Mano Vikrant Singh v Cargill TSF Asia Pte Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 07 August 2012
• Neutral Citation: [2012] SGCA 42
• Plaintiff Counsel: Philip Jeyaretnam SC, Mark Seah and Germaine Tan (Rodyk & Davidson LLP)
• Docket Number: Civil Appeal No 149 of 2011
• Date: 07 August 2012
• Hearing Date: 02 May 2012
• Subject Matter: Restraint of Trade,Contract
• Published date: 16 August 2012
• Citation: [2012] SGCA 42
• Defendant Counsel: Blossom Hing, Kimberley Leng, Mohan Gopalan and Justin Kwek (Drew & Napier LLC)
• Court: Court of Appeal (Singapore)
• Year: 2012

Andrew Phang Boon Leong JA (delivering the judgment of the court):

This is an appeal against the decision of the judge (“the Judge”) in Mano Vikrant Singh v Cargill TSF Asia Pte Ltd [2012] 1 SLR 311 (“the Judgment”).

The Judgment is a comprehensive one and (more importantly) is one with which (as we shall elaborate upon below) we agree – save in respect of just one (albeit crucial) issue (“the crucial issue”). Indeed, the Judge did proceed, on the assumption that he was wrong with regard to the crucial issue, to ascertain whether or not his decision (in favour of the Respondent) would have been otherwise. In this regard, the Judge held that he would have decided otherwise. Given our agreement with the Judge with all aspects of his decision except for his decision in relation to the crucial issue, we are of the view that the appeal ought to be allowed. However, before proceeding to give our reasons as to why we respectfully differ from the Judge with regard to the crucial issue, it would be appropriate to set out – in brief – the relevant factual background as well as a summary of the decision in the court below.

A final preliminary point might be in order. That the crucial issue has been characterised as such (viz, as “crucial”) is, in our view, an understatement of no small measure. Given its importance not only in the context of the resolution of the present appeal but also with regard to its implications for the broader commercial context, it is apposite to set out the issue in its general form right at the outset: Is a clause forfeiting an employee’s benefits when he competes with his ex-employer after the termination of his employment one that falls within the ambit or scope of the restraint of trade doctrine? With this in mind, let us now proceed to consider – in brief – the relevant factual background leading to the present proceedings.

Factual background

Cargill TSF Asia Pte Ltd (“the Respondent”) is part of the Cargill group of companies (“the Group”) which is privately owned and which runs 75 businesses worldwide. The Respondent is involved in the Group’s “Trade & Structured Finance Business” (“TSF Business”). The TSF Business customises financing arrangements for importer-exporters, profiting from the use of financial instruments in the process of commodities trading. The customisation is done both for importer-exporters owned by the Group, and for importer-exporters for non Group entities.¹

Mano Vikrant Singh (“the Appellant”) was an employee of the Group from 23 October 2001 to 27 November 2008, when his resignation took effect, and was posted to Singapore from September 2003. He was a TSF Business coordinator at all material times. From June 2006 until 30 March 2007 when the employment contract (see [6(a)] below) was signed, the Appellant worked informally for the Respondent.²

The Appellant executed the following documents, inter alia, on 30 March 2007, two days before formally commencing his employment: an “Employment Contract” set out in a letter from the Respondent to the Appellant dated 28 March 2007 (“the Employment Contract”). Under clause 1 of the Employment Contract, the Appellant’s salary comprised a monthly salary of S$25,000 per month and an annual wage supplement equivalent to one month’s salary; and a “Non-Compete Agreement” (“the NCA”) agreeing, under clause 3, not to compete with the Respondent for one year after termination of his employment.

In addition, towards the end of every financial year, the Appellant was given a document headed “Terms and Conditions of Incentive Award”. These terms and conditions (“T&Cs”), which were the same for both years, arose out of an “Incentive Award Plan” (“the Plan”) only available to key senior staff (including the Appellant). Under the Plan, the Respondent declares a discretionary incentive award (“based on individual, team and business unit results [for that year]”) for each participating employee over and above their base salary. This incentive award is split evenly – 50% is paid out as a “Cash Award” and the other 50% is retained by the Respondent as a “Deferred Incentive Award”. The Deferred Incentive Award is then paid in stages, as follows:

Quantum of Declared Incentive Award	Quantum of Deferred Incentive Award; Deferral period
$ 74,999 and below	No Deferred Incentive Award
$75,000-$199,999	50% of declared incentive award, deferred for 1 fiscal year from grant date
$200,000-$399,999	50% of declared incentive award, deferred over 2 fiscal years from grant date (2 annual payments)
$400,000 and greater	50% of declared incentive award, deferred over 3 fiscal years from grant date (3 annual payments)

The T&Cs also provide that the Deferred Incentive Award earns compound interest at the one-year USD London Interbank Offered Rate, plus 1% per annum spread.

