Prashant Mudgal v SAP Asia: The High Court Confirms Singapore Employers Owe an Implied Duty of Mutual Trust and Confidence

When a Singapore employer places an underperforming staff member on a Performance Improvement Plan (a “PIP“), it is usually seen as a routine, defensible piece of HR administration: give the employee formal notice of the problem, a fixed period to fix it, and a documented basis for whatever decision follows. The High Court’s decision in Prashant Mudgal v SAP Asia Pte Ltd [2026] SGHC 15 shows that this comfortable assumption can be wrong, and expensive to get wrong, even where the actual damages award turns out to be nominal.

On 21 January 2026, Justice Dedar Singh Gill delivered a closely reasoned judgment confirming, for the first time at High Court level with full analysis, that Singapore employment contracts carry an implied term of mutual trust and confidence. He went on to find that SAP Asia Pte Ltd breached that term when it placed Mr Prashant Mudgal, then its Head of Services Sales for the Ariba line of business, on a 45-day PIP that was never a genuine opportunity to improve, but a “farce” designed to build a paper trail for a termination decision that had already been made. The claim succeeded. The damages awarded were just SGD 1,000. For Singapore employers, the lesson is not about the size of the cheque; it is about the fact that a cheque was required to be written at all, and about what that means for how disciplinary and PIP processes are documented and run.

1. What the Case Is About

Mr Mudgal joined a SAP SE subsidiary in October 2012 and moved to SAP Asia Pte Ltd (the “Defendant“) on 11 August 2015. By the time of the events in question he held the role of Head of Services Sales for the Ariba line of business across the Asia Pacific and Japan region. His team sold services attached to SAP’s Ariba procurement software; a separate services delivery team, headed by a colleague, then delivered those services to customers. The two teams had to work closely together, and it was the breakdown of that working relationship, principally through two incidents in 2018 (the “Wipro Incident” and the “Sesa Goa Incident”) involving heated internal e-mail exchanges and client complaints, that set the case in motion.

Following those incidents, Mr Mudgal’s superior formed the view, as early as November 2018, that she wanted him out of the business “as soon as possible”. Instead of terminating him immediately (which the Employment Agreement plainly allowed, for any reason or none, provided proper notice was given), the Defendant placed him on a PIP on 21 March 2019 for a period of 45 days, ending 5 May 2019. Correspondence disclosed at trial showed that Mr Mudgal’s superiors did not believe the issues were resolved and had, from the outset, no real appetite to give him a long-term opportunity to correct his conduct. A notice of termination was served on 21 November 2019, with his last day of service on 31 December 2019.

Mr Mudgal sued, alleging a conspiracy to terminate his employment and breaches of several implied terms in his Employment Agreement. The Court dismissed the conspiracy claim and an implied term said to prohibit an “arbitrary, capricious, perverse, irrational and/or bad faith” termination process (following the Appellate Division’s clear rejection of that particular formulation in Dong Wei, discussed below). But the Court found that the Defendant had breached the implied term of mutual trust and confidence by using the PIP as a pretext, an outwardly legitimate process that, in substance, was never intended to give Mr Mudgal a genuine chance to keep his job.

2. Legal Basis

The implied term of mutual trust and confidence originates in English law, from the House of Lords’ decision in Malik v Bank of Credit and Commerce International SA [1998] AC 20, where Lord Steyn formulated it as an obligation that an employer shall not, “without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee”.

Singapore case law had, for some years, proceeded on the assumption that this term was part of local law. The High Court first said so definitively in Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd [2013] 2 SLR 577, and the term appeared to have, in Justice Gill’s words, “strongly taken root” in local jurisprudence thereafter. That settled position was disturbed by the Appellate Division’s decision in Dong Wei v Shell Eastern Trading (Pte) Ltd [2022] 1 SLR 1318 (“Dong Wei“), which cast doubt, in obiter remarks, on whether the implied term should be recognised as part of Singapore law at all. Several subsequent High Court decisions declined to take a firm position either way, leaving Singapore employers and employees in a genuinely uncertain position for several years.

