Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter

• Jurisdiction: Singapore
• Judgment Date: 11 January 2013
• Date: 11 January 2013
• Docket Number: Suit No 25 of 2011
• Court: High Court (Singapore)

Centre for Creative Leadership (CCL) Pte Ltd

Plaintiff

and

Byrne Roger Peter and others

Defendant

[2013] SGHC 4

Woo Bih Li J

Suit No 25 of 2011

High Court

Contract—Consideration—Promissory estoppel—Whether there was clear and unequivocal representation to former employee that non-compete covenant (‘NCC’) was not enforceable or would not be enforced

Contract—Illegality and public policy—Restraint of trade—NCC in employment contract—Employer suing former employees for breach of restraint of trade covenant—Whether employer had legitimate interest to protect by NCC—Whether NCC was reasonable with reference to parties' interest and public interest

Contract—Illegality and public policy—Restraint of trade—NCC in employment contract—Employment contract contained clause protecting trade secrets—Whether employer had to show legitimate interest over and above protection of trade secret

Contract—Remedies—Damages—Employer claiming loss of chance to compete for tender without unfair exploitation by former employees—Whether claim for loss of chance should be struck off

Centre for Creative Leadership (CCL) Pte Ltd (‘CCL APAC’) was a company incorporated in 2003 and in the business of,inter alia, conducting research, producing publications and providing leadership development and training programmes. It was a wholly-owned subsidiary of the Centre for Creative Leadership (‘CCL US’), a company established in the United States of America.

The third defendant, Mr Michael Jenkins (‘Mr Jenkins’) was employed as CCL APAC's Managing Director on 1 August 2003 and promoted to Vice-President of CCL US' Asia-Pacific business in 2007. According to CCL APAC, Mr Jenkins was responsible for creating the business strategy and operational plans to build CCL APAC's operations and for building a team of staff to operate the business. Given the size of CCL APAC at that time, Mr Jenkins was expected to take an active role in business development. Mr Jenkins, on the other hand, stated that his role did not include having direct contact with CCL APAC's clients ‘for the purpose of any functional tendering process or any programme-related planning, administration or delivery’. Mr Jenkins' last day with CCL APAC was on 31 March 2009. He joined Roffey Park Institute Ltd (‘Roffey Park’) as its Chief Executive Officer on or around 1 April 2009.

The first defendant, Mr Roger Peter Byrne (‘Mr Byrne’) was employed as CCL APAC's Business Development/Conversion Faculty pursuant to an employment agreement between CCL APAC and Mr Byrne dated 31 August 2006. According to CCL APAC, Mr Byrne was, inter alia, responsible for driving CCL APAC's business development and training programmes in the Asia-Pacific region and managing client relations for CCL APAC. It was undisputed that Mr Byrne consulted with CCL APAC's clients on their leadership development needs and collaborated with CCL APAC's faculty to design programmes to meet these needs. Mr Byrne's last day with CCL APAC was on or about 1 June 2009. He also joined Roffey Park pursuant to an agreement signed on 1 August 2009.

Mr Byrne's and Mr Jenkins' employment agreement with CCL APAC contained a restraint of trade covenant which was a non-compete covenant (‘NCC’).

One of CCL APAC's main clients was the Civil Service College. CCL APAC claimed that Mr Jenkins and Mr Byrne were involved in generating, designing, delivering and/or providing a number of programmes to CSC when they were with CCL APAC. On 17 February 2010, CSC sought tenders for three programs, the Management Development Course for 2010 (‘2010 MDC’), the Senior Management Programme for 2010 (‘2010 SMP’) and the Leaders in Administration Programme for 2010 (‘2010 LAP’).Four companies including CCL APAC and Roffey Park were invited to submit tenders. CCL APAC and Roffey Park tendered bids for all three programmes. CSC awarded the 2010 MDC to Roffey Park, the 2010 SMP to Impact International and did not award the 2010 LAP to any bidder.

