No. 955 of 2006) where the Industrial Court found that the making of an offer at a reduced salary did not amount to a breach of contract.

[39] The Industrial Court stated at p. 40 as follows:

[17] From the evidence before this court and the recapitulation of evidence above, this court finds that the issue of reduction of salary of the claimant was raised with the claimant merely for discussion in order to ascertain whether the claimant would agree to such a suggestion and to give his consent. This was clearly stated by COW3 even under cross - examination. Salary is indeed a fundamental term in a contract of service and hence it can only be changed or varied by mutual consent of the parties: Primason Sdn. Bhd. v. Chin Ooi Leng (supra). And this was what the respondent were trying to do with the assistance of COW3. When the claimant refused to accede to such a reduction of his salary and upon COW3'S advice, the agreement of contract of employment was drafted with the claimant's salary remaining unchanged or without any reduction: see COB page 3. There was no challenge as to this agreement as the undenied fact is that such an agreement had been drawn up by COW3 and claimant was requested to call at COW3's office to execute it vide COW3's letter to claimant dated 2 January 2002: COB page 3. However, the claimant did not execute it. Hence, there was no unilateral act on the part of the respondents firm to reduce the salary of the claimant when the meeting at the office of COW3 between COW1 and the claimant was merely to discuss on the issue and to ascertain his consent bearing in mind that the claimant had been paid with the same salary even till the month of December 2001 which he last received the fortnight payment on 2 January 2002 itself: COB page 42. Had the firm evinced an intention not to be bound by the contract of employment, it would only be reasonable to perceive that they would have unilaterally reduced his salary and paid the claimant the reduced salary in the month of December 2001 which would justify such an intention or the guilt of breach which went to the root of the claimant's contract of service. It is however not the case here. In addition, had the 3 respondents the intention no be bound by the contract of service with the claimant, they would not have instructed COW3 to prepare the agreement COB page 3-7 in the claimant's same salary of RM3,200. They could also have taken action against him on ground that the claimant had been absent from work especially in the month of November and December 2001 under s. 15(2) Employment Act 1955 and to terminate claimant's contract of service under s. 13(2) of the same Act. But again, the 3 respondents did not. COW1, according to COW3, was compassionate to say that the firm did not. want to terminate the claimant as he had a family to support. This court finds that the 3 respondents had not evinced an intention no longer to be bound by the contract of service with the claimant, though they were not happy with the continuous absence from office by the claimant.

[18] ... This court thus finds that from the evidence before this court, there was a discussion with the claimant of the proposal of reduction of his salary in COW3's office and it was not a fact that the claimant's salary had been reduced. This court therefore holds that the mere discussion by COW1 with the claimant in the presence of COW3 to seek his consent to the reduction of his salary does not constitute a fundamental breach which went to the root of the contract of service between the 3 respondents and the claimant. There must be an affirmative act of the breach of the fundamental term of the contract of service and not a mere contemplation before it can constitute one of the important elements of constructive dismissal. It is premature for the claimant to leave the service claiming constructive dismissal under such circumstances.

[40] Learned counsel for the company submitted that like in the Leong Peng Yoong case, the claimant was only made an offer by the company. There was no unilateral act on the part of the company to implement the terms of the offer. The claimant had walked out prematurely even before the offer was implemented or even discussed with him. On this ground alone, he submitted, the claimant's claim for constructive dismissal should fail.

[41] Learned counsel for the company further submitted that the offer was made in accordance to the agreed arrangement with the claimant.

[42] The company's case is that it had a temporary arrangement with the claimant arising from a discussion between COW3 and the claimant. The claimant was asked to assist with the transition and that his position would be reviewed once the transition period was over. The claimant denied such an arrangement when he was cross-examined. However, when COW3 was cross-examined by counsel for the claimant, it was put to COW3 that while that the claimant admits having a discussion with COW3 where he was asked to assist in the transition, the arrangement was not temporary.

