Universal Westech (S) Pte Ltd v Ng Thiam Kiat and Others

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 23 October 1996
• Neutral Citation: [1996] SGHC 242
• Docket Number: Suit No 2217 of 1993
• Date: 23 October 1996
• Published date: 19 September 2003
• Year: 1996
• Plaintiff Counsel: Liew Teck Huat and Ravindra Samuel (Niru & Co)
• Citation: [1996] SGHC 242
• Defendant Counsel: Thio Ying Ying and Lim Tanguy Yuteck (Chor Pee & Co)
• Court: High Court (Singapore)
• Subject Matter: Successful party deprived of costs,Costs,Damages,Whether confidential information amounted to trade secret,Conduct not beyond reproach,Contract of service,Civil Procedure,Loss suffered by company which was only a bare party,Illegality and public policy,Sales strategy and knowledge of products,Restrictive covenants,Setting aside interlocutory injunction,Contract,No personal loss,Restraint of trade,Trade secret,Competing with employer while still an employee,Injunctions,Employment Law

This is an action by the plaintiff company against the first andsecond defendants, its former employees. The first defendant was employed as its marketing manager till his resignation on 14 September 1993 and the second defendant was employed as a sales manager till his resignation on 7 October 1993. The two defendants are the shareholders and directors of Optim Application (S) Pte Ltd (hereinafter referred to as Optim Application).

On 19 November 1993, the plaintiff obtained an interlocutory injunction against the first and second defendants in an ex parte application restraining them from persuading the plaintiff`s principals to switch their distributorships from the plaintiff to them or Optim Application, from using confidential information and trade connections obtained during their employment, and from soliciting orders from the plaintiff`s customers. The order was set aside by Lai Kew Chai J on 3 December 1993 on the application of the two defendants and on 15 August 1994, with the questions of costs and whether the plaintiffs` undertaking as to damages should be enforced referred to the trial judge. On 15 August 1994 Optim Application was joined as the third defendant in the action on its own application.

The plaintiff alleged that the first defendant had acted in breach of his fiduciary duties as an employee and former employee and that the second defendant was in breach of his fiduciary duties as an employee.

With regard to the first defendant two forms of such wrongdoing as an employee were pleaded. The first related to his conduct with the plaintiff`s American principals, Metcal and Westbond. It was pleaded that while he was still employed by the plaintiffs he approached its principals to instigate and persuade them to terminate distributorship rights of the plaintiff and award them to him when he set up his own business or company. In the particulars pleaded, it was alleged that he did that with Metcal and Westbond when he was sent to America to the Boston Cleanroom Show in March/April 1993 and that he did that again in August 1993 with representatives of the same principals when he was in Kuala Lumpur at another trade show known as the Nepcon Show. He was also accused of telling the representatives of the two principals that the plaintiff had not treated him well or fairly and that he was the person responsible for developing the plaintiff`s business.

The second form of misconduct alleged was that he approached the plaintiff`s customers to obtain orders for his new business venture or company. In particular, it was alleged that in August 1993, he agreed to team up with Mok Chit Kuan (hereinafter referred to as Mok), the marketing manager of the plaintiff`s associate company in Malaysia, Uniwes Technology Sdn Bhd (hereinafter referred to as Uniwes Technology) to set up their own company to deal in goods and competition with the plaintiff in Singapore and with Uniwes Technology in Malaysia. It was further alleged that Mok had pursuant to the scheme diverted two orders placed with Uniwes Technology to a company known as Kimic Technologies (M) Sdn Bhd, a company belonging to one Lum Ooi Lin when the plaintiff asserted to be a business partner of the first defendant.

Two instances of the first defendant`s alleged wrongdoing as a former employee were pleaded. Firstly it was claimed that on 15 October 1993 he had informed another principal of the plaintiff, Corpane, that the plaintiff was engaged in fabricating cleaning equipment on their own and that the plaintiff had sent an engineer to spy on Corpane. The plaintiff claimed that in fact it was engaged in the design and manufacture of cleaning equipment using CFC-free solvents on the suggestion of Du Pont and that this was a part of the plaintiff`s trade secrets and business strategy that the first defendant had disclosed to Corpane.

Secondly, the plaintiff alleged that after he left its employ, the first defendant had made use of the plaintiff`s confidential information regarding its pricing policy and had informed the plaintiff`s customers that the plaintiff had been unfairly profiteering in the dealings with them. It was not pleaded that the confidential information was of a nature as to amount to a trade secret.