Mudgal resolves that uncertainty, at least at High Court level. After an extensive review of precedent, principle and policy, Justice Gill held that the implied term of mutual trust and confidence has existed, and continues to exist, in Singapore employment contracts since Cheah Peng Hock, unless and until that decision is expressly overruled by a higher court. Importantly, the judgment also makes clear that the threshold for breach remains a high one: the employer’s conduct must be objectively assessed, and it must be of a kind that is “calculated and likely to destroy or seriously damage” the relationship of trust, not merely conduct that an employee subjectively found unfair or upsetting. An employer retains a full defence if it can show “reasonable and proper cause” for what it did. The Court was also careful to preserve an employer’s unqualified right to terminate an employment contract for any reason (or none) in accordance with its terms; the implied term does not fetter that right, and does not itself convert an otherwise lawful termination into a wrongful one. What it does constrain is the manner in which an employer conducts itself in the run-up to a decision, particularly where it dresses up a foregone conclusion as a genuine process.

3. Who This Affects

This decision matters to two overlapping groups.

Singapore employers of every size, but especially those with structured HR processes (PIPs, disciplinary frameworks, performance review cycles), now face a confirmed and specific ground of contractual liability that sits alongside, and is analytically distinct from, wrongful dismissal and statutory claims under the Employment Act 1968 or before the Employment Claims Tribunals. It is not limited to large multinationals; any company that uses documented performance management, including SMEs advised by corporate secretarial or HR consultants, is potentially exposed if a PIP or disciplinary process is run as a formality rather than a genuine one.

Employees facing a PIP, a warning process, or a disciplinary investigation now have clearer legal footing to challenge conduct that goes beyond the substance of the process itself, particularly where there is documentary or testimonial evidence that management had already decided on an outcome before the process began.

4. Step-by-Step Process: How Such a Claim Is Brought

A claim of this kind is a contractual claim, not a claim under the Employment Act, and it typically proceeds as follows:

Step 1: Identify the implied term said to have been breached. A claimant must plead which facet of the implied term is engaged, for example a duty not to behave in an intolerable or wholly unacceptable way, or a duty to conduct fair investigations. These are all facets of the same underlying implied term, not free-standing duties in themselves.

Step 2: Establish the employer’s conduct, objectively assessed. It does not matter whether the employer subjectively intended to cause harm, or whether the employee subjectively felt his trust was destroyed; what matters is whether the employer’s conduct, viewed objectively, was of a kind calculated and likely to destroy or seriously damage the relationship of trust and confidence. In Mudgal, this meant closely examining internal e-mails and testimony to show the PIP had a pre-ordained outcome.

Step 3: Show the threshold is met, and anticipate the “reasonable and proper cause” defence. The bar is deliberately high. Not every act of unfairness, poor management, or hurt feelings will qualify; the Court reiterated that it would take “quite extreme behaviour” on the employer’s part, and even then, an employer escapes liability if it had reasonable and proper cause to act as it did.

Step 4: Prove loss, or accept nominal damages. Breach of contract is actionable without proof of loss, so a claimant can succeed on liability alone. But to recover more than a nominal sum, the claimant must separately prove the fact and quantum of loss flowing from the breach, and that the loss is not too remote. In Mudgal, claims for psychiatric injury, injury to reputation and pride, and aggravated or punitive damages were all rejected on the facts, principally because the claimant could not show the necessary causal link, or because the loss was too remote given that the deception was, in the Court’s words, “insidious, not apparent” at the time.

Such a claim is typically brought alongside, or as an alternative to, other causes of action: conspiracy (as here, though it failed on the facts), wrongful dismissal at common law, or a parallel statutory claim under the Employment Act before the Tribunal for the Adjudication of Employment Claims. Directors and HR teams should note that a contractual claim of this kind falls outside TADM’s jurisdiction and must be brought in the ordinary courts.

5. Documents and Evidence Relevant

The judgment turned heavily on documentary and testimonial evidence assembled over years, which is itself an important lesson for employers. Key categories of evidence included:

• The PIP document itself: its stated objectives, the period given, and whether it was framed, as the Defendant’s own written communication claimed, as a genuine opportunity to be “successful”.
• Internal correspondence among managers and HR, predating the PIP, that revealed the true intention behind it. Here, e-mails showed management had decided to terminate the claimant as soon as possible months before the PIP was formally issued.
• The employer’s own internal PIP policy, setting out the possible outcomes (successful completion, extension, or termination), used by the Court as the benchmark for whether the process was genuine.
• Contemporaneous performance review records, including whether the employee was properly assessed against the PIP’s stated objectives, and whether any closing-out in fact took place.
• Witness testimony under cross-examination, particularly of the HR business partner, whose attempt to explain away the absence of any genuine intention to provide long-term correction was found “an afterthought” unsupported by the documentary record.
• Medical and psychiatric evidence, where a claimant seeks damages for psychiatric injury; here, the Court examined psychiatric reports and the claimant’s own account to his treating doctor to determine causation and remoteness.