[43] It is submitted that the company's evidence that there was a temporary arrangement is true for the following reasons:

(a) The company's F&B business was in a poor financial state. A perusal of p. 75-77 of COB shows that most of the subsidiaries with a double asterisk (to indicate that there were uncertainties in their ability to continue as going concerns) were in the F&B business under the claimant's responsibility (which CLW2 confirmed). It is highly unlikely that any rational or reasonable or even a sane person would offer the claimant, who was in charge of these loss making F&B operations, a long term role in the company as the head of the F&B operations. If a long term role was contemplated, then the claimant would have remained on the Board but instead, he was asked to resign. What makes it even more likely is that the review and restructuring following the takeover had not even commenced when COW3 spoke to the claimant and he would have no way of knowing what the new organization structure of the company would look like.

(b) Under the Multi Destar Agreement dated 8 March 2002 at p. 114-147 of COB, all the directors of the company were required to resign from their executive and directorship positions in the company. It is important to note that shortly after the agreement, on 22 March 2002, the claimant was given a testimonial by CLW3 (at p. 1-2 of CLB). The claimant's explanation for the testimonial is confusing. He says that it was given to him just in case he needed a job but not because he was thinking of leaving. The question is after being in the company since the 1970's, why would he suddenly ask for a testimonial in March 2002 if he was not interested in leaving?. The terms of the Multi Destar Agreement make it obvious that it was because he knew that he had to leave the company and that any arrangement with him to assist in the transition post-takeover would be temporary in nature.

(c) After the takeover, the claimant submitted resignation letters on the same terms as all the executive directors of the company dated 18 October 2002. Following the resignation letters all the executive directors of the company ceased to be employed by the company. The claimant was the only executive director who did not cease to work for the company immediately on 18 October 2002. He and 3 non-executive directors stayed on in the company after the takeover to assist in the transition. After the transition was over and after the F&B outlets had been shut down, consistent with there being only a temporary arrangement for the transition period, the 3 non-executive directors resigned in March 2003 and in the same month, the claimant was offered a new position in the company on a permanent basis.

(d) As CLW3 said in his evidence, the arrangement when the takeover occurred was "Tuan baru masuk dan Tuan lama keluar". The claimant was part of the "Tuan lama". He knew that he had to leave. When he was asked to stay on to assist during the transition, the claimant's role was restricted to assisting in the wrapping up of operations, the running of the dwindling restaurant business and the general transition of the company. A Director of Operations (COW1) was appointed to head the F&B operations. The claimant's position itself was transitory in nature. He was not given a permanent role in the company after the takeover. The only time the company did make an offer of a permanent role, he claimed constructive dismissal and walked out of the company.

(e) There were real business reasons for COW3 asking the claimant to stay on to assist in the transition period following the takeover on a temporary basis. COW3 did not have full details about the company's operations and the documentation in the company was weak. There was a need to arrest the huge losses in the F&B operations with minimal disruption. The claimant seemed to be the ideal person to assist in the transition as he was responsible for the operations of the F&B business prior to the takeover. As with all transition periods, they are temporary in nature. Even based on the claimant own version that he was asked to assist in the transition period, once the transition period was over, the whole arrangement would come to an end.

(f) The first 3 paragraphs of the letter at p. 38-42 of CLB set out the background to the offer being made to the claimant. Amongst other things, it stated that the claimant was asked to assist in the transition and that the transition had come to an end. The background stated in the letter is consistent with the evidence of COW3. The claimant, in his reply at p. 23-24 of CLB1, did not deny any part of the background set out in the letter at p. 38-42 of CLB. It is submitted that this shows that the claimant accepted the background as fact as if indeed there was no arrangement, the claimant would have furiously denied it when he gave his reply.

(g) The credibility of the claimant's evidence is weak. The claimant made many inconsistent statements in his evidence about his job scope. Although he was Executive Director (and he claimed that he paid attention at board meetings), he claimed that he did not know that the company was suffering from losses and that he did not know that audited accounts had been signed. His evidence was incredible and his answers were focused on being self serving rather that to tell the truth.

