Asia Petworld Pte Ltd v Sivabalan s/o Ramasami

• Jurisdiction: Singapore
• Judge: Philip Jeyaretnam J
• Judgment Date: 26 May 2022
• Docket Number: Suit No 258 of 2021
• Court: High Court (Singapore)

Asia Petworld Pte Ltd

and

Sivabalan s/o Ramasami and another

[2022] SGHC 128

Philip Jeyaretnam J

Suit No 258 of 2021

General Division of the High Court

Intellectual Property — Law of confidence — Breach of confidence — Former employee setting up new business — Employee using information acquired while working for former employer — Whether burden of proof was on employee to show that his conscience was unaffected — Whether information possessed necessary quality of confidence

Tort — Conspiracy — Company allegedly committing act of conspiracy — Whether pre-incorporation act could amount to act of conspiracy — Section 41(1) Companies Act 1967 (2020 Rev Ed)

Held, dismissing the claim:

(1) The employee was subject to an equitable duty of confidence, derived from his implied duty of good faith and fidelity as Asia Petworld's employee: at [41].

(2) Where confidential information was accessed or acquired without a plaintiff's consent, the legal burden lay on the defendant to prove that its conscience was unaffected. However, as confirmed by the Court of Appeal in Lim Oon Kuin v Rajah & Tann Singapore LLP[2022] 2 SLR 280, this shift in the burden of proof only occurred where the acquisition of the confidential information by the defendant was unauthorised. Here, the burden of proof to show that the employee misused the Information remained on Asia Petworld. This was because the employee had acquired his knowledge of Asia Petworld's procurement or sales market over the years, and this was not an unauthorised manner: at [36], [37] and [56].

(3) Not all information that an employee was obliged to keep confidential during his employment was information that was protectable as confidential information after he ceased to be employed. The Information was confidential only in the sense that it would have been a breach of the employee's duty of good faith to reveal it to a competitor while he was still an employee and such information was current and of value. The Information was not confidential in that it constituted trade secrets which were protectable after he ceased to be an employee: at [42] and [54].

(4) The knowledge and experience that an employee acquired during his employment was not protectable confidential information. When a salesman left a company, he might well be able to remember how that company priced its products. While it would be wrong for him to take with him unpublished price lists, he was not prevented from using his knowledge and recollection of company's prices in his new business. There was no evidence of documents or information being taken from Asia Petworld by the employee at the end of his employment, and thus the Information was simply knowledge and experience in his head that he legitimately acquired while working for Asia Petworld. This was not information possessing the requisite quality of confidence: at [43], [53] and [54].

(5) Section 41(1) of the Companies Act 1967, which permitted ratification of pre-incorporation contracts or other transactions, could not be relied on to ratify an overt act for the purpose of conspiracy: at [72] and [73].

(6) Preparatory steps to compete with a former employer would not constitute a breach of the duty of good faith and fidelity. Only actual competitive activity was not permissible. The employee's incorporation of GPC and registration of its website did not constitute competitive activity: at [78] and [79].

(7) If damages had been awarded, the appropriate comparator to assess loss of profits would have been the profits that Asia Petworld would have been able to make without the employee working for it. This was because the employee was not obligated to continue working for Asia Petworld. He was entitled to resign and remove his skills from the service of Asia Petworld: at [80].

Case(s) referred to

Adinop Co Ltd v Rovithai Ltd [2019] 2 SLR 808 (folld)

Asia Business Forum Pte Ltd v Long Ai Sin [2003] 4 SLR(R) 658; [2003] 4 SLR 658 (folld)

E Worsley & Co Ltd v Cooper [1939] 1 All ER 290 (refd)

Faccenda Chicken Ltd v Fowler [1986] 3 WLR 288; [1986] 1 All ER 617 (refd)

I-Admin (Singapore) Pte Ltd v Hong Ying Ting [2020] 1 SLR 1130 (refd)

Lim Oon Kuin v Rajah & Tann Singapore LLP [2022] 2 SLR 280 (folld)

Quah Kay Tee v Ong and Co Pte Ltd [1996] 3 SLR(R) 637; [1997] 1 SLR 390 (refd)

Sir W C Leng & Co Ltd v Andrews [1909] 1 Ch 763 (refd)

Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart [2012] 4 SLR 308 (folld)

Tang Siew Choy v Certact Pte Ltd [1993] 1 SLR(R) 835; [1993] 3 SLR 44 (folld)

Tribune Investment Trust Inc v Soosan Trading Co Ltd [2000] 2 SLR(R) 407; [2000] 3 SLR 405 (refd)

Facts

Asia Petworld Pte Ltd (“Asia Petworld”) was a Singapore company involved in the drop shipping of pet products. Mr Sivabalan s/o Ramasami (the “employee”) was Asia Petworld's warehouse manager for around six years.

