Erco Lighting Pte Ltd v Tan Soo Khoon (Thomas Tan) and another

• Jurisdiction: Singapore
• Judge: Sandra Looi
• Judgment Date: 19 April 2012
• Neutral Citation: [2012] SGDC 131
• Hearing Date: 16 March 2012,19 March 2012
• Citation: [2012] SGDC 131
• Published date: 01 June 2012
• Court: District Court (Singapore)
• Docket Number: District Court Suit No. 146 of 2012, SUMS No. 1777 of 2012, RAS 40 of 2012
• Plaintiff Counsel: Foo Soon Yien (M/s Bernard & Rada Law Corporation)
• Year: 2012

District Judge Sandra Looi: Introduction

The Plaintiff (“Erco”) and the 2nd Defendant (“Thorn Lighting”) are rival companies in the business of providing lighting solutions under the ERCO Group and Zumtobel Group respectively. The 1st Defendant Mr Tan Soo Khoon (Thomas Tan) (“Mr Tan”) was a regional sales manager of Erco until 30 September 2011 after which he joined Thorn Lighting shortly in October 2011 as a sales director for Zumtobel South East Asia.

Erco applied for an interlocutory injunction to restrain Mr Tan from working for Thorn Lighting, from soliciting customers of Erco, and from disclosing any confidential information of Erco, for a period of one year from the effective date of his termination of employment, that is, until 30 September 2012.

I granted the interlocutory injunction and Mr Tan appealed only against the order restraining him from working for Thorn Lighting until 30 September 2012.

Plaintiff’s case

Erco’s action against Mr Tan is for, inter alia, breach of clause 14.1 of the employment contract (non-competition clause). Clause 14.1 provides –

“You shall not, during the term of your employment and for a period of (12) months after its termination, be employed by or work for any of the Company’s competitors..., whether they are manufacturers, agents, distributors or suppliers.”

According to Mr Hendrik Michael Schwartz (“Mr Hendrik”), the managing director of Erco, Thorn Lighting and the Zumtobel Group of which it is a part, are one of the Plaintiff’s main competitors as both parties service the same industries and market segments, including offices, museums, galleries, art shows, hospitality and retail spaces.

By virtue of Mr Tan’s position in Erco, Mr Hendrik alleged that Mr Tan had access to confidential information including customer lists, customers’ requirements, pricing, costs, products, technology, information regarding upcoming potential projects to be secured, and preparation for bids to prospective customers. Alternatively, such information was acquired using time and resources at the expense of Erco for the sole purpose of enabling Mr Tan to carry out his duties of promoting and securing the business of Erco in his capacity as regional sales manager.

Mr Hendrik said that an average period of 18 months was needed to prepare tenders for projects by building up relationships with customers and knowing their requirements in order to increase chances of obtaining the bid. Mr Tan was well positioned to influence customers whose bids were closing as Mr Tan would have attended meetings with customers, architects and lighting designers involved in those projects on behalf of Erco. Mr Hendrik contended that there was a substantial risk that the customers would follow Mr Tan’s movement in the lighting industry or heed his advice as to which lighting company to contract with. Confidential information of upcoming projects or leads obtained by Mr Tan during his employment remained current and relevant to Erco’s business even after termination of Mr Tan’s employment.

According to Mr Hendrik, Mr Tan had thus acquired vital trade knowledge or trade connections with Erco’s distributors, customers, lighting designers, interior designers, architect and developers by virtue of his position as their regional sales manager. Erco’s counsel submitted that these trade connections were a legitimate interest to be protected, citing the case of Heller Factoring (Singapore) Ltd v Ng Tong Yang [1993] 1 SLR(R) 495 where the enforceable clause prohibiting the employee from accepting a position with one of the employer’s competitors so as to be likely to destroy the employer’s trade connections by misuse of his acquaintance with the employer’s customers or clients, must satisfy the test of reasonableness and protect some legitimate interest of the employer such as trade secrets, trade connections and confidential information. Erco’s counsel submitted that the non-competition clause was reasonable as to duration and purpose as its objective was to protect Erco’s legitimate interest of trade connections.

Erco’s counsel submitted that therefore, the non-competition clause restraining Mr Tan from joining a competitor within 12 months from the date of termination removes any advantage obtained by Mr Tan that can be misused to assist Thorn Lighting to Erco’s detriment; the non-competition clause inhibits unfair competition, not competition. Mr Hendrik said that Mr Tan has options of working in many other non-architectural areas of the lighting industry, such as selling lighting products for non-architectural lighting companies including tunnel lighting, decorative lighting, LED screens, and lamp manufacturers. Mr Tan’s skills as regional sales manager (essentially a salesperson of lighting products) are easily transferable to non-architectural and lower end lighting product segments of the lighting industry. Mr Tan also has the option of working in any other building material related job that deals with product specifications.

Despite Erco’s letters reminding Mr Tan of the non-competition clause on 8 September 2011 and 21 October 2011, Mr Hendrik said Mr Tan took up employment with Thorn Lighting sometime in October 2011. It is noted that Mr Tan remained in their employ as of the date of the hearing of the application for interlocutory injunction. On 7 October 2011, Ms Chelsea Ho, the regional sales manager for Zumtobel South East Asia emailed Mr Tan at his previous email address at Erco forwarding a string of email correspondences between Zumtobel South East Asia and a potential customer. Erco found that Mr Tan had sent one of the earlier emails on 5 October 2011 using his new Zumtobel email address, quoting and getting involved in a sale.

Mr Hendrik said that on another occasion, Erco’s distributor Mr Henry Ting informed Erco that the contractor for the Brunei Banquet Hall project told him that he was offered a very similar LED downlight to theirs with the calculation done, and that according to a Zumtobel ex-ERCO staff, ERCO did not have the product and capability to manufacture on time for the project. Mr Hendrik stated that Mr Tan was the only ex-ERCO staff who had joined Thorn Lighting recently.

According to Mr Hendrik, Erco discovered through a computer forensic status update report (“computer forensic report”) that Mr Tan had on several occasions before and after his notice of resignation, attached USB drives to Erco’s computer which Mr Hendrik averred was done to copy Erco’s confidential information to the USB drives. Further, the report revealed that Mr Tan wrongfully installed a third party cleaning software called “CCleaner” on the office computer on 18 August 2011 and used the software to overwrite selected data on Erco’s computer four times. Mr Hendrik averred that this was deliberately done to prevent Erco from discovering any wrongful acts done by Mr Tan while in Erco’s employment. Erco’s counsel...