Powerdrive Pte Ltd v Loh Kin Yong Philip and others

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 10 October 2018
• Neutral Citation: [2018] SGHC 224
• Plaintiff Counsel: Srinivasan s/o V Namasivayam and Vaishnavi Vivehgananden (Heng, Leong & Srinivasan LLC)
• Docket Number: Suit No 1015 of 2017 (Summonses Nos 605, 628 and 698 of 2018)
• Date: 10 October 2018
• Hearing Date: 13 July 2018,13 August 2018
• Subject Matter: Civil Procedure,Striking out,Restraint of trade,Contract,Illegality and public policy
• Year: 2018
• Defendant Counsel: Koh Kok Kwang (CTLC Law Corporation),Adrian Wong and Sara Sim (Rajah & Tann Singapore LLP)
• Court: High Court (Singapore)
• Citation: [2018] SGHC 224
• Published date: 13 October 2018

Woo Bih Li J: Introduction

The plaintiff, Powerdrive Pte Ltd (“Powerdrive”), is in the business of training military armour vehicle drivers both on training simulators and on actual vehicles.

Powerdrive brought the present action against five of its former employees for being employed by the sixth defendant, Singapore Technologies Kinetics Ltd (“ST Kinetics”), a competitor of Powerdrive, in breach of a restraint of trade (“ROT”) provision.

On 2 February 2018, ST Kinetics filed Summons No 605 of 2018 (“Summons 605”) to strike out Powerdrive’s claim against it.

On the same day, Powerdrive filed Summons 628 of 2018 (“Summons 628”) to amend its Statement of Claim (“SOC”).

On 7 February 2018, the first five defendants filed Summons 698 of 2018 (“Summons 698”) to strike out certain paragraphs of the SOC. Further, or alternatively, they sought to strike out Powerdrive’s claim against them.

By the time of the first hearing of all three applications before me on 13 July 2018, Powerdrive had proposed two more versions of the draft of the amendments to be made to the SOC, ie, for the SOC (Amendment No 1). In other words, three drafts of the SOC (Amendment No 1) had been prepared. The initial hearings were fixed before an Assistant Registrar. Eventually, after the third and last draft was prepared by Powerdrive, the three applications were fixed for hearing before me. The hearing before me on 13 July 2018 was part-heard and adjourned. It was fixed for further hearing on 13 August 2018. At that hearing, the first five defendants elected to proceed only with the application to strike out Powerdrive’s claim against them.

After the further hearing, I made the following decisions: For Summons 628, I concluded that the ROT provision in question was too wide and not enforceable. This in turn meant that in so far as the proposed amendments were based on the validity of the ROT provision, they should not be allowed. I dismissed Summons 628 with some qualifications which I will elaborate below. For Summons 605, I granted the application of ST Kinetics for Powerdrive’s claim against it to be struck out. For Summons 698, I granted the application of the first five defendants for Powerdrive’s claim against them to be struck out.

I set out my reasons below. Costs orders were also made.

The court’s reasons

The ROT provision which Powerdrive was relying on was found in the second paragraph of cl 5 of each of the letter of employment for the first four defendants. I set out the entirety of cl 5 below as the first paragraph of cl 5 was also considered in construing this ROT provision. Clause 5 states: 5. Confidentiality

You shall not, during the continuance of this Agreement or after its termination, disclose, divulge, impart or reveal to any person or company any of the Company’s clients’ information or confidential reports, processes, dealings or any information concerning the business, finance, transactions or affairs of the Company which may come to your knowledge during your employment hereunder and shall not use or attempt to use any such information in any manner which may injure or cause loss directly or indirectly to the Company or its business or may likely to do so.

Not withstanding the above, you cannot work for a rival company and/or direct competitor for two (2) years from your termination. Management reserves the right to pursue on legal grounds if there is a breach of this condition.

For the fifth defendant, Powerdrive said that he had been informed and had agreed to a similar ROT provision which was found in para 4 of an email dated 6 April 2010 which Powerdrive had allegedly sent to all employees. Paragraph 4 states: 4. For leaving employees, you are not allow [sic] to join a rival company and/or direct competitors within two-years of your last day of employment.

Parties proceeded on the basis that the substance of para 4 was the same as the ROT provision found in the second paragraph of cl 5 of the letter of employment for each of the first four defendants. I will henceforth refer to both of these provisions collectively as “the ROT Clause” for convenience.