On 1 February 2021, the employee tendered his resignation. Thereafter, he set up Global Pet Co Pte Ltd (“GPC”), with Mr John Robert Foley (“Mr Foley”). Mr Foley was a director and shareholder in Sierra Nevada Pet Company (“SNPC”), a major customer of Asia Petworld. After GPC was set up, SNPC stopped using the services of Asia Petworld and started using those of GPC instead.

Before the end of his employment by Asia Petworld on 28 February 2021, the employee told some of Asia Petworld's other employees and customers that he was leaving Asia Petworld and setting up a new business, GPC. One of the customers that the employee spoke to was PetBucket. By August 2021, the volume of orders from PetBucket to Asia Petworld had reduced significantly.

Asia Petworld alleged that the employee and GPC had misused its confidential information (the “Information”). It also alleged that the employee and GPC and had conspired to injure it. Finally, Asia Petworld alleged that the employee breached his implied duty of good faith and fidelity arising from his employment.

Legislation referred to

Companies Act 1967 (2020 Rev Ed) ss 41, 41(1) (consd)

Employment Act (Cap 91, 2009 Rev Ed) ss 18A, 18A(2)

Nandwani Manoj Prakash and Quah Chun En Joel (Gabriel Law Corp) for the plaintiff;

Narayanan Vijya Kumar (Vijay & Co) for the defendants.

26 May 2022

Judgment reserved.

Philip Jeyaretnam J:

Introduction

1 It is difficult for an employer when a good employee leaves to set up his own business, especially if he plans to do so with an erstwhile customer of the company. In the absence of restrictive covenants negotiated and agreed by the employee for the legitimate protection of the employer, there is nothing to stop the employee from doing so. The employer must simply adapt and find a replacement. The question may arise, however, of whether the employee has taken confidential information of the employer for use in the new business. In the present case, the employee was indeed very good at his job, having built up experience with his employer in procurement for drop shipping of veterinary and other pet products. The principal issue in this case is whether he had simply honed a skill and legitimately acquired knowledge that he was entitled to carry with him, or instead was wrongfully exploiting confidential information of his previous employer.

Facts

The parties

2 The plaintiff is Asia Petworld Pte Ltd, a Singapore-based drop shipper of pet products. The plaintiff procures products from authorised dealers, generally for reduced prices, and then sells those products to online retailers. When a customer of the online retailer places an order on its website, the order is relayed to the plaintiff who fulfils the order by sending the product directly to the customer. Mr Sebastian Wiradharma (“Mr Wiradharma”) is the plaintiff's CEO and director, while his wife, Ms Jeanette Marhalim (“Ms Marhalim”) is the plaintiff's sole shareholder.

3 In addition to Mr Wiradharma and Ms Marhalim, two employees of the plaintiff gave evidence, namely, Ms Naik Jagruti Jigar (“Ms Jagruti”) and Mr Zahid Alware (“Mr Alware”).

4 The first defendant, Mr Sivabalan s/o Ramasami, is a former employee of the plaintiff. He was employed by the plaintiff, from around January 2015 to 28 February 2021, as a warehouse manager.

5 The second defendant, Global Pet Co Pte Ltd, is a Singapore company which provides wholesale supplies to Sierra Nevada Pet Co(“SNPC”), an online retailer. The second defendant was set up by the first defendant and Mr John Robert Foley (“Mr Foley”), who is a director and shareholder of SNPC. The first defendant and Mr Foley are each 50% shareholders and directors of the second defendant. The second defendant was incorporated on 16 February 2021.

Background to the dispute

6 In August 2012, the first defendant was first employed by Singpet Pte Ltd (“Singpet”), which is another company run by Mr Wiradharma. The first defendant signed a contract of employment with Singpet dated 7 August 2012 (the “Singpet Contract”). On 3 April 2014, the plaintiff was incorporated, and the first defendant began working for the plaintiff some time thereafter. However, the first defendant did not sign a new written contract of employment with the plaintiff. There is therefore some disagreement concerning the precise start date and terms of his employment with the plaintiff. However, it is agreed that the plaintiff started paying the first defendant's salary and making payments to the first defendant's CPF account in January 2015. It is also agreed that from that point onwards, the first defendant was an employee of the plaintiff.

7 It is worth setting out the plaintiff's business model in detail. The manufacturers of the pet products which the plaintiff deals with will only sell them to authorised dealers. Thus, the plaintiff acquires pet products from these authorised dealers. There are different authorised dealers in different countries, and the different authorised dealers sell the pet products at different prices. Online retailers prefer to acquire pet products from authorised dealers...