District Judge Lim Wen Juin:
This was the plaintiff’s application for an interim injunction restraining the defendant from “participating in, or performing, any work” for Power Partners Pte Ltd (“PPPL”) until 19 May 2020. The defendant was formerly employed by the plaintiff. His last day of service with the plaintiff was 20 November 2019 and he started work for PPPL on the same day.
The plaintiff contended that PPPL is its competitor and that by doing work for PPPL before 19 May 2020 the defendant is in breach of what the plaintiff calls in its pleadings in the underlying action the “Non-compete Obligation”. The Non-compete Obligation is a contractual term that provides that the defendant shall not compete with the plaintiff for a period of six months after ceasing to be employed by it. This period expires on 19 May 2020 and the plaintiff’s position was that the defendant should thus be restrained from working for PPPL until that time. It was common ground that the Non-compete Obligation is a covenant in restraint of trade.
I heard the application on 17 March 2020 and dismissed it on 19 March 2020. I publish now the reasons for my decision primarily in order to address a legal argument advanced by the defendant that appeared not to have been discussed before in local jurisprudence. The broad contours of this argument were that the usual principles governing interim injunction applications in American Cyanamid Co v Ethicon Ltd [1975] AC 396 (“American Cyanamid”) must be modified in a particular type of case of which this was one.
The applicable legal principles
Under the American Cyanamid principles a court dealing with an application for an interim injunction has first to assess whether the claims made by the applicant in the underlying action raise a “serious question to be tried”. If they do the court has then to consider whether the “balance of convenience” lies in favour of granting or not granting the injunction sought. There is by now no question in Singapore that the American Cyanamid principles apply where the interim injunction is sought to restrain a party from breaching a covenant in restraint of trade: see the Court of Appeal decision Reed Exhibitions Pte Ltd v Khoo Yak Chuan Thomas and another [1995] 3 SLR(R) 383 (“Reed Exhibitions”) at [12]–[14]). But counsel for the defendant Ms Poonaam Bai contended that the American Cyanamid principles need modification in restraint of trade cases in which it would be impossible for the trial of the action to take place before the expiry of most or all of the interim period for which the injunction would be in force. The significance of this is that any decision as to the interim injunction would in effect determine with finality the rights of the parties in relation to the injunctive relief sought. Put another way any interim injunction granted in such a case would resemble a permanent injunction.
Ms Bai submitted that the applicant in such a case had to show not merely the “serious question to be tried” required at the first stage of the American Cyanamid enquiry but a reasonably good prospect of succeeding at the trial of the action, meaning that if the applicant failed to cross that higher threshold its application should be dismissed without any need to consider the balance of convenience. In this case the injunction sought if granted would cease to have effect after 19 May 2020. Given that I heard this application about two months before that date it was plain that the trial of this action would not take place before then. Thus if Ms Bai’s submission were correct I should dismiss the plaintiff’s application outright unless I was first satisfied that it had a reasonably good prospect of succeeding at the trial of this action.
Ms Bai’s submission was grounded on the decision of the Court of Appeal of England and Wales in Lansing Linde Ltd v Kerr [1991] 1 WLR 251 (“Lansing”). The plaintiff employer in that case sought an interim injunction to restrain a defendant ex-employee from working for a competing business. The relevant contractual clause prohibited the defendant from working for a competing business for 12 months after termination of his employment with the plaintiff. At first instance Knox J declined to grant the injunction, and one of his conclusions was that “[s]ince a trial could not take place until the 12-month period of restraint had almost expired, it was necessary to assess and take into account the prospects of the plaintiff succeeding at trial, before granting an interlocutory injunction” (at 256B–C). The Court of Appeal unanimously agreed that Knox J had been right to take into account the plaintiff’s prospects of success at trial. Staughton LJ opined that “justice requires some consideration as to whether the plaintiff would be likely to succeed at a trial” and that in the circumstances of the case “it is not enough to decide merely that there is a serious question to be tried” (at 258B). Beldam LJ had “difficulty” seeing how a judge could reach a decision as to whether to grant the interim injunction or not “without considering the likelihood that the plaintiff will succeed in establishing the enforceability of the covenant in restraint of trade at trial” given that any such decision would “effectively determine the rights of the parties” (at 266F–H). Butler-Sloss LJ expressed the view that Knox J had been “right to take into account in the circumstances of this case the strength of the case of the plaintiff company as disclosed on the affidavit evidence” (at 270C).