In respect of Powerdrive’s application to amend the SOC, Powerdrive’s solicitors prepared a table of the proposed amendments in the latest draft of the SOC (Amendment No 1) (“the Table”). The Table is attached as Annex A to the present grounds of decision.

The main amendments which Powerdrive wanted to include were those in serial nos 3 to 5 and also serial no 6 of the Table.

Serial nos 4 and 5 of the Table

Serial nos 4 and 5 pertain to the proposed additions of new paras 63 to 68 and 69 to 93. The purpose was to elaborate on the particulars of confidentiality of Powerdrive’s Induction Programme used to train the first five defendants and the particulars of confidentiality of Powerdrive’s training methodologies and system.

These amendments were proposed in response to a point taken by all the defendants that Powerdrive could not rely on the ROT Clause to protect confidential information. Two arguments were advanced for this point.

The first argument arose from the undisputed proposition that an ROT provision is justifiable only if it protects the employer’s legitimate interests and it is reasonable in the circumstances (see Buckman Laboratories (Asia) Pte Ltd v Lee Wei Hoong [1999] 1 SLR(R) 205 (“Buckman”) at [21]). A possible legitimate interest is the protection of confidential information. However, in the present case, the first paragraph of cl 5 already protected Powerdrive against the disclosure of confidential information. Moreover, each of the first to fifth defendants had executed a separate confidentiality agreement with Powerdrive.

In Stratech Systems Ltd v Nyam Chiu Shin (alias Yan Qiuxin) and others [2005] 2 SLR(R) 579 (“Stratech”), the Court of Appeal held that if an employer has the benefit of a clause protecting against the disclosure of confidential information, then it could not use that same interest to justify the imposition of an ROT provision against its employee.

The second argument was that there must be more than just a vague or general reference to confidential information. Particulars of the confidential information had to be specified.

The problem for Powerdrive was that even if the proposed amendments provided sufficient particulars of confidentiality, which was disputed by all the defendants, these proposed amendments would address the second argument only.

As regards the first argument, Powerdrive submitted that, notwithstanding the decision in Stratech, the court should not at this stage conclude that Powerdrive was not entitled to rely on the protection of confidential information as a legitimate interest to justify the ROT Clause even though there was a separate provision or provisions protecting its confidential information. All the defendants argued that the court should so conclude and that in the absence of any other legitimate interest, the ROT Clause was not enforceable.

In Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter and others [2013] 2 SLR 193, I had suggested, at [92], that the Court of Appeal may wish to review the decision in Stratech in the light of some English cases which recognised that an ROT provision can also protect trade secrets and confidential information even though there is already a confidentiality clause elsewhere in the contract of employment.

In Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd [2014] 3 SLR 27, Vinodh Coomaraswamy J was apparently of a similar view, at [71].

I was of the view that it was not necessary to decide whether to rule against the enforceability of the ROT Clause based on Stratech.

Even if Powerdrive could use the protection of confidential information as a legitimate interest to justify the ROT Clause, the question remained whether the ROT Clause was reasonable in the circumstances. On this point, Powerdrive had to satisfy the twin tests of reasonableness stated by Lord Macnaghten in Thorsten Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company, Limited [1894] AC 535 and applied by the Court of Appeal in Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663 (“Man Financial”) at [70]. The twin tests are that each ROT provision must be reasonable in reference to the interests of the parties concerned and also in reference to the interests of the public. Therefore if the ROT Clause was too wide from either perspective, the proposed amendments to particularise the confidential information to be protected would be academic.

On the question of the width of the ROT Clause, various points were raised by the defendants but for present purposes, I need to refer to three arguments only, ie, that the ROT Clause was unreasonably wide: (a) in terms of the scope of employees it sought to restrain, (b) in terms of the scope of work it sought to restrain the first to fifth defendants from doing when employed by a rival, and (c) in terms of the duration of the prohibition.

The first point was that Powerdrive was using the ROT Clause against all its employees regardless of their seniority, nature of work or level of access to information. In Buckman, the court recognised, at [26], that such an indiscriminate application would suggest that the true purpose of the provision was to restrain competition rather than to protect a legitimate interest of an employer. If that was the true purpose it would be unenforceable.

In Man Financial, the Court of Appeal also noted, at [141], the argument that an ROT provision would be too wide if it covered too broad a category of employees, although on the facts there, the court...