More significantly, the T&Cs set out a Forfeiture Provision. It is this particular clause which lies at the heart of the dispute between the parties in the present proceedings, and not the NCA. The Forfeiture Provision reads as follows:

FORFEITURE PROVISIONS Deferred Incentives that have been awarded but not yet distributed will be forfeited if the Participant (1) is Terminated for Cause, or (2)(a) Separates from Service other than by reason of death or Disability, and (b) continues a career within the financial or commodity trading industry outside of the Company within a period of two years from the date of such Separation from Service (referred to as the “Two-Year Non-Compete Period”). Continuance of a career within the financial or commodity trading industry is defined as employment by, consulting with, establishing, or having a substantial ownership interest in any organization, which competes with the Company for employees, customers, clients, market share, or financial/commodity resources or deals.

[emphasis added]

Under the T&Cs, before the Deferred Incentive Award can be processed for payment, the participant is required to sign his acknowledgement that “I have received, read and agree to these Terms and Conditions ... I acknowledge that failure to execute this agreement will result in being removed from this program and receiving future awards” [emphasis added].³

The Appellant’s incentive award for the financial years 2006/2007 and 2007/2008 were US$400,000 and US$3.2 million, respectively. Half of these amounts were paid to him in cash, and half were deferred for a period of three years. Up to the hearing date, the Appellant had not received a total of US$1,741,894 (excluding interest), representing the outstanding portion of the Deferred Incentive Award for 2006/2007 and all of his Deferred Incentive Award for 2007/2008 (see the Judgment at [12]–[14]).

On 4 November 2008, the Appellant gave notice of his resignation. This was accepted by the Respondent via a letter on the same date informing the Appellant that his outstanding Deferred Incentive Award for the financial years 2006/2007 and 2007/2008 would be paid in a lump sum within 60 days after the expiry of the “Two-year Non-compete Period” (see [8] above).⁴ Soon after, the Appellant started using Xangbo Global Markets Pte Ltd (“Xangbo”), a company he had incorporated prior to his resignation, to engage in financial and commodities trading. The Appellant conceded in his affidavit that Xangbo is in the same primary business as the Respondent.⁵

On 19 October 2010, the Respondent wrote to the Appellant seeking that he sign a statutory declaration confirming fulfilment of the conditions in the Forfeiture Provision before receiving his outstanding Deferred Incentive Award. ⁶ The Appellant refused, taking the view that:⁷

... under the [T&Cs of the Incentive Award Plan], participants are only required to “complete a statement to certify that they have successful [sic] fulfilled the Two-year Non Compete Period” in order to be eligible to receive payment of the Deferred Incentive awarded. There is no obligation to make a statutory declaration, nor is there an obligation to provide the information sought by the Statutory Declaration enclosed in your letter.

...

In any case, I have taken advice on the provision for forfeiture of the Deferred Award and understand that it is in restraint of trade and void as being against public policy.

On 14 February 2011, the Appellant commenced Originating Summons No 103 of 2011 (“OS 103/2011”), seeking the following reliefs: A declaration that the Forfeiture Provision is void for being a Restraint of Trade clause, and an order that it be severed from the T&Cs; Payment from the Respondent of the sum US$1,741,894, being the outstanding Deferred Incentive Awards for the financial years 2006/2007 and 2007/2008; and Contractual interest on the above sum, and costs.

Counsel for the Respondent, Ms Blossom Hing, had applied to convert OS 103/2011 into a writ on the basis that substantial disputes of fact were likely. The Judge did not convert OS 103/2011 into a writ action on condition that he would revisit the application to convert if there were genuine disputes of facts germane to the resolution of OS 103/2011.⁸ He was persuaded to do so by counsel for the Appellant, Mr Philip Jeyaretnam SC’s (“Mr Jeyaretnam”) acceptance, for the purposes of proceeding with OS 103/2011, of the Respondent’s version of those facts which bore some evidential basis,⁹ namely that (see the Judgment at [18]): the Appellant had breached the Forfeiture Provision by incorporating Xangbo; the Appellant’s role in the Respondent’s TSF Business was that of “initiator” (one who brings in the business by identifying trading partners and financial institutions willing to participate) or “structurer” (one who creates the customised financing arrangement); the Respondent’s TSF Business is non-generic, ie, is proprietary; and the Respondent’s TSF Business...