Learned counsel for the company further submitted that in view of the arrangement, the claimant's position in the company was transitory. He had submitted his resignation letters on the same terms as the other executive director's which was intended to cover the termination of all his relationships with the company. Once the transition period had come to an end, instead of asking the claimant to leave or side lining him, the company in good faith, sought to find him a position which could be suitable and offered give him the opportunity of a long term position in the company. There was no unilateral act amounting to a breach on the company's part and neither was there any repudiatory breach nor a fundamental breach of contract committed by the company. The company's actions were in fact consistent with the agreed arrangement arrived at with the claimant.

[44] It is not disputed that the claimant had tendered his resignation as the director of the company and 14 other related companies. However the claimant's stand is that he continued in his position as the Executive Director.

[45] It is equally not disputed that the claimant did not tender his resignation as the executive director. However it is the company's stand that when the claimant resigned as a director of the company and the related companies, he had also resigned "executive and salaried positions".

[46] Having duly considered the evidence as a whole and the submissions of both parties the court upholds and accepts the submissions of the company.

[47] From the evidence adduced before the court,the court finds that since October 2002 the claimant no longer functioned as Executive Director of any of the companies. This finding of fact is supported by the claimant's own evidence in cross-examination whereby he admitted that by a memo dated 1 January 2003 following the take over he was redesignated as Senior General Manager Restaurant reporting to the Director of Operations, Abdullah bin Rasul and he had duly complied with the memo and reported to Abdullah bin Rasul. If indeed the claimant was the Executive Director he would not have reported to the Director of Operations who was not an Executive Director with effect from January 2003.

[48] It is the view of the court that the claimant's claim that he was demoted vide the offer letter was an afterthought as the claimant know or should have known he was no more Executive Director when he resigned as a Director (not removed) and that he was asked to stay on a temporary basis during the transition period. The claimant denied such an arrangement during cross-examination. The court finds that there was indeed such an arrangement. It is absurd that the new management would retain the position of the claimant as Executive Director. The fact that he resigned as a Director shows that his position with the company was temporary in nature as Senior General Manager on a temporary basis.

Conclusion

[49] Having duly considered the facts and evidence before the court, the court rules that the claimant's case against the company that he has been constructively dismissed has been misconcieved and therefore must fall. The burden is on the claimant to show that he was constructively dismissed because of the breach committed by the company. There were too many doubts regarding the tenure of employment of the claimant after the takeover by Zil Group. The only one thing that was certain was that the service of the claimant was retained on a temporary basis after the takeover of the company by the Zil Group and that the claimant resigned Director which the court finds should include his position as Executive Director and that he remained in the service with the company on temporary basis as Senior Manager during the transition period after the takeover to assist the new management as agreed. It was meant to be a temporary arrangement and upon restructuring the company then made an offer of appointment vide the letter dated 26 March 2003 (see p. 38-42 of CLB). It is the court's view that the said letter was a mere offer and the company had not implemented the term of the offer as stated in the letter which the claimant alleged to have been breached. In the circumstances it was premature on the part of the claimant to walk out on constructive dismissal. Hence it can only be said that the claimant resigned on his own accord as he could not accept the new offer of employment. Accordingly, the claimant's claim against the company is hereby dismissed.

* * * * * *

Award(s) referred to:
Leong Peng Yoong Ors v. Venuganan Muniandy [2007] 1 ILR 30 (Award No. 955 of 2006)

Case(s) referred to:
Lewis v. Motorworld Garages Ltd [1986] ICR 157
Quah Swee Khoon v. Sime Darby Bhd [2001] 1 CLJ 9
Western Exccavating (ECC) Ltd v. Sharp [1978] 1 All ER 713
Wong Chee Hong v. Cathay Organisation (M) Sdn Bhd [1988] 1 CLJ 45; [1988] 1 CLJ (Rep) 298

For the claimant - VK Raj; M/s P Kuppusamy & Co
For the respondent - K Sivakumar; M/s Skrine

Reported by Sharmini Pillai