I disagreed with Ms Bai’s submission in this regard even though I ultimately decided this application in her client’s favour. No doubt Lansing is authority for the proposition that it might be apt and proper to take into account the plaintiff’s prospects of succeeding at trial in deciding whether to restrain the defendant in cases where the period of restraint would end before the trial can take place. But it is quite another thing to say, as Ms Bai did, that Lansing establishes that in such cases the usual requirement of a “serious question to be tried” under the American Cyanamid principles is replaced by a more stringent requirement of a reasonably good prospect of the plaintiff succeeding at trial. Were that so, it would mean that the shorter the period of restraint the more likely it is that the plaintiff will have to surmount a higher threshold just to advance to the stage where the balance of convenience is assessed and avoid having its application dismissed outright. This is because the shorter the period of restraint the more likely it will lapse before a trial can occur. That would be a counter-intuitive and perverse state of affairs because I would expect that all else being equal the shorter the period of restraint the more reasonable it is to impose it on the defendant and hence the easier it should be for the plaintiff to entreat the court to do so. I thought this a reason why it would not be right as a matter of principle to accept Ms Bai’s submission.
I thought also that a close analysis of Lansing itself revealed no firm foundation therein for Ms Bai’s submission. The premise of the submission was that Lansing had modified the “serious question to be tried” standard at the first stage of the American Cyanamid enquiry. But Lansing could not have heralded any change at that first stage because the English Court of Appeal regarded the likelihood of the plaintiff succeeding at trial as a point belonging to the subsequent stage of the enquiry where the balance of convenience is assessed and not to the first. Although, as Ms Bai pointed out, Staughton LJ did say in Lansing that “it is not enough to decide merely that there is a serious question to be tried” (at 258B), this must be read in the light of his earlier comment that the cases subsequent to American Cyanamid “show that a wider survey of the balance of convenience may sometimes be necessary, including an assessment of the plaintiff’s prospects at trial” (at 257A). It thus seemed to me that Staughton LJ did not have in mind any elevation of the usual bar of a “serious question to be tried” and meant only to say that it would not suffice for the plaintiff to raise a “serious question” if the weakness of its case were so pronounced even on an interlocutory basis that it tilted the balance of convenience away from the grant of an interim injunction.
I thought it clearer still that the other members of the English Court of Appeal in Lansing regarded the plaintiff’s prospects of success as but one factor among several to be weighed in the overall balance of convenience. Butler-Sloss LJ referred to it as “a relevant additional element which understandably and rightly tipped the balance” for Knox J (at 270C–D), while I understand Beldam LJ to have accepted that it would be an error to treat it as a factor “of paramount or overriding importance” and to omit to “give proper weight to the other matters bearing upon the balance of convenience” (at 267G–268A).
Turning to first principles, in considering any application for an interim injunction the court must “give full weight to all the practical realities of the situation to which the injunction will apply”, as Lord Diplock put it in the House of Lords decision NWL Ltd v Woods [1979] 1 WLR 1294 (“NWL”) at 1306C. These “practical realities” would include the fact that the period of restraint under the injunction – or most of it – would end before the trial of the action, thereby causing the interim injunction to take on the character of a permanent injunction in the sense that it would, in relation to the injunctive relief sought, determine the rights of parties and leave little or nothing to be decided at the trial when it eventually takes place. And if an interim injunction “would have the effect of a permanent injunction” this is a factor that “militate[s] against the grant of the injunction” within the rubric of...
