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Restraint of Trade: A Singapore Perspective
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Restraint of Trade: A Singapore Perspective
Ravi Chandran
Business Law Review
Volume 29, Issue 12 (2008) pp. 382 – 386
https://doi.org/10.54648/bula2008060
Abstract
The position in Singapore with regards to restraint of trade clauses in employment contracts is largely similar to the position in the United Kingdom. Nonetheless, while the authorities in the United Kingdom are divided on the validity of “non–poaching of employees” type of restraint of trade clauses, the very recent Singapore Court of Appeal decision of Man Financial (S) Pte Ltd v Wong Bark Chuan, David has endorsed the validity of such clauses whole heartedly after an extensive review of authorities from the United Kingdom, Hong Kong and Australia. In addition the court in Man Financial (S) Pte Ltd v Wong Bark Chuan had the opportunity to consider several other related issues such as the significance of the fact that the employee was specifically paid for entering into the restrictive covenant, the significance of the fact that the employee had expressly agreed to the restrictive covenant and the significance of fact that the employee received legal advice in relation to the restrictive covenant.
Extract
Restraint of Trade: A SingaporePerspectiveRavi Chandran*SummaryThe position in Singapore with regards to restraint oftrade clauses in employment contracts is largely similar tothe position in the United Kingdom. Nonetheless, whilethe authorities in the United Kingdom are divided on thevalidity of ‘‘non-poaching of employees’’ type of restraintof trade clauses, the very recent Singapore Court ofAppeal decision ofMan Financial (S) Pte Ltd v WongBark Chuan, Davidhas endorsed the validity of suchclauses whole heartedly after an extensive review ofauthorities from the United Kingdom, Hong Kong andAustralia. In addition the court inMan Financial (S)Pte Ltd v Wong Bark Chuanhad the opportunity toconsider several other related issues such as the signifi-cance of the fact that the employee was specifically paidfor entering into the restrictive covenant, the significanceof the fact that the employee had expressly agreed to therestrictive covenant and the significance of fact that theemployee received legal advice in relation to the restric-tive covenant.The FactsThe plaintiff, Wong Bark Chuan, David was themanaging director and chief executive officer of thedefendant, Man Financial (S) Pte Ltd which providedbrokerage services. On 13 June 2005, the plaintiff wasasked to resign and was placed on garden leave forthree months from 13 June 2005 to 13 September2005. Meanwhile the plaintiff and the defendant com-pany entered into an agreement regarding the termina-tion of his employment. The termination agreementcontained among other restrictive covenants, a ‘‘non-solicitation of employees’’ clause. It also provided thatthe plaintiff would discharge and release the defendantcompany and its officers from all claims, demands andcauses of action related to his employment with thecompany. In return, the termination agreement pro-vided that the plaintiff would receive 13,014 shares inthe Man Group plc and US$263,000, assuming he didnot breach the terms of the termination agreement.Later, the defendant company alleged that the plaintiffhad breached among other things, the ‘‘non-solicita-tion of employees’’ clause and hence declined to payhim the benefits under the termination agreement.The plaintiff commenced an action to claim the bene-fits.The High Court Decision1In the High Court, in relation to the ‘‘non-solicitationof employees’’ clause, the first issue was whether thecategories of restraint of trade were closed. In thisregard, the court acknowledged that the categories ofrestraint of trade were not closed, citing another localdecision, namely,National Aerated Water Co Ltd vMonarch Co Inc2(though this was not a case relatingto employment law) wherein the Court of Appeal hadstated,3InEsso Petroleum, supra, at p 337, LordWilberforce, after reviewing the case law on thesubject recognised that while contracts which werefound to be in restraint of trade might becategorised, the categories could never be closed.The second issue was whether the defendant companyhad a legitimate interest in relation to the ‘‘non-solici-tation of employees’’ clause. Though the court referredto the English authorities on this point which weredivided4it did not finally rule on the point. This wasso for two reasons. Firstly, the court held that thedefendant company had not tendered any evidence toshow that it had a legitimate interest. The court con-trasted this withSBJ Stephenson Ltd v Mandy5whereevidence was specifically tendered to show that thecompany had invested a great deal in training the staff.However, the High Court did not consider whetherthere could be a legitimate interest on any other basis.Secondly, the court held that the clause was toowide in any event. The relevant clause in questionread, ‘‘In further consideration of the foregoing, youagree that for a period of seven (7) months, from theTermination Date, that is, up to 13 January 2006 youshall not directly or indirectly employ or solicit theemployment of (whether as an employee, officer, direc-tor, agent or consultant) any person who is or was atany time during the period 13 June 2004 to 13 June2005 an officer, director, representative or employee ofthe Company.’’The court in held that this was too wide on severalgrounds. Firstly, as inTSC Europe (UK) Ltd vMassey,6it was too wide in that in extended to allemployees regardless of their experience or impor-tance. As the clause stood, it even prevented the plain-tiff from soliciting a ‘‘cleaner, an office-boy or aclerical officer’’.7The court also said that the covenantwas too wide in that in extended to employees whohad already left the employment of the defendant com-International Corner* Associate Professor, National University ofSingapore.1[2007] SGHC 5.2[2000] 2 SLR 24.3Ibidat 31.4SeeIngham v ABC Contract Services Ltd(12 November 1993,unreported), SBJ Stephenson Limited v Keith Anthony Mandy[2000] FSR 286,Dawney, Day & Co Ltd v De BraconierD’Alphen[1997] IRLR 442,Alliance Paper Group plc vPrestwich[1996] IRLR 25 andTSC Europe (UK) Ltd v Massey[1999] IRLR 22 on one hand andKores Manufacturing Co Ltd vKolok Manufacturing Co Ltd[1959] Ch 108 andHanoverInsurance Brokers Ltd v Shapiro[1994] IRLR 82 on the other.5[2000] IRLR 233.6[1999] IRLR 22.7Supran. 2 at 31.Business Law ReviewDecember 2008282
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