The overarching lesson is that the paper trail an employer creates to protect itself in a disciplinary process can just as easily be the evidence that defeats it, if that paper trail is inconsistent with what management actually intended at the time.

6. Timeline and Costs

Timeline of Key Events

Costs and Damages Exposure

The nominal damages figure is the single most important practical nuance of this case. A finding of breach carries real reputational and governance consequences, and exposes an employer to a costs order (typically the losing party bears a substantial portion of the successful party’s costs, subject to the court’s discretion), but it does not automatically translate into a large damages award unless the employee can independently prove financial or other recoverable loss caused by the breach itself, as distinct from the underlying termination.

7. What Happens After the Order

The judgment does not, by itself, change any statutory obligation on Singapore employers. There is no new form to file and no new registration requirement. What it does change is the legal risk profile of everyday HR administration. Boards, directors and HR leads should treat the following as practical governance takeaways:

• Design PIPs to be genuine, not decorative. If a PIP is issued, decision-makers must, at that point, be genuinely open to the employee succeeding. Internal correspondence that pre-judges the outcome, even informally, is discoverable and can be fatal.
• Keep internal and external communications consistent. The gap between what an employee is told and what management privately intends is precisely what the Court scrutinised. Inconsistency between the two is strong evidence of bad faith.
• Follow through on the PIP’s own stated process. If a PIP promises regular reviews and a defined set of outcomes, those steps should actually happen and be documented. A PIP quietly abandoned or never properly closed out is itself evidence of a sham process.
• Remember the employer’s right to terminate is not what is at risk. This decision does not stop an employer terminating lawfully with notice or payment in lieu. The risk arises specifically from dressing up a foregone conclusion as a fair process; employers who prefer certainty may be better served terminating cleanly than running an insincere improvement process.
• Expect this decision to be tested on appeal. Because Mudgal resolves a point that has divided the High Court for years, and because costs remain outstanding, employers should watch for further appellate guidance before treating the law as entirely settled.

8. Frequently Asked Questions

What does “mutual trust and confidence” actually mean?
It is a term implied by law into Singapore employment contracts, requiring that an employer not, without reasonable and proper cause, act in a way that is objectively calculated and likely to destroy or seriously damage the relationship of trust between employer and employee. It does not require perfect management; the threshold for breach is high.

Can an employee sue just for being placed on a PIP?
No. It is not the decision to place an employee on a PIP that breaches the implied term. The breach arises from the manner in which the PIP is administered, specifically, misleading an employee into believing he has a genuine opportunity to improve when the outcome has already been decided.

How should a Singapore employer design a defensible PIP?
Ensure decision-makers are genuinely willing to retain the employee if performance improves; set clear, achievable objectives; follow through with reviews and close-out the PIP’s own policy promises; and keep internal communications about the employee’s prospects consistent with what the employee is being told.

Does this apply to all employment contracts, or just written ones?
The implied term operates as a matter of Singapore contract law and applies by default to employment contracts generally, unless expressly excluded. It is not limited to any particular seniority level or industry.

If a breach is found, how much can an employee recover?
Breach of contract is actionable without proof of loss, so an employee can succeed on liability alone and recover nominal damages, as happened here (SGD 1,000). To recover a substantial sum, the employee must separately prove actual, non-remote loss caused by the breach, a difficult evidential hurdle for claims of psychiatric injury or reputational harm.

Does this decision affect an employer’s right to terminate employment at any time?
No. A Singapore employer may still terminate an employment contract at any time and for any reason, or none, provided it does so in accordance with the contract. The implied term does not fetter that right; it constrains the conduct and representations made in the run-up to a decision.

Need Help With This Matter?

If your company is facing this situation, Raffles Corporate Services can assist with the groundwork – ACRA filings, compliance documentation, and coordinating with experienced Singapore law firms. For matters requiring court proceedings, we work with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice.

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This article is for general information only and does not constitute legal advice. For advice specific to your situation, please consult a qualified Singapore Advocate and Solicitor.

For related reading, see our guides on the Singapore Employment Act 2026: Key Provisions Every Employer Must Know, Employment Claims Tribunals and TADM in Singapore (2026), the Workplace Fairness Act in Singapore (2026): An Employer’s Guide, Flexible Work Arrangements (FWA) Singapore 2026: Employer’s Complete Guide, and Your Singapore Company Has Been Sued: A Director’s First-Steps Guide to Defending a Civil Claim (2026).

The Editorial Team, Raffles Corporate Services