As particulars, it was pleaded that the first defendant represented to Seagate Technology in October/November 1993 and General Motors at an unspecified time that the plaintiff was no longer authorised to sell Metcal products and that the third defendant was the authorised distributor, and that the plaintiff had been unfairly profiteering from them in their previous dealings.

The plaintiff`s complaint against the second defendant was that he breached his fiduciary duty as an employee by becoming a director of the third defendant, a competitor of the plaintiff, when he was still in the plaintiff`s employ.

I have referred to the matters that the plaintiff complained of and the particulars set out in the statement of claim because complaints of other alleged misdeeds not pleaded in the statement of claim were made, explained and refuted at the trial, which I do not take into account in coming to my decision.

There was nothing in their contracts of employment that prohibited the first and second defendants from competing with the plaintiff after their employment. They were required to make a declaration and undertaking to the plaintiff in the following terms:

I hereby declare that other than my employment with you, I am not holding any other position or employment or job of whatever nature with any other third party, whether paid or unpaid.

In consideration of your continuing to employ me, I hereby undertake that I shall not, during my employment with you, accept any form of employment or work or job of whatever nature from any third party during or after office hours or during off days or on weekends or public holidays.

I hereby acknowledge that in the event that my declaration herein is shown to be false or that I breach my undertaking, then you shall have the right to terminate my employment with you forthwith without having to give me any notice or to give me any form of payment whatsoever.

On an employee`s fiduciary duties, counsel for the plaintiff referred to Neill LJ`s ruling in Faccenda Chicken Ltd v Fowler [1987] Ch 117 at p 135 that:

While the employee remains in the employment of the employer the obligations are included in the implied term which imposes a duty of good faith or fidelity on the employee.

which was cited with approval by the Court of Appeal in Tang Siew Choy & Ors v Certact Pte Ltd [1993] 3 SLR 44.

Counsel also cited Tang`s case as authority that an ex-employee is precluded from using confidential information he obtained from his ex-employer, overlooking the qualification that the class of affected confidential information is narrower after his resignation. Lai Kew Chai J who wrote the judgment quoted Neill LJ that:

The implied term which imposes an obligation on the employee as to his conduct after the determination of the employment is more restricted in its scope than that which imposes a general duty of good faith. It is clear that the obligation not to use or disclose information may cover secret processes of manufacture such as chemical formulae (see Amber Size and Chemical Co Ltd v Menzel [1913] 2 Ch 239), or designs or special methods of construction (see Reid Sigrist Ltd v Moss Mechanism Ltd (1932) 49 RPC 461), and other information which is of a sufficiently high degree of confidentiality as to amount to a trade secret. [Emphasis added.]

The first defendant joined the plaintiff in 1983 as a sales executive. He worked hard and rose to be the sales and marketing manager of the plaintiff`s electronics division, and was groomed by the general group manager Randall Oliveiro to take over as general manager eventually. However the relationship with Oliveiro suffered during the last stage of his employment. He had differences with Oliveiro over the development of the division. He made and submitted a Marketing and Business Development Plan dated 30 September 1992 which was rejected and returned to him by Oliveiro in mid-August 1993. Their relationship was strained further when Oliveiro arranged for a former employee, Steven Lake, to return to work for the plaintiff on 1 September 1993. The first defendant did not have a good relationship with Lake and felt slighted and threatened by his return. By late August/early September he had decided to leave. He tendered his resignation on 14 September and left the company on the same day.

The second defendant was also unhappy in his job. He felt that too many duties were placed on him and that he did not have sufficient support from the plaintiff. He was thinking of leaving the plaintiff in early September 1993.

The second defendant tendered his letter of resignation on 8 September 1993 and his resignation was effective on 7 October 1993. The first defendant tendered his letter of resignation on 14 September and his resignation took place with immediate effect.

The third defendant was incorporated on 18 September 1993. Neither the first nor second defendants were involved with its incorporation, but they became its directors on 27 September 1993 (while the second defendant was still an employee of the plaintiff) and they are shareholders of the company.

Evidence of the first and second defendants` alleged misdeeds was adduced from Oliveiro, Mok and Lake. A large part of their evidence on what they claimed to have learnt from the plaintiff`s customers and principals about the activities of the defendants was hearsay evidence disputed by the defendants, and other allegations were made which went beyond the wrongdoings pleaded in the statement of claim.

In his affidavit of evidence-in-chief, Oliveiro explained the plaintiff`s grievance was that:

All this (the plaintiff`s relationship with its principals) has been the

...