CCL APAC sued Mr Jenkins and Mr Byrne for breach of the NCC, and sued Roffey Park for inducement of Mr Byrne's and Mr Jenkins' breaches. CCL APAC also sued Mr Jenkins for breach of his fiduciary duties if he did inform Mr Byrne that the NCC in his employment agreement was not enforceable. Before being employed by CCL APAC, Carolyn Chan had sent an e-mail to Mr Jenkins asking that he consider an amendment to the NCC, in the form of a proposed new clause which provided for compensation for the period during which the NCC was enforced post-employment. Mr Jenkins informed Mr Paul Draeger (‘Mr Draeger’), CCL US' Vice-President and Chief Talent Officer, of this. According to Mr Draeger, his response was that the proposed clause would not be ‘viable’ for CCL APAC. In contrast, Mr Jenkins alleged that Mr Draeger told him in 2004 and/or in 2006 that the NCC was (a)not enforceable, (b)just there to deter people, and (c)not deemed to be enforceable even in the US (‘the Three Representations’). Mr Jenkins also stated that he told Mr Byrne of the Three Representations when the latter queried about the NCC before signing his employment agreement with CCL APAC. According to Mr Byrne, Mr Jenkins told him that Mr Draeger said that the NCC ‘was not enforceable and was not deemed to be enforceable even in the United States, and that it was there only as a scare tactic towards employees’. The defendants thus pleaded that CCL APAC was estopped from enforcing the NCC as against Mr Byrne.

Pursuant to an order of court on 23 February 2012, the trial proceeded on two preliminary issues of law:

1. (a) whether the NCC in Mr Byrne's and Mr Jenkins' employment agreements with CCL APAC was enforceable; and

2. (b) whether CCL APAC's case of ‘loss of chance’ as pleaded in its Further and Better Particulars of the Statement of Claim served pursuant to a request by the solicitors for Roffey Park dated 31 March 2011 and filed on 14 April 2011, might be struck off?

On 11 July 2012, CCL APAC applied and obtained leave to amend some of the particulars on the loss and damage suffered, including those in respect of loss of chance. However, the defendants maintained that even on those amended pleadings, CCL APAC's case on ‘loss of chance’ should be struck out.

Held:

(1) There were generally two main interests which had been identified by courts as meriting protecting in the context of covenants in restraint of trade: trade secrets and trade connection.

(2) While the content of the programme and quality of the faculty were important to CCL APAC's clients and CCL APAC enjoyed an institutional relationship with its clients, Mr Jenkins was able to and did acquire personal knowledge and did exercise some degree of influence over CCL APAC's clients that was enough to constitute a legitimate interest for the NCC to protect.

(3) Mr Byrne did acquire personal knowledge and influence over CCL APAC's clients given the nature of his role in CCL APAC.

(4) CCL APAC succeeded in establishing that there was trade connection interest to be protected by the NCC: at [93] .

(5) CCL APAC failed to discharge its burden to persuade the court that the one-year restraint was not unreasonable. It seemed to have just plucked a figure from the air and that would not do.

(6) The geographical scope of the NCC was too wide to be reasonable with reference to the parties' interests. The NCC not only prevented a former employee from contacting the client contact but precluded the former employee from attempting to deliver a competitive programme to any other office of the client even if the employee did not seek assistance from his contact.

(7) The term ‘competitive’ programmes per se did not render the NCC unreasonably wide with reference to the parties' interests. The term had to be read in the context of the NCC as a whole.

(8) The definition of ‘Base Client’ was unreasonably wide. The words ‘generated, designed, delivered or provided programs or other services’ were wider than necessary to protect CCL APAC's interests and extended to employees who had no interaction with the client and had been simply instructed on what to include in a proposal for a leadership development programme for a client.

(9) To sever the NCC such as to make it valid would require a rewriting of the contract between the parties.

(10) The defendants failed to establish that Mr Draeger made the Three Representations and that Mr Jenkins made the Three Representations to Mr Byrne before Mr Byrne signed his employment agreement with CCL APAC. If the NCC was to deter the employees of CCL APAC from soliciting Base Clients with competitive programmes, there would be no reason for Mr Draeger to tell Mr Jenkins to inform employees who asked about the NCC that it was not intended to be enforced.

(11) CCL APAC's claim for loss of chance might be maintained and accordingly should not be struck out. The sharp distinction between no decision and a flawed decision (by CSC) could not be supported. What CSC would have decided, if not for the involvement of Mr Jenkins or Mr Byrne, was a hypothetical question even though it might be answered with some degree of confidence, depending on the evidence: at [178] and [211] .

[Observation:The Court of Appeal had affirmed that where there was another clause in the employment agreement that pertained to the protection of confidential information or trade secrets, the employer had to show that an NCC protected a legitimate proprietary interest over and above the protection of confidential information or trade secrets. Observations in English cases which suggested otherwise merited consideration by the Court of Appeal. One might add that it seemed illogical that an employer who did not have the benefit of a confidentiality provision in his employee's contract of employment had a better chance of establishing confidential information as a legitimate interest to protect under an NCC than an employer who had sought to protect...