Legal update 13 of 2017

Does the Employee’s resignation in this case amount to a Constructive Dismissal by the Employer?

CASE: Southern Investment Bank Bhd/Southern Bank & Anor v Yap Fat & Anor [2017] 3MLJ 327

·    Yap Fat was the Acting CEO of and headed Southern Investment Bank’s Capital Market Department [the Bank].

·   On 26 May 2005 a meeting was held between one Mr. Goh and Yap Fat discuss Yap Fat’s future at the Bank.

·   During the meeting, Mr. Goh conveyed instructions given by Tan Sri Tan Teong Hean [CEO] that Yap Fat should leave the Bank’s employment.

·     Mr. Goh also informed Yap Fat that if he resigned voluntarily in writing, he will be paid the bonus and salary increment which was due to be paid soon.Yap Fat refused to do so.

·   However, on 12 July 2005, Yap Fat wrote to the Mr. Goh stating that he considered himself to have been constructively dismissed with effect from 12 July 2005.

·    His claim for Constructive Dismissal was on the following grounds:-

·   That he was not paid his bonus and increments for the years 2004 and 2005;

·   That the transfer of the 'agency' function from his portfolio to the bank's Credit Administrative Department was a demotion and/or victimization.

·  But, in the same letter he gave the bank three months' notice of his resignation as required by his employment contract and continued working for those three months receiving his usual salary and benefits. The matter was referred to the Industrial Court.

·    At the Industrial Court, the claim of Constructive Dismissal was allowed by the Court. The Court held that Yap Fat was dismissed without just cause and excuse by the Bank.

·  The Bank’s application to the High Court to quash the decision of the Industrial Court was also dismissed. The High Court essentially agreed that there was Constructive Dismissal.

·    The Bank then appealed to the Court of Appeal.

·   The Bank argued that:-Yap Fat was not constructively dismissed but that he had voluntarily resigned by giving notice of resignation as per his employment contract; during that notice period he continued to receive his monthly salary and other contractual benefits 

DECISION: The Court of Appeal allowed the Bank’s appeal and held there was no constructive Dismissal. 

The main grounds of the Court were:- 

·  The constructive dismissal contended for by Yap Fat cannot sustain because he failed to prove that there was any breach of the employment contract by Bank, let alone one which went to the root of the contract justifying his resignation.


·   The Court also held that any annual increment of salary or payment of bonus was at the absolute discretion of the management. Therefore, it was not a valid basis for Constructive Dismissal. 

·    As for the transfer of the 'agency' function from Yap Fat's portfolio, this was the prerogative of the Bank and was carried out in line with the structural revamping conducted by the Bank. These actions could not be construed as a breach going to the root of the employment relationship between Yap Fat and Bank. 

·       The removal of certain duties and responsibilities from Yap Fat's portfolio did not constitute a demotion as he continued to enjoy his monthly salary along with other benefits accorded to him under his employment contract during the three months' notice period. 

·       Yap Fat's delay of approximately five months in leaving employment went to show that there was never any conduct by the Bank which rendered his continued employment impossible, unreasonable and unbearable as alleged by him. 

·      In a claim for constructive dismissal, it was imperative for the employee to take immediate steps to walk out of his employment within a reasonable time after the alleged breach of contract failing which the employee would be deemed to have waived the breach and agreed to vary the